Jim Chalmers has announced the most ambitious and politically risky tax changes since the Howard era as part of a federal budget that defies the looming economic threat of the Iran war to push Australia along the “hard road to reform”.

Arguing that the Australian public is ready for difficult choices aimed at reviving intergenerational fairness and the collapsing dream of home ownership, the government will scale back tax breaks for landlords by abolishing negative gearing for new investors and replacing the 50% capital gains tax discount with the inflation-linked approach that existed before 1999.

Treasury modelling suggests that the property tax changes will help an extra 75,000 Australians “achieve the dream of home ownership” over the coming decade.

“I think the time is right for these kinds of reforms and for this level of ambition,” the treasurer said.

“Around the Australian community there is an appetite for a government which is prepared to take on some difficult things. It has become increasingly clear to us, for example, that the housing challenge is primarily about supply but it is not exclusively about supply.”

The budget also includes the previously announced deep cuts to the national disability insurance scheme, with the “difficult but necessary reform” slated to save $36.2bn over the four-year forward estimates.

The property tax changes that cost Labor two federal elections are now likely to receive an easy passage through parliament, as Anthony Albanese flexes his party’s huge majority in the lower house and a friendly Senate.

The budget also includes tax relief for more than 13 million workers in the form of an automatic $250 “working Australians tax offset” but the relief will be delayed until 2027-28.

This sits alongside a $1,000 instant tax deduction that will deliver an average $205 benefit for 6.2 million people in 2026-27.

The budget includes $2.6bn for the previously announced 26-cent temporary cut to the fuel excise.

But Labor held back from announcing any major new cost-of-living support measures, in a major break from what has been the centrepiece for budgets at the federal and state level since the Covid pandemic began.

Instead, the government preferred to keep its powder dry as the Treasury modelled a worst-case scenario where a doubling in oil prices to US$200 a barrel would drive inflation above 7%, unemployment above 5% and send the economy backwards in the September quarter.

“A lesser government would have used the developments overseas as an excuse to do less, and what we’ve tried to do is accelerate the reform and not just absorb the shock,” Chalmers said.

“In an era where people feel like the system no longer works for them, this budget doesn’t just acknowledge that – it acts on it.

“Tonight we choose the hard road to reform, not the path of least resistance. By responding to the pressure Australians confront today, and fulfilling our obligations and responsibilities to the generations to come.”

Assisted by major upgrades to tax revenues from higher commodity prices and inflation, the budget shows cumulative improvements to the bottom line of $44.9bn over five years compared with the December fiscal update.

But the finances remain firmly in the red, with an estimated deficit of $28.3bn in 2025-26, growing to $34.4bn in 2028-29. The “structural savings” such as the NDIS reforms allow the budget to project a return to surplus in a decade’s time.

The government expects to recoup $36.2bn by curbing the national disability insurance scheme’s growth over the next four years as it looks to return to the NDIS’s “original purpose” of supporting people with “significant and permanent disability”.

The treasurer, Jim Chalmers, said the budget’s savings package amounted to genuine economic reform, beyond the “usual nips and tucks”.

“It is all about saving the NDIS from itself,” he said on Tuesday.

“It’s all about making sure that we can continue to provide [the] levels of support people need and deserve in a way the country can afford.”

The budget papers show changes to limit who can access the NDIS – which supports more than 760,000 Australians with disabilities – will reduce participant payments by at least $37.8bn until 2030.

The health minister, Mark Butler, announced last month he would introduce drastic changes to bring down the scheme’s growth to 2% every year until the end of the decade to prevent its budget soaring past the $100bn-a-year mark by the mid-2030s.

The budget papers show the plan to reduce the NDIS’s growth is by far the budget’s single largest savings measure.

The National Disability Insurance Agency, which runs the scheme, also faces cuts, with its headcount reduced by 669 in the next financial year to 9,840.

But the NDIS Quality and Safeguards Commission will gain almost 200 more staff as the government widens registration requirements for providers.

The budget papers show the government expects payments made to participants to plateau at between $53bn and $54bn a year until 2030 while employee benefits will halve from 2027-28.

Butler will introduce legislation this week to begin his overhaul of the scheme. It’s expected to focus on limiting the number of unscheduled reassessments, which the minister said had been a “major driver” of spending growth in recent years.

The scheme’s cost grew by more than 10.3% last year and it had been on track to cost $63bn by 2028-29. Without changes, it had been projected to support more than 1 million participants by 2033 and to cost $95.8bn in 2034-35.

“The NDIS costs too much and is growing too fast, put alongside any comparable government program,” Butler said last month.

“And unless we take action to make it sustainable, it simply will not be there in the future for the Australians who need it most.”

He said the eligibility changes would reduce the number of people using the scheme to about 600,000 by 2030, down from forecasts of 900,000 participants.

A new standardised assessment tool to determine a person’s NDIS access will be in place from 1 January 2028.

“These are hard decisions – but they’re unavoidable and urgent,” Butler said.

Programs outside the NDIS for those no longer eligible will receive $3bn over the next five years from the federal government, a figure to be matched by states and territories.

The Thriving Kids program for children under nine with autism and developmental delays will begin rolling out from October and is expected to be fully operational from January 2028.

The unusual pursuit was captured on CCTV cameras inside the Philippine senate. Ronald dela Rosa, a longtime ally of the former president Rodrigo Duterte, raced along the hallways of the upper house complex, stumbling on the staircase, as he fled government agents.

“They want to forcibly bring me to The Hague, to surrender me there,” Dela Rosa said later on a Facebook livestream, pleading for public support.

He served as police chief under Duterte and is named as a co-perpetrator in a case at the international criminal court (ICC) accusing the former leader of crimes against humanity over his anti-drugs crackdowns, in which thousands of people were killed. The ICC confirmed on Monday night it had issued an arrest warrant for Dela Rosa.

By evening, barbed wire and riot police surrounded the senate compound. The national union of journalists in the Philippines issued a statement calling for calm, saying media workers had been blocked from leaving or entering the complex.

Dela Rosa slept at the senate office overnight after its new president, Alan Peter Cayetano, another Duterte ally, announced it was offering protective custody. Dela Rosa has previously denied any wrongdoing.

The chaos, which coincided with a vote by the lower house to impeach the vice-president, Sara Duterte, the former president’s daughter, capped off a dramatic day in Philippine politics and marked the latest chapter in a bitter power struggle between Sara Duterte and the president, Ferdinand Marcos Jr.

The two leaders were once allies who ran on a joint campaign in the 2022 election. Relations quickly soured, however, and they are now embroiled in a fierce feud that intensified last year when Rodrigo Duterte was arrested in Manila and flown to the ICC in The Hague.

The court’s arrest warrant for Dela Rosa had been issued confidentially in November. Unconfirmed reports of his looming arrest had been circulating ever since, prompting Dela Rosa to stay away from the senate for months. He chose to attend a hearing on Monday, however, when senators elected Cayetano as its president. Cayetano said the senate would allow an arrest only “under the condition that it is a Philippine court”.

Cayetano’s appointment underlines the Dutertes’ stronger position in the senate, which is crucial for the vice-president’s survival after Monday’s impeachment vote.

The complaints against her – of misusing public funds, amassing unexplained wealth and threatening the lives of the president and first lady – will be passed to the senate for trial. If found guilty, Duterte will be banned from public office, derailing her plan to run for president in 2028.

She will need only nine senators to back her in order to be acquitted. Analysts say much will depend on not only the outcome of any impeachment trial but also how damaging such hearings are to her campaign.

Jean Encinas-Franco, a political science professor at the University of the Philippines Diliman, said: “If [the Dutertes] have the majority [in the senate] then they can actually allow or not allow some pieces of evidence to appear in that trial. They can allow or not allow some witnesses to be included.”

Sara Duterte has led several opinion polls despite the legal battles and allegations surrounding her and her father. They both have denied any wrongdoing.

Families whose relatives were killed during the anti-drug killings have called for Dela Rosa to be handed over to the ICC. He was pictured in local media on Tuesday emerging from a fellow senator’s office dressed in shorts and T-shirt. It is unclear how long he will remain there or what will happen when he emerges.

Llore Pasco, whose two sons were killed at the height of the crackdowns, said: “He played a major role in carrying out Duterte’s bloody war on drugs.” Like Duterte, she said, Dela Rosa “deserves to be jailed and held accountable”.