Treasury really to blame for broken tax cut promise

So now we get the truth, Treasury really was off on a frolic all of its own, in coming up with the Chalmers and Albo’s plan to break the Stage 3 tax cut promise.

So now we get the truth: Treasury really was off on a frolic all of its own, in coming up with the plan to break the Stage 3 tax cut promise.

The revelation also explains the curious opening to the Treasury statement, that I noted last week: “this (Treasury) advice paper recommends” the changes.

Treasury deputy secretary Diane Brown told the Senate Monday that the proposed revamp was not done at the request of Treasurer Jim Chalmers.

He’d only asked Treasury – back on December 11 – for further options in providing cost-of-living relief.

This intersected, according to Ms Brown, with concurrent musings by Treasury head Steven Kennedy “about how to provide cost-of-living relief without adding to inflationary pressures”.

So the die was very neatly, very cutely, all-but cast two weeks before Christmas.

Even Blind Freddy would have seen that if you wanted to put billions of dollars in the pockets of low and middle-income earners – providing cost-of-living relief - this was the utterly inevitable way any advisor would go.

You would be taking already legislated and, importantly, already budgeted tax cuts, and redirecting them, or most of them, from the higher end to the middle and bottom.

There’d be little or no change to the budgeted bottom line – so, it wouldn’t ‘add to overall demand’ vis-a-viz the budget numbers.

Voila: Magic fiscal and economic pudding Kennedy-Chalmers 2024-style.

Indeed we actually got a slight anti-inflation tightening – thanks to the rebirth of the 37c tax bracket and so more aggressive bracket creep.

Treasurer Jim Chalmers. Picture: Adam Head

Treasury said that would add $28bn to the budget bottom line, albeit over ten years. In reality,

utterly trivial. But ‘their’ way, not yours.

The political bottom line was that prime minister and treasurer could claim: don’t blame us for the broken promise; Treasury made us do it. Of course, for the good of the country.

While at the same time, pocketing the credit from the 70 per cent of taxpayers, and voters, who would now get a surprise additional tax cut. To start from July 1, running neatly into the election next March.

Now, while any half-adequate economist, including Treasury head Kennedy, would know that if you wanted “cost-of-living relief without adding to inflation pressures”, reshuffling legislated/budgeted tax cuts, that had not yet started, would be an absolute no-brainer.

The ‘interesting’ question, on a number of levels, is whether Treasurer Chalmers knew that, when he asked Secretary Kennedy?

He should have, at the very least, have understood that back on December 11, he had set a hare running.

How can we put more money in the pockets of 11m low and middle-income earners? Hmm, surely no-one would think of redirecting those pending tax cuts?

The politics was cute. Some mix of: Treasury made me break our promise; we didn’t have a clue this would be suggested, until, well, it was; and anyway 11m voters will be happy we did break the promise.

Even our ‘cash rate’ PM can do that math: take from 5m, largely likely Coalition, voters and give to 11m voters.

Starting nine months from an election, and continuing every week up to and through the election.

Originally published as Treasury really to blame for broken tax cut promise