Cameron England: The pocketful of cash might appeal to voters, but it might cause problems down the track

Tax cuts will put more money in the pockets of Australians from 2024 – but that may have a bad effect on inflation, writes Cameron England.

With a pre-election cash-splash a favoured tactic of both sides of politics, this week’s high inflation figures pose quite the conundrum for our major political parties in the lead-up to the May 21 federal election.

It is the natural inclination of the 21st century Australian politician to promise to put more money in your pocket if you elect them rather than the other mob and, indeed, both are already promising to do just that.

The third stage of Treasurer Josh Frydenberg’s income tax plan, first announced in 2019, will come into force in the 2024-25 financial year, and will bring in a 30 per cent tax rate for everyone earning $45,000-$200,000.

Labor last year announced it would support the stage three changes, meaning in coming years, further tens of billions of inflationary dollars are expected to be unleashed by Australian consumers.

Don’t get used to the handouts.

Ancient history perhaps, so they both get a free pass on that one, but going forward, as former Prime Minister’s John Howard’s 2004 pre-election mantra went, “who do you trust to keep interest rates low?”

That rhetorical question did not age well, but it’s one which voters will certainly be asking, and it’s a difficult standard for politicians to live up to while also laying out an attractive pre-election pitch.

Prime Minister Scott Morrison has been keen to emphasise the role that the war in Ukraine and supply chain issues have had on inflation. And these are figures that are being seen in countries right around the world.

He’s certainly not wrong on this front, but it lays bare the fault in any political leader laying claim to the ability to control interest rates.

While domestic governments certainly have great capacity to make things worse, they are at often the mercy of global events and have limited tools at their disposal to make things better.

Not that they won’t claim credit, of course, should the pendulum in the end swing their way.