Coalition rules out income tax cuts as Dutton scrambles to find savings

Opposition Leader Peter Dutton has no plans to offer income tax cuts to win over financially strained voters as his razor gang knocks back spending requests from shadow ministers who fail to offer savings in their portfolios to demonstrate budget restraint.

The opposition, spearheaded by shadow treasurer Angus Taylor, is still working out how to make good on its pledge to shed 36,000 public servants, planning to use the savings to underwrite Dutton’s pledge to match Labor’s $8.5 billion Medicare boost, while aiming to improve the budget bottom line.

Peter Dutton and his shadow treasurer Angus Taylor talk in Question Time.Credit: Dominic Lorrimer

Three senior Coalition MPs and several other senior sources said that, despite public speculation, there was no discussion or plans for personal tax relief inside the shadow expenditure review committee, which is meeting frequently to finalise policies as Prime Minister Anthony Albanese is expected to call an election in the next two weeks.

“It’s just not on our agenda,” said one source who was unable to talk publicly about election planning. Another source said, “there’s not enough money” and that the Coalition was struggling to find enough savings even though it had opposed about $90 billion in Labor spending this term on items such as housing and energy funds.

One MP said tax cuts could not be ruled out if Labor’s pre-election budget outlook gave the opposition room to move.

Finance spokeswoman Jane Hume and Taylor are meeting at a high tempo to come up with savings.Credit: Louise Kennerley

Dutton’s call to match Labor’s $8.5 billion Medicare boost made the task of balancing the Coalition’s own books harder as it tries to give life to its “back-to-basics” rhetoric with a substantially better budget position than Labor’s.

Dutton, Taylor and opposition finance spokeswoman Jane Hume are also facing spending pressure on areas such as defence, where the Coalition has suggested it would spend more than Labor.

The Coalition has a convincing 17-point lead over Labor on the critical question of economic management in the latest Resolve Political Monitor, but this month’s interest rate cut has buoyed Labor’s hopes and placed pressure on the opposition to release compelling economic policies.

Institute of Public Affairs senior fellow John Roskam said it was unclear if Dutton’s team had crafted an alternative vision of how to run the economy.

“The Coalition is at risk of just running a ‘Labor-lite’ strategy that is just a copy of Labor’s big spending policies. The Coalition hasn’t yet crafted an alternative narrative that would gain it public support for an economic reform agenda around productivity improvement and income tax cuts,” he said.

Neither party is pitching big-picture policies on tax or productivity heading into the election.

Labor has focused on new spending on bulk-billing and waiving student debts, while the Coalition has sought to sell a broad agenda on reining in spending and inflation, while also announcing tax changes for business expenses – including the instant asset write-off – and a move to pursue nuclear energy.

Albanese and Chalmers re-jigged the Morrison government’s stage 3 tax cuts in January last year to prioritise middle and low-income earners. Speculation has persisted since then that the Coalition, which supported Labor’s changes after initially criticising them, would serve up extra tax relief, but Dutton has repeatedly said he would only do so if the nation could afford it.

Australia relied too heavily on income tax revenue compared to other nations, prominent economist Chris Richardson said, but it was unlikely major parties would make the case so close to an election to tax resources and superannuation more heavily to offset income tax cuts.

Richardson said the 1993 Keating-Hewson election and the 2019 Morrison-Shorten poll proved the risk of presenting a sprawling economic manifesto from opposition, acting as a warning for Dutton.

“And if they do put extra money into tax cuts, the bulk of tax is paid by the wealthy and if you give extra tax cuts to the wealthy, that’s politically unpopular,” Richardson said.

Much of what the opposition has promised by way of cuts revolves around 36,000 extra public servants who have been hired since Labor took office in 2022. Shadow ministers have given a series of different explanations on the opposition’s plans, with some saying the 36,000 “will go” and others suggesting “natural attrition” would drive down numbers.

A statement from Dutton on Monday about saving $24 billion from the money spent on the 36,000 public servants employed under Labor caught some MPs by surprise as the shadow cabinet has not settled on its plans for the cuts.

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