The Albanese government has been praised for taking the first step towards budget repair by banking its unexpected commodities windfall, with serious tax reform likely to be addressed in future budgets.
With government debt expected to hit the trillion dollar mark in the next financial year and the debt interest bill the fastest-growing area of government expenditure, the treasurer is under pressure to improve the budget bottom line.
Jim Chalmers said that’s why the government opted to bank – not spend – the billions in tax upgrades courtesy of high commodity prices and strong employment.
Nearly 100 per cent of the budget savings boost from commodity prices will be returned to the budget over the next two years.
Dr Chalmers said it wasn’t common practice to keep upgraded tax receipts when governments were fortunate enough to receive them.
“On average, across those revisions over the past quarter-century, about 60 per cent has been spent, and about 40 per cent has been returned to the bottom line,” he told reporters on Wednesday.
The other way the Labor government looked to improve the budget position was to keep spending contained, aside from some of its key election commitments, such as cheaper child care and medicines.
But missing from the budget was substantial tax reform, with multinational tax avoidance measures expected to return $1 billion extra tax to the budget.
H&R tax expert Mark Chapman said the treasurer was likely deferring tax reform until a later date.
“What will happen to the stage three tax cuts that are scheduled to start from July 1, 2024, and provide substantial tax breaks, largely to the wealthiest?” he asked.
The tax cuts will see the 32.5 per cent marginal tax rate cut to 30 per cent to create one big tax bracket between $45,000 and $200,000.
Shadow treasurer Angus Taylor said Labor’s budget was a placeholder for tax increases.
“There is nothing in this budget suggesting that Labor supports the stage three tax cuts,” he said.
But he said it was important to send a signal to Australian workers that they were going to keep at least 70 cents in the dollar, so they have an incentive to “take risks, build their businesses and have a real go”.
Prime Minister Anthony Albanese did not rule out the possibility of tax reform in this term of government.
“We will have a discussion with the Australian people over coming years about reform,” Mr Albanese told ABC radio.
“The job of reform is never done, the job of reform has to be continuous. I want Australia to be as strong and resilient as we can be.”
(Australian Associated Press)