Labor casts doubt over future tax cuts

Labor’s treasury spokesman Jim Chalmers has cast doubt over the government’s phase three tax cuts, warning the $130bn measure will be funded from debt.

Jim Chalmers has cast doubt on the Morrison government’s stage-three tax cuts and says last week’s budget is purely political. Picture: Gary Ramage

Labor’s treasury spokesman Jim Chalmers has cast doubt over the government’s phase three tax cuts, warning the $130bn measure will be funded from debt while declaring “barely anything” in this year’s budget will survive after the election.

In his National Press Club post-budget address on Wednesday, Dr Chalmers will say Josh Frydenberg’s third budget delivers generational debt “without a generational dividend”.

He will also launch a scathing attack against the COVID-19 recovery, crediting the states, Australia’s geographic location and its people for climbing the country out of the recession and saying “it’s time for the commonwealth to live up to its share of the bargain”.

With opposition MPs divided over whether to support the stage three tax cuts due in mid-2024, Dr Chalmers will hint the budget cannot afford them. The deficit is estimated to be $106.6bn next financial year.

Promised by Scott Morrison at the 2019 federal election and legislated soon after, the tax cuts abolish the 37 per cent tax bracket and see Australians earning between $45,000 and $200,000 taxed at 30 per cent.

“What concerns me and my colleagues is that this year’s budget is spending $100bn – all the proceeds of the recovery, and then some – without any lasting social benefit or any long-term economic dividend,” Dr Chalmers will say in his National Press Club post-budget address.

“Of course, this is in addition to baking in the stage three tax cuts for high income earners, at a cost to the bottom line of over $130bn. When the Treasurer airily says he’s funding all this from growth he really means from debt – every new dollar borrowed – and even with the resources of Treasury he still can’t or won’t tell us what the return would be.”

While Labor has not yet confirmed what income tax policy it will take to the next election, Dr Chalmers will say the party’s position was “straight forward”.

“Borrowing should be invested in projects and programs that create secure jobs and opportunities, drive broad and inclusive growth, and deliver long-term value for money,” he will say.

“Our fiscal strategy will be driven by economics and bang for buck, not by the politics of the last election or the one before.

“The level of debt matters but the quality of the spending matters more.”

Labelling the budget a “$100bn missed opportunity”, Dr Chalmers will argue the Liberals cannot claim to be the “party of fiscal responsibility” at the next election.

Dr Chalmers will use his speech to demand the government outline a vision “to secure Australia’s future beyond COVID-19”, saying without one the recovery won’t be real, enduring, worthwhile or fair.

But in excerpts seen by The Australian, the Labor frontbencher does not present any ideas for the vision.

“Just because the recession could have been worse – doesn’t mean the recovery can’t be better,” Dr Chalmers will say.

“Australia won’t achieve a first-rate recovery with a third-rate vaccine rollout and a quarantine strategy run out of the Holiday Inn. Indeed, the Prime Minister’s incompetence on the vaccine rollout is holding Australia’s recovery hostage.”

Josh Frydenberg has drawn election battlelines with Labor over the stage the tax cuts, saying moves to repeal them would leave middle-income earners hundreds of dollars a year worse off.