Anthony Albanese’s tax cut backflip package declares war on aspiration and denies reality
As much as the Prime Minister rails against this notion, Labor’s denial of this reality is a futile exhortation.
The boldness of Albanese’s claim, made at least seven times during his National Press Club address on Thursday, is almost as impressive in its deception as suggesting the scrapping of the stage three tax cuts is rooted in economics.
Unless you aspire to paying a higher tax rate as wages grow, there is nothing aspirational in the Prime Minister’s tax package.
What he and Jim Chalmers have embarked upon is a transparent exercise in wealth and income redistribution, rooted in political ideology.
Economics has little to do with it other than the neutral cost of the changes and Treasury’s brave assumption that giving lower-income earners more money won’t be inflationary. What Albanese has ensured is that aspiration now becomes the new political contest. And political history is littered with the failures of governments hostile to this fundamental principle at the heart of Australian ambition.
It is this that Albanese may discover becomes a more significant political problem than the broken election pledge not to touch the stage three formula.
Politicians are known for lying. And this one is big. The forgiveness equation relies on the quantum of the offer in return. In this case, it amounts to around $800.
As opposition Treasury spokesman Angus Taylor points out, this barely touches the sides of the decline in real disposable income over the past 18 months, which would amount to several thousand dollars.
What Albanese has done is brought bracket creep back into the picture. Over the next couple of years there will be a flood of people moving into the $135,000 bracket. Best estimates are this will add $28bn over the next decade to government coffers. You can see why Treasury isn’t unhappy with it.
This is the middle Australia Albanese says his tax cuts are aimed at.
By Treasury’s own admission, the recalibrated formula does nothing to address inflation itself. And this remains the core problem.
What is killing households is rising taxes, interest rates and prices. Getting inflation under control is the only way to fix it.
Albanese’s admission that the government’s policies to date had not been “effective” in addressing the cost-of-living crisis was an expression of the political urgency that has driven he and Chalmers to this point. They may have come to the decision on Tuesday, but Treasury would have been worked hard by Chalmers on this for some time.
To now be hiding behind Treasury to suggest they are responding to circumstances rather than breaking a promise has echoes of Kevin Rudd and Ken Henry.
What Albanese has delivered the Coalition is the building blocks for a pre-election scare campaign on every other element of aspiration. Negative gearing and capital gains tax will come back into focus. The Coalition will rightly argue Labor can no longer be trusted on anything.
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Anthony Albanese has declared war on the very foundations of aspiration.