Treasurer Scott Morrison to tighten government spending, fund tax cuts

FEDERAL Treasurer Scott Morrison has vowed to keep a tight lid on government spending so that voters can be rewarded with tax cuts.

Treasurer Scott Morrison in Question Time in the House of Representatives Chamber, Parliament House in Canberra.

FEDERAL Treasurer Scott Morrison has vowed to keep a tight lid on government spending so that voters can be rewarded with tax cuts.

Mr Morrison will today flag spending cuts in the May Budget and argue that Australia needs strong fiscal discipline to boost economic growth.

“Treasury modelling shows that high ‘tax and spend’ policies are a drag on the economy,’’ Mr Morrison will tell the National Press Club.

“Keeping a lid on spending will keep taxes lower, and lower taxes reward hardworking Australians and back them to work, save and invest in our new economy.

“We need to get expenditure below revenue, not push revenue through higher taxes above expenditure.”

The December federal budget update showed the deficit had blown out $37.5 billion for 2015-16 and the government was unlikely to achieve a surplus before 2021.

Mr Morrison will today say that government spending remains a problem and warn that using budget savings to fund new government spending can be risky.

“The problem with new spends supposedly offset by saves, is that the spending is locked in and the saving gets blocked,’’ he will say.

The Treasurer will argue that budget savings and higher revenue from economic growth should be used to cut taxes.

“Government budget savings and increases in revenue as a result of economic growth should benefit Australian income taxpayers,’’ he will say.

Mr Morrison’s will make the speech after Prime Minister Malcolm Turnbull was yesterday forced to explicitly rule out take any proposals for an increased GST to the next election.

Mr Turnbull was quizzed about the consumption tax after Employment Minister Michaelia Cash said possible changes to the GST remained on “the table”.

“I can assure you that the government will not be taking a proposal to increase the GST to the election,” Mr Turnbull said.

“It has been demonstrated to us that increasing the GST and then reducing income tax, after you take into account all of the compensation that you would need to ensure the change was equitable, simply is not justified in economic terms.”

Some Coalition MPs remain worried the May Budget could include a tightening of negative gearing tax concessions.

Opposition Leader Bill Shorten said Mr Morrison should today rule out any changes to negative gearing which affected existing investments.

“Any decision that has any impact on current investments is a retrospective tax,’’ Mr Shorten said last night.

“You can’t change the rules halfway through the game — which is why under Labor’s policy, all investments currently negatively geared or purchased before 1 July 2017 will not be affected.”

Under Labor’s plan, negative gearing would only be available for new investment properties.

The tax reform agenda the Government will use the Budget to fully outline the tax reform plan it will take to the general election later this year.