‘Won’t make a difference’: What can the $5 tax cut really get you?

With a small coffee costing $4.88 for a hospo business to make in 2025, is the Albanese government’s $5 a week tax cut of any help to Aussies, or is it very “underwhelming”, as a top economist has claimed? It certainly won’t buy you a sanga and milkshake.

A day after the 2003 federal budget, then Howard government minister Amanda Vanstone delivered a hard truth – Australians would struggle to even buy a sandwich and a milkshake under the Liberals’ $4 a week tax cut.

Labor seized on the comments as an admission the average deduction would make little practical difference to pay packets, claiming it was “completely out of touch with the financial pressures on Australian families”.

Fast forward 21 years and the hospitality industry is warning the Albanese government’s $5 a week tax cut won’t even buy a regular cup of coffee when it comes into effect in July 2026.

Treasurer Jim Chalmers, like Senator Vanstone at the time, argued that $250 a year would provide support to households and should be considered in addition to the government’s broader cost of living measures.

Chloe Goodear has said the cut should have gone towards healthcare. Picture: David Crosling

But as a 22-year-old who lives at home, nurse Chloe Goodear said, “I wouldn’t say $5 a week is enough”.

“I don’t think it’s practical and affordable to move out at this age … I believe $5 won’t make a difference to me,” Ms Goodear said.

“I’ve just gone into a career in nursing and I think the government could have put that towards something more tangible (like healthcare).”

Pascoe Vale South accountant Maree Wright, 57, said it should have been given to people on low incomes who needed it.

“It’s good for some people, but for others who are on higher incomes, it’s probably not going to make a lot of difference,” Ms Wright said.

Maree Wright said the cut should have been given to people on low incomes that needed it. Picture: David Crosling

In May 2003, a tuna and salad sandwich was going for $3.90 and flavoured milk was $2.40 at the Parliament House cafeteria, taking the total cost to $6.30.

But costs of goods have soared over the same period with a salad sandwich and a large vanilla milkshake at Essendon cafe Benny & Me costing $17 on Wednesday.

Australian Restaurant and Cafe Association CEO Wes Lambert said it was a “pitiful excuse of a tax cut”, with a small cup of coffee already costing $4.88 just to make.

“The government’s current policies are already putting even a single regular cup of coffee out of reach for tax payers in 2026,” Mr Lambert said.

AMP chief economist Shane Oliver said the “underwhelming” tax cuts would not be noticed by most people and “wouldn’t buy much”.

“The basic problem is that the government can’t afford to give big tax cuts because there’s too much spending,” Mr Oliver said.

“Unless they’re prepared to put a lid on government spending, then they can’t really afford to give decent-sized tax cuts.”

He said the 2003 tax cut — which came in the midst of several years of tax cuts and the start of the mining boom when the Coalition was also paying down debts — was also criticised for the lack of buying power.

A salad sandwich and large milkshake will set you back $17. Picture: David Crosling

Leichhardt MP Warren Entsch, who was a member of the Howard government when comments were made in 2003, said 73c a day in 15 months’ time under Labor was “not going to get you the sugar for the coffee”.

The retiring MP said the major parties should have the “courage” to address the longer challenges that were driving up prices.

“You’ve got to be looking at something that is longer term rather than a quick fix for the election,” Mr Entsch said.