Budget seen revisiting tax changes Labor ruled out before election

Good morning. Here’s what happened overnight and what you need to know today.

1.

On budget: Labor is preparing politically contentious housing tax reforms in Tuesday’s budget, with Jim Chalmers arguing the “broken” intersection between housing and the tax system must be addressed. Chalmers warned against expecting a “heap” of new revenue from a widely anticipated overhaul to investment tax breaks, despite ruling this out in last year’s election. He told Sky News the reforms were aimed at addressing intergenerational concerns and recognising that “the status quo in housing and tax, and the intersection of those two things, is effectively broken”. Nine newspapers reported citing unnamed sources that changes to negative gearing will apply to properties acquired from budget night but not take effect until 1 July next year, with a similar transition for changes to capital gains tax concessions. Existing negatively geared properties are expected to be exempt, while only new-built homes acquired after budget night will remain eligible after the transition period, according to the reports. Meanwhile, the government said it would spend $500 million implementing environmental reforms to streamline approvals, on top of $2 billion for housing infrastructure expected to unlock 65,000 homes. Chalmers also confirmed the budget would not forecast surpluses over the next four years, though deficits would be lower. (Capital Brief)(AFR)(SMH)

2.

Iran’s answer: Iran sent its response to the latest US proposal to end the war as drone attacks and shipping incidents continue to test a fragile ceasefire in the Gulf. Iran’s state-run media said Tehran delivered its reply via Pakistani mediators and wants negotiations to focus on permanently ending the war and securing maritime routes, including the Strait of Hormuz. Pakistan confirmed receiving the response, according to The Associated Press. The US proposal would reopen Hormuz and end the US blockade on Iranian ports, while deferring negotiations over Iran’s nuclear program. According to an Axios report the US memo also proposed suspending Iranian uranium enrichment and lifting sanctions. The White House had not commented at time of writing. Meanwhile, Donald Trump posted that Iran had been “playing games with the United States, and the rest of the world, for 47 years”, while earlier on Sunday local time, US ambassador to the UN Mike Waltz told ABC the administration was giving diplomacy “every chance we possibly can before going back to hostilities.” Despite the ceasefire, a drone strike briefly set a cargo vessel ablaze off Qatar on Sunday. Separately, the UAE said it intercepted two drones coming from Iran, while Kuwait said its forces responded to drones entering its airspace. And the Qatari LNG tanker Al Kharaitiyat was seen transiting the Strait of Hormuz over the weekend, marking Qatar’s first export from the region since the crisis began. (BBC)(Bloomberg)(AP)

3.

One Nation: One Nation’s historic victory in Farrer has intensified fears the Coalition is losing regional heartland seats to the populist right, with Pauline Hanson declaring: “We’re coming after those other seats.” David Farley became the first federal MP elected under a One Nation banner after routing the competition in Saturday’s by-election to replace former Liberal leader Sussan Ley. The Liberals’ primary vote collapsed by more than 30% in 12 months, while the Nationals also suffered heavy losses. “Farrer confirmed federally what occurred in [the South Australian state election], that One Nation is likely the strongest non-Labor party across the country at this time,” DemosAU research head George Hasanakos said. The DemosAU/Capital Brief polling has consistently tracked the One Nation’s rise ahead of time, and was the first to find the party had overtaken the Coalition on the primary vote. The result has sharpened pressure on Opposition Leader Angus Taylor before his budget reply this week, with the Coalition now holding just 41 lower house seats. Farley used his victory speech to attack immigration and net zero policies, while Taylor said the Coalition had failed to appear “united and stable and strong”. But more broadly, the surge of a populist right-wing party, propelled by anger at the major parties, will be a concern for Labor. Albanese is grappling with a cost of living crisis, driven by the Middle East war, over which he has limited control. That brings the difficult decisions Treasurer Jim Chalmers has to make in Tuesday’s budget into sharper focus. (Capital Brief)

4.

Only Packer: James Packer emerged as a backer of a deal for a minority stake in OnlyFans, after the adult content platform confirmed a long-rumoured transaction valuing its parent company at about USD3.15 billion ($4.36 billion). The Financial Times first reported OnlyFans was in talks with San Francisco-based Architect Capital over a stake sale. OnlyFans confirmed on Friday that Architect Capital would acquire a 16% stake in parent company Fenix International for USD535 million. The FT later reported citing unnamed sources the deal was financed through a special-purpose vehicle backed by investors and family offices including funds associated with Packer and US venture capitalist Sam Lessin. The deal leaves open the possibility of Architect acquiring a larger stake in future. The Australian reported citing a source familiar with Packer’s thinking that the billionaire viewed OnlyFans as a positive force for creators and a technology investment uncorrelated to his existing portfolio. (FT)(AFR)(The Australian)

5.

Drop zone: Passengers from the hantavirus-stricken MV Hondius began flying home from Tenerife, Canary Islands, with one of five French evacuees developing symptoms mid-flight, prompting French Prime Minister Sébastien Lecornu to place all five in strict isolation. The MV Hondius, carrying 147 passengers and crew from 23 countries, docked at Granadilla port at about 6am Sunday local time (3pm AEST). There were four Australians and one permanent resident on board, after a separate Australian had reportedly returned home earlier. Spanish health minister Mónica García said doctors who boarded the vessel before disembarkation found no symptoms among those on board. Evacuations are expected to continue Monday. Australia’s plane is expected to be the last to depart and will carry passengers from New Zealand and unspecified Asian countries, Garcia said. US nationals will be quarantined in Omaha, Nebraska, British passengers face up to 72 hours in hospital then 45 days at home, health authorities said. Three people have died since the outbreak began. The Andes hantavirus can spread between humans in rare cases, the WHO said, but it carries a fatality rate of up to 50% and is particularly dangerous to older people. The average age of Hondius passengers is 65, the FT noted citing the WHO. Separately, British Army medics parachuted onto Tristan da Cunha on Saturday to assist a Hondius passenger with suspected hantavirus after disembarking from the MN Hondius last month. That person is stable and in isolation, the WHO said. (AP)(CNN)(Reuters)

6.

Hike time: Pimco, the USD2.3 trillion ($3.7 trillion) bond giant, warned the Federal Reserve may need to raise interest rates, not just delay cuts, as Iran war-driven energy prices push US inflation further above the central bank’s target. Dan Ivascyn, Pimco’s CIO, told the FT on the sidelines of the Milken Institute conference in Beverly Hills that rate cuts would be “counter-productive” and that tightening could not be ruled out. Any rate reduction “very well could lead to higher intermediate long-term rates,” he said. Jenny Johnson, chief executive of Franklin Templeton, which manages USD1.7 trillion, also separately told the paper that “inflation is going to be harder to keep control of” and that it would be “difficult for the Fed to cut.” It comes as the Fed’s preferred inflation gauge, personal consumption expenditures, hit 3.5% in March, its highest level in almost three years, and as the two-year Treasury yield, which closely tracks policy expectations, has jumped around 0.5 percentage points since the war began to 3.87%. Ivascyn said central banks in Europe, the UK and possibly Japan are also headed for tightening.  (FT)

7.

2027 normal: Saudi Aramco posted a 26% rise in first-quarter profit as surging oil prices and a bypass pipeline offset war disruption, while its CEO warned the oil market may not normalise until 2027. Adjusted net income rose to USD33.6 billion in the three months to March 31, beating analyst expectations. “If trade flows resume immediately or today through the Strait of Hormuz, it will take a few months for the oil market to rebalance,” Aramco’s boss Amin Nasser told media in an emailed statement. “But if trade and shipping remain curtailed by more than a few weeks from today, we anticipate the supply disruption to persist, and the market to normalise only in 2027.” The company’s East-West pipeline reached its maximum capacity of 7 million barrels a day as Aramco rerouted exports to the Red Sea port of Yanbu after Iran effectively closed the Strait of Hormuz when war broke out in late February. The surge restored some of the kingdom’s pre-war export levels, though the FT noted, citing Kpler data, that crude shipments still averaged about half pre-war volumes in March, when Brent crude traded at about USD100 a barrel, around 44% higher than the previous month. (Aramco)(FT)(Bloomberg)(Reuters)

8.

Trucking hell: The federal opposition accused the Albanese government of cowering in the face of union pressure over a national shortage of 28,000 truck drivers — 13% of the total required workforce — backing the recruitment of more overseas drivers. The Australian Trucking Association told a government committee the shortfall is holding back productivity in an industry that moves about 80% of Australia’s non-bulk freight, and has called for truck driving to join the skilled occupation list. Opposition transport spokeswoman Bridget McKenzie told Capital Brief the case for overseas drivers is clear, even as the Coalition pushes to reduce migration overall. “If you can bring in yoga teachers or dog walkers on skilled migration visas, it is laughable that you can’t include truck drivers,” she said. TWU national secretary Michael Kaine meanwhile, said the real shortage in the industry is one of secure, safe and well-paid jobs, warning that importing a new workforce has been shown to entrench lower standards through sham contracting. The government did not respond to a request for comment. Separately, Treasurer Jim Chalmers told journalists on Friday that training is “primarily” the government’s answer to a projected shortfall of 300,000 workers flagged by Infrastructure Australia, despite Master Builders Australia research showing just 21,415 Australians completed construction trade apprenticeships in 2023. (Capital Brief)