Labor to leave tax package – for now

Anthony Albanese says he wants to implement the policies Labor took to the last election but is refusing to rule out amending stage three tax cuts in this term of parliament.

Anthony Albanese in Perth on Sunday. Picture: NCA NewsWire / Philip Gostelow

Anthony Albanese says he wants to implement the policies Labor took to the last election but is refusing to rule out amending stage three tax cuts in this term of parliament.

After deciding against making changes to the stage three package in the October budget, the Prime Minister would not rule out tinkering with the election commitment in the future.

A senior government source told The Australian the tax cuts would be reviewed ahead of future budgets and weighed up against the economic outlook.

“We haven’t changed our position on that, so our position stands. So there’s been no change here,” Mr Albanese told the ABC.

“What we’re doing is getting on with the immediate cost of living pressures.”

Mr Albanese moved at the weekend to kill speculation the government would amend stage three in the October budget, after Treasurer Jim Chalmers and Finance Minister Katy Gallagher floated the potential of walking away from a key election commitment.

Sources say Mr Albanese supported his economic team in exploring the option of amending stage three but over the weekend decided there would be no changes to the package in the October budget.

“It is on ice,” one government source said.

Deputy Prime Minister Richard Marles also would not rule out amending the package in future budgets.

“We’ve made our position in relation to tax clear and there is no change to our position since the election,” he said.

Peter Dutton said the uncertainty about the future of the stage three package would “kill confidence”.

“Labor will always make the wrong decisions when it comes to the budget and to the management of the Australian economy,” the Opposition Leader said.

“And at the moment, we need certainty because we know the headwinds are significant, particularly in the UK and the US.”

OECD acting chief economist Alvaro Pereira on Monday morning backed the stage three tax cuts to the degree that they reduced the impact of “bracket creep”.

“Something that we like about these changes is they tackle some of the issues regarding bracket creep,” he said.

Bracket creep was particularly pernicious when real wages were going backwards, Mr Pereira said.

“This is important,” he said. “High inflation means that people will get pushed to higher income brackets even when the real income (increase) does not warrant that, and so we think tackling this bracket creep is important.”

Mr Pereira said the legislated tax changes – which come into effect in 2024 – would not complicate the Reserve Bank’s battle against inflation.

“In two years time we think inflation has subsided by then, so this will not have an impact,” he said.