CANBERRA — Treasurer Jim Chalmers ruled out an immediate extension of the 26-cent cut to the fuel excise in the next federal budget and warned there would be little room for further cost-of-living support in his fifth budget. He said petrol prices had fallen from their March highs and that the fuel tax cut would remain in place only until the end of June.

Chalmers said the budget would play "a helpful, not a harmful, role in the fight against inflation" and pointed to global conditions weighing on the domestic economy. "Australians are already paying a very hefty price for this war in the Middle East. We had some inflationary pressures in our economy before the war. The war has turbocharged those inflationary pressures," he said.

He said fiscal restraint would shape the document and that the government intended to spend less than it saves. He also said the government had a whole range of contingencies should the economy deteriorate more quickly than expected, and did not intend to use proposed changes to investor taxes to fund additional tax relief for workers.

Labor is poised to announce changes to the capital gains tax discount and negative gearing rules. Prime Minister Anthony Albanese had explicitly ruled out changes to negative gearing.

At its last pre-budget election, Labor promised to reduce the lowest income tax rate from 16% to 15% from mid-2026 and to 14% from mid-2027. The planned tax rate reductions would deliver at most $268 in tax relief in the next financial year and $538 in the following year. A big part of the budget will be the more than $2.5bn allocated to the fuel tax cut, with the standard deduction also set to take effect. Chalmers said the government has implemented the standard deduction to provide additional tax relief as part of the budget.