12/05/2026

BIZ & FINANCE TUESDAY | MAY 12, 2026

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Australia govt faces difficult budget balancing act o Treasurer seeks tax reforms, vows spending restraint

Modi urges reduced fuel use amid Mideast war disruption MUMBAI: Prime Minister Narendra Modi on Sunday urged the people of India to cut down on petrol and diesel consumption amid supply disruptions due to the Middle East war. India is one of few countries in the region that has not increased prices of petrol and diesel for domestic consumers or rationed supplies. But it has increased prices of liquefied petroleum gas (LPG) – a primary cooking fuel in the country – after disruptions following the US-Israeli strikes on Iran, which led to Iran’s near-total blockade of the strategic Strait of Hormuz. “We have to reduce our use of petrol and diesel. In cities with metro lines, we should try to travel by metro ... If we must use a car, then we should try to car pool,“ Modi said Sunday, addressing a gathering in southern Telangana state. He said restrictions on use were also necessary to save foreign currency spent on fuel imports. “We must also place a strong emphasis on saving foreign exchange, as petrol and diesel have become so expensive globally.” Modi also urged people to resume energy-saving schemes that were in place during the Covid pandemic. “We should prioritise work from home, online conferences, and virtual meetings again,“ he said. Hardeep Singh Puri, India’s minister for petroleum and natural gas, said oil marketing companies (OMCs) had taken a hit on their revenues while ensuring “uninterrupted energy imports and supply”. “OMCs are buying crude, gas and LPG at higher cost, but in order to protect consumers, they are selling final products at lower cost leading to massive mounting losses of upto 1,000 crore rupees (RM470 $120 million) per day.“ He added that losses for the government, after reducing taxes on diesel and petrol for domestic consumption, “saw revenue losses of 14,000 crore rupees in a month”. He urged citizens to turn Modi’s “empathetic appeal” into a mass movement “to save and conserve energy”. – AFP

SYDNEY: Australia is expected to deliver a smaller than initially forecast budget deficit this week as the government banks revenue windfalls from higher commodity prices, while aiming to deliver politically risky reforms without worsening inflation. The budget is tipped to remain in the red over the coming years just as the Middle East conflict darkens the economic outlook. The central bank has lifted interest rates three times this year to head off the war-driven energy shock, warning growth will stay anemic and unemployment will rise further. Ahead of his fifth budget today, Treasurer Jim Chalmers has said the budget would be “responsible”, saving more than it spends, but also “ambitious” with tax reforms to address intergenerational inequality facing young Australians. “People shouldn’t expect there will be big near-term cash splashes in the budget. It is a very responsible budget. There is a lot of spending restraint,” said Chalmers in an interview with SBS News on Sunday. Analysts expect a revenue boost from high inflation and commodity prices, tipping the budget shortfall for 2025/26 financial year will not be as large as the A$36.8 billion (RM104 billion) deficit first flagged in the government’s mid-year economic projections in December. That should carry over to the next 2026/27 year. For this financial year, the Commonwealth Bank of Australia expected a deficit of A$29 billion, UBS tipped A$25 billion and Westpac forecast A$23.8 billion. “In our view, the Budget will largely be judged on how much new spending it BEIJING: China’s consumer prices ticked up in April as the cost of crude oil rose globally due to the Iran war, official data showed yesterday. Helped by the surging oil costs, factory gate prices also continued to show signs of recovery, rising for a second straight month after being stuck in negative territory since October 2022. However, analysts warn deflation is still a threat for the world’s second-largest economy as prices in other sectors continue to fall and overcapacity remains a headache. China’s consumer price index (CPI), a key measure of inflation, last month rose 1.2% year-on-year, data from the National Bureau of Statistics showed. The jump was due to “changes in international crude oil prices and increased demand for holiday travel”, according to Dong Lijuan, chief NBS statistician. Domestic gas prices rose 19.3% on-year, Dong said, impacted by international commodity price fluctuations. A five-day holiday at the beginning of May also typically sees more travel and spending in the weeks preceding it. However, last month’s CPI was still well below the government’s 2% target for the year. The April producer price index (PPI), which measures wholesale inflation, increased by 2.8% on-year – up from 0.5% in March. It beat a Bloomberg forecast of 1.8% and marked the quickest pace since July 2022, when the PPI rose by 4.2% on-year. The gauge slipped into negative territory that October and did not reverse until March. “The rise in international crude oil prices drove up prices in domestic petroleum-related sectors,“ the NBS’ Dong said in a statement, listing fuel processing and manufacturing of raw materials.

federal or state – will make it harder to dampen demand. Australia’s low debt to GDP ratio and coveted AAA sovereign credit rating usually mean the federal budget holds few surprises for markets. However, this year will be closely watched due to possible changes to property and investment taxes, the very reforms that cost Labor a national election just seven years ago. Hopes are running high that Chalmers will unveil changes to capital gains tax discounts and negative gearing, policies that have been long criticised for skewing housing ownership towards wealthy investors as young Australians are increasingly locked out of the property market. While details remain thin, local media reports the government may scrap the 50% capital gains tax discount on assets held for more than a year and return to the pre-1999 policy of taxing inflation-indexed gains. Negative gearing, which allows investment losses to be offset against taxable income, is likely to be limited. The budget will also set aside A$10 billion to establish a permanent government-owned fuel reserve as the Iran war triggered localised fuel shortages across the country. The government has also committed an extra A$53 billion in defence spending over the next decade, including a A$14 billion lift over the budget forecast period. – Reuters

contains,” said Luke Yeaman, chief economist at the CBA. “There is an opportunity to deliver more tax reform or leave the structural budget position stronger overall. Too much new spending will undermine this, and risks driving up inflation and interest rates.” The Labor government has already announced a major overhaul to its disability welfare programme, whose ballooning costs are projected to blow a hole in budget bottom lines. That is expected to deliver savings worth more than A$35 billion over the next four years. Housing tax reforms could also raise revenues, but details are not finalised yet. Targeted cost-of-living relief, including a potential extension of fuel excise cuts, is still expected, though analysts warn it must be offset by savings elsewhere to avoid stoking inflation. Since taking office in 2022, the Labor government has delivered income tax cuts, alongside energy and rent relief, to ease cost-of-living pressures. However, economic demand is still running too hot, complicating the inflation challenge. The Reserve Bank of Australia has fully reversed three rate cuts from last year, lifting interest rates to 4.35% to match their post-pandemic highs. Governor Michele Bullock has warned any cash handout from governments –

China consumer prices rise on oil price surge

A man with a cart goes down an escalator at a supermarket in Beijing yesterday. – AFPPIC

But analysts warn shocks caused by oil blockages in the Middle East are temporary. “The fallout from the Iran War pushed up inflation again in April but price pressures

remain narrow in scope and aren’t likely to build into a wider reflationary impulse”, Capital Economics said in a note. “(With) overcapacity in most sectors

unresolved and domestic demand growth still sluggish, the ingredients for a sustained reflationary impulse still appear to be missing.” – AFP