Finance Minister Katy Gallagher admits Labor's net-zero spending is 'not sustainable'

Published: 23:37, 10 May 2026 | Updated: 23:49, 10 May 2026 Finance Minister Katy Gallagher has admitted the Albanese government's net‑zero spending is 'not sustainable', amid growing accusations that government spending is fuelling inflation. Senator Gallagher flagged that past expenditure levels on climate action, in the tens of billions of dollars, will not be met in Tuesday's budget. 'We have invested heavily in this area and the transition is under way. It's gaining pace,' she told The Australian. 'You can actually see that investment paying off, but you wouldn't expect to see what we've done in earlier budgets where we've kind of supercharged the investment. That's not sustainable.' Gallagher said this did not mean the government was less committed to hitting its ambitious targets to lower carbon emissions by 43 per cent of 2005 levels by 2030 and 62 per cent by 2035. Budget papers show Labor committed tens of billions of dollars towards climate action in its first term, including an $8 billion injection in November to help meet the new 2035 emissions target. It comes as it is expected Labor will unveil a $500 million commitment to help progress its plans to fast‑track environmental approvals. Gallagher dismissed concerns that government spending was fuelling inflation, describing those accusations as 'political', and said the budget would not add stimulus to the economy. Finance Minister Katy Gallagher admitted government spending on net zero is 'not sustainable' Labor committed tens of billions of dollars towards climate action during their first term The government announced $8 billion in new funding for climate projects in November 'The budget we're in now is the same budget, essentially, that saw interest rates being cut last year,' Senator Gallagher said. 'It's got really political, actually, about the role of the budget in driving inflation, or allegations that it can push inflation. I don't accept that. But I do believe we have a responsible role to play about ensuring that the budget is working alongside monetary policy, and that's the approach we've taken.' The government is also facing accusations that it could break a key election commitment on negative gearing and capital gains tax reform on Tuesday. It has all but been confirmed that the Albanese government will announce changes to the CGT discount in the budget to address concerns about intergenerational inequity and housing affordability. Under rules introduced by the Howard government in 1999, investors who hold an asset, including an investment property or shares, for more than 12 months only pay tax on half the profit when they sell, a policy Pape has previously described as 'boneheaded.' Before that, capital gains were indexed to inflation, meaning investors were taxed on real gains rather than receiving an automatic 50 per cent discount. Treasurer Jim Chalmers is expected to remove the 50 per cent capital gains tax discount for assets held longer than 12 months. Research from Finder.com.au showed Australians now need to earn around $200,000 a year to comfortably afford a typical house in most capital cities without falling into mortgage stress. Treasurer Jim Chalmers is expected to remove the 50 per cent capital gains tax discount. Research from Finder.com.au showed Australians now need to earn around $200,000 a year to comfortably afford a typical house in most capital cities without falling into mortgage stress. Treasurer Jim Chalmers is expected to remove the 50 per cent capital gains tax discount Labor previously took plans to halve the CGT discount to 25 per cent to the 2016 and 2019 elections, but both campaigns ended in defeat. Those losses prompted Anthony Albanese to rule out changes to CGT after he was elected Prime Minister four years ago. Chalmers has conceded the backflip marks a departure from Labor's previous pledges, but insisted the government was always transparent about reviewing housing tax settings. 'The commitment that I give you and I give the Australian people more broadly, is, if we come to a different view, we will explain why,' Chalmers told Sky News on Sunday. 'But people know there is an appetite in this government for ambitious tax reform. 'Part of that is recognising that the status quo in housing and tax and the intersection of those two things is effectively broken because there aren't enough homes in our local communities.' Chalmers described the current system as unfair and unsustainable. No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. 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