Why the huge cost of this teeny tax cut may come back to bite Labor
Jim Chalmers has dealt a pre-emptive strike to mooted Coalition plans for tax cuts, but at $7b a year this sweetener could leave Aussies with a sugar hangover for decades.
Federal Budget
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It’s hard to get any change from $5 for a coffee in Australia these days, but Treasurer Jim Chalmers is betting big on voters taking a big picture view of his “modest” surprise tax cut.
Considering former treasurer Peter Costello was ridiculed more than two decades ago when he handed Australians a similarly bite-sized tax cut, Mr Chalmers came prepared for the blowback.
Look not at the $5 and then $10 a week saving in “isolation” he urges, instead consider it a small part of a larger whole that also includes cheaper medicines, student debt relief and a $150 energy bill rebate.
It’s a difficult argument to land politically given the high cost economically — about $7bn a year in foregone revenue plunging the budget bottom line deeper into the red for the next decade.
So why bother at all?
The answer to this gamble is due to arrive in just 48 hours, when Opposition leader Peter Dutton delivers his final budget in reply speech before Anthony Albanese must call the 2025 federal election.
The thinking inside Labor has been that this big platform afforded to the Coalition was the perfect opportunity for Mr Dutton to snooker his opponents and bet his own election fortunes on income tax cuts.
The attacks on the Coalition’s thus far meagre policy offerings would fall flat if at the eleventh hour the party unveiled a comparatively bolder plan to put more money back into the pockets of working Australians.
Having just delivered their own deeply in debt budget, it would have been an embarrassing and expensive about-face for Labor to have to scramble to match the opposition a few days later.
So finding — err borrowing — the cash for this blink-and-you’ll-miss-it tax cut may end up worth the ridicule if it keeps Labor in race.
Big picture indeed.
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Originally published as Why the huge cost of this teeny tax cut may come back to bite Labor
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