Budget 2018: Income tax cuts not ‘mammoth’, Morrison says

Scott Morrison says Tuesday’s budget will contain ‘real’ income tax cuts, but that they will ‘affordable’.

Treasurer Scott Morrison at Parliament House in Canberra today. Picture: Kym Smith

Treasurer Scott Morrison says the budget will contain “real” income tax cuts, but that they will “affordable”, and “not mammoth”.

Mr Morrison said the government had flagged tax relief for low- and middle-income earners for many months, and would deliver on Tuesday.

“There’s a good reason for that: they have been doing it tough, it’s been some time since they have had a decent pay rise, and as we have seen things improve and the economy has strengthened, then they should be the first to whom we seek to provide that relief, tax relief for working Australians,” the Treasurer told Nine Network political editor Chris Uhlmann in a pre-budget interview.

“We need to provide reward and incentive for people who have been working hard.”

Mr Morrison would not confirm that the cuts will apply in the coming financial year.

“The budget is on Tuesday night, but what we are making really clear is we will only do those things that are affordable and that are responsible,” he said.

“The Prime Minister said that when he first flagged this last November, and so our budget is one that stays on track to a balanced budget, but it is also one that is strengthening that economy so we can do these things.

“We think higher taxes is not good for the economy, it’s not good for Australians because whoever’s levied with them, everyone else pays for it.

“What we have said is we would provide tax relief that was affordable and responsible, so I’m not going to pretend these are going to be mammoth tax cuts or anything like that.

“That wouldn’t be responsible. They will be what’s affordable. They will be real and they will be within what the budget can afford.”

Returning to surplus “as soon as possible”

Mr Morrison said the government’s fiscal rule of returning the budget to surplus “as soon as possible” still applied, but refused to be drawn on when that would be.

The government’s Mid-Year Economic and Fiscal Outlook, delivered in December, forecast a budget surplus of $10.2 billion or 0.5 per cent of GDP by 2020-21, prompting Labor treasury spokesman Chris Bowen to this week accuse Mr Morrison of “giving up” on the task of budget repair and the government’s previous aim of 1 per cent.

Mr Morrison said the government could make spending and tax cut pledges because it was focused on returning the budget to surplus.

“We are not getting there by taxing the economy, because that is like the snake eating itself from the tail,” he said.

Mr Morrison said the government’s tax “speed limit” of 23.9 per cent of GDP would also help.

Government debt is currently forecast to peak at a historic high of $684 billion, but Mr Morrison said the government had been bringing the deficit down year after year.

“The debt growth, when we came to office, has reduced by two-thirds,” he said.

Mr Morrison said the government was not using more of the cash generated by a stronger economy to pay down debt because the money was needed to keep the economy going.

“You’ve got to run a strong economy where people can be guaranteed the essential services they rely on and you need to have a responsible, methodical path back to budget balance which is what we have been doing, for five successive statements and it will be six on Tuesday night,” he said.

However, Mr Morrison would not say whether the government plans to announce an earlier return to surplus on Tuesday night.

“As my good friend and colleague (Finance Minister) Mathias Cormann says, the budget is on Tuesday night at 7:30,” he said.

Pressed on whether he would be aiming for a 1 per cent of GDP surplus, Mr Morrison said the government’s fiscal rule was that they would return to that level “as soon as possible”

“That’s what the fiscal rules say,” he said.

“Tuesday night, tune in.”

‘We’ve kept every promise since 2016’

Asked whether the government had a “trust deficit”, given it lifted taxes on people earning more than $180,000 on coming to government in 2013, Mr Morrison conspicuously omitted the Abbott years, saying the Turnbull government had kept every promise since being elected in 2016.

“At the 2016 election, and from then we have kept every promise we made,” Mr Morrison said.

“When Malcolm Turnbull took our government to the last election and I was there as Treasurer, every promise, every commitment we made at that election, we have kept.”

‘The best form of welfare is a job’

Asked about calls from leading economist Chris Richardson and Business Council boss Jennifer Westacott to increase welfare payments, Mr Morrison said the best form of welfare was a job.

And the Treasurer refused to confirm that the government has dropped its plan to axe the energy supplement for welfare recipients.

“We will outline what we are doing on Tuesday night,” he said.

“In last year’s budget we made a whole range of changes of matters that were not progressing through the Senate.

“Now there are still a number of matters that are still before the Senate including that one, and these are matters that we will be provisioning for in this budget, but what I mean by that is what we’ve learnt over some years is you can’t always predict what the Senate is going to do and you need to give yourself some room for Mathias and his colleagues to be able to work matters through the Senate.”

Mr Morrison said the government would still proceed with its planned company tax cuts, highlighting the banking levy amid Labor’s campaign against tax cuts for the banks, which has been bolstered by damning revelations during the banking royal commission.

New PBS drug listing

Health Minister Greg Hunt has today announced the listing on the Pharmaceutical Benefits Scheme of spinal muscular atrophy drug Spinraza, at a cost to taxpayers of $240 million.

“When it comes to essential services you can’t really go much past this,” Mr Morrison said.

“Spinal muscular atrophy is a heartbreaking condition, a genetic condition that is suffered by not a lot of young Australians, but the sooner you can diagnose it early, the better.

“Now those families who currently have children that are dealing with this condition have to shell out almost $370,000 a year for that medication for what’s called Spinraza.

“Now we’re are putting that on the PBS, and those families are already going to be able to access their drugs right now, we have been working with the medicine sector to ensure they can achieve it right now.”

Mr Morrison said the PBS listing would reduce the cost of the drug to less than $40 a script.