Attack on bracket creep a start

After three weeks of giveaways and faux reform from both sides of politics, Peter Dutton finally has opened the discussion on what is needed to start rebuilding the nation’s economic fortunes.

In an interview with editor-at-large Paul Kelly and national editor Dennis Shanahan, Mr Dutton declared his aspiration to index personal income tax scales to tackle bracket creep.

The Opposition Leader is correct that our personal tax system stifles productivity, entrepreneurialism and hard work. He is also right to say tax reform is expensive and must be done when the budget can afford it.

Mr Dutton has invoked the legacy of the Howard-Costello government, which delivered on budget repair in its first term before embarking on structural changes, including the GST, that helped set up Australia for decades of national prosperity.

By opening up the discussion Mr Dutton sets a marker beyond the election campaign and a possible first term. It shows political bravery in avoiding the small-target strategy used by Anthony Albanese against Scott Morrison. And it serves as a marker for voters as to where the real contest of economic ideas must be.

Welcome as the longer-term aim of tax indexation is, voters are entitled to ask: Is that it?

The 2025 election campaign to date has been a race to the bottom on the economic front. Mr Albanese got in early with a pledge to reduce the lowest two tax scales permanently. This may be smart politics, but it is dumb tax reform policy. By promising a rerun of the “tax cuts for everyone” campaign that followed Labor’s broken election promise on the stage three tax cuts, the ALP’s intention was to steal flexibility from Mr Dutton for greater reform.

Mr Dutton responded with a temporary 50 per cent cut to fuel excise that was cost-of-living support targeted at outer suburbs, where he believes the real election contest lies. From there it has been an economic horror show for policy purists, with competing measures designed to quell voter concerns about the high cost and low availability of housing.

Mr Albanese is offering for government to take over mortgage insurance for new buyers, who will need only a 5 per cent deposit. The Coalition wants to redraw lending rules to lower the risk buffers for lenders, allow new buyers to access a portion of their superannuation savings and, most controversially, allow some new home buyers to deduct their interest costs from taxable earnings. The political imperative to do something is understandable, but the likely impact of the housing policies being offered by all sides is to keep putting upward pressure on the cost of housing.

This will not change without a rethink of policies and actions at a state level. If Jim Chalmers’ inquiry to Treasury about negative gearing does eventually make its way to modelling and policy, the damage to new buyers, renters and investors will be made only worse. Alongside housing, most of the election campaign action has been on ways to keep spending rather than better manage what government collects from taxpayers. While being able to present a big picture on what is needed to restore financial responsibility and promote private sector growth to build the economy, Mr Dutton has shown himself too willing to sign off on what has been offered by Labor.

The erratic behaviour of US President Donald Trump has not helped. But reticence can be perceived as weakness, and the reluctance to stand by Jacinta Nampijinpa Price’s desire to make Australia great again suggests a party that is overly sensitive and unsure about what it actually stands for. Senator Nampijinpa Price speaks for a lot of people when she says our standard of living has gone backwards in the past three years.

Putting indexation of tax scales on the table is good, but Mr Dutton must go further. Ruling out changes to eligibility for access to the National Disability Insurance Scheme is a wrong direction. But both sides of politics have a responsibility to rein in spending on the $48.5bn program. Eligibility is a good place to start given that of the more than 680,000 people on the NDIS, almost one-quarter are under the age of nine.

This is not what was intended and a failure to address it will only cement further a culture of welfare entitlement that will be a permanent drag on the prosperity of all Australians.

With a promise to address bracket creep for personal income tax Mr Dutton has shown he is capable of arguing the longer-term economic point of view. He needs to deliver more vision and less me-tooism if he wants to persuade wavering voters.