‘Electoral bribe’: economists slam Coalition tax offset

Economists have slammed the Coalition’s proposed ‘Cost-of-­Living Tax Offset, calling it an ‘electoral bribe’ that could add to inflation and take away from the budget bottom line.

Peter Dutton at his party's campaign launch in western Sydney on Sunday. Picture: AP

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Economists have slammed the Coalition’s proposed “Cost-of-­Living Tax Offset”, calling it an “electoral bribe” that could add to inflation and take away from the budget bottom line, despite ­Coalition calls for a restoration of a budget surplus in the face of global economic headwinds.

At the same time, Labor offered to streamline tax deduction and earn some a bonus tax offset for work-related expenses by offering a $1000 tax deduction instead of claiming individual items.

“No paperwork, no box of receipts, no scrolling through your online banking – just tick the box and your return is ready,” Anthony Albanese said on Sunday.

The Labor Party claimed it would benefit 39 per cent of taxpayers – some 5.7 million people – who claim less than $1000 in ­deductions.

The $10bn Coalition pledge would see taxpayers who earn up to $144,000 a year get up to $1200 in tax relief in their July 2026 tax return, with those earning between $48,000 and $104,000 getting the full discount.

“It’s an electoral bribe,” economist Saul Eslake said.

“The ­Coalition’s not the only one offering electoral bribes, of course – they’re offering two big ones along with the one-year cut to fuel excise.

“The concern is there will be pressure to extend them.”

He cited the previous ­Coalition government’s low to middle income tax offset (LMITO or the “lamington”) which offered up to $1080 in a tax discount for people who earned up to $126,000 – and how it was extended beyond the original intention.

“There will be pressure to extend the fuel excise cut,” Mr Eslake said. “There will be pressure to offer lamingtons in subsequent years. That pressure might be hard to resist.”

Mr Eslake said while the measure might add to the inflation rate by a few decimal percentage points, the larger concern was that money might be the budget revenue “we might need to spend if Donald Trump pushes the world – including us – into recession”.

Economist Saul Eslake.

Economist Chris Richardson. Picture: Richard Jupe

Economist Chris Richardson accused both sides of politics of shirking their responsibility to propose “unpopular policies that would raise our living standards”.

“So all we’re getting is the stuff that redistributes the pie, like the new lamington or, for that matter, anything else,” he said.

“You could do the actual YIMBY (Yes in my back yard) stuff around housing and start overruling – you have to do this or that; we have terrible taxes, you could improve them; we have stupid spending, you could improve them; you have competition reform, you could do all that sort of stuff, but they’re not.

“So all they are doing is redistributing the pie … none of these policies increase the size of the pie, by putting extra money into an economy that still has an inflation problem.”

He said while the policy offering from the parties may “sound like winners”, it would leave many Australians with less “who don’t realise they’re losing”.

“It’s pathetic,” he said. “This is the best that the two major parties in Australia can serve up to us?

“All it does is confirm that they’ve got their heads firmly buried in the sand.”

Peter Dutton last week said the federal budget needed to be “in good shape to prepare ourselves for whatever comes our way”, amid seesawing global share­markets in the wake of the Trump administration tariff announcements.

“Nobody can predict what’s going to happen over the next three years, let alone the next 30 years, but what I do know is that we need to prepare our economy and our budget needs to be in good shape to prepare ourselves for whatever comes our way,” the Opposition Leader said.

Opposition Treasury spokesman Angus Taylor two weeks ago told the National Press Club that “how we provision for budget repair to take the heat off inflation, prepare for future shocks” was a “vital” challenge that faced the next government.