Peter Dutton goes cold on income tax cuts for high earners

Peter Dutton has played down the prospect of going to the election with tax cuts for workers earning more than $150,000, in a backflip from the Coalition’s plans flagged earlier this year.

Peter Dutton on Wednesday cast doubt on the prospect of additional tax relief for high income earners. Picture: NewsWire / Linda Higginson

Peter Dutton has played down the prospect of going to the election with tax cuts for workers earning more than $150,000, in a backflip from the Coalition’s plans flagged earlier this year after Labor revamped the stage three tax cuts.

Despite indicating a pre-election package to address bracket creep for middle to higher income earners earlier this year, the Opposition Leader on Wednesday said the Coalition would only consider further tax relief for workers if there was enough room in the budget.

Mr Dutton also labelled Labor’s broken promise on stage three cuts – which left 1.1 million people earning more than $150,000 worse off compared to the original design – as a “good change”.

With investors increasingly betting against a pre-election interest rate cut, Mr Dutton said the Coalition’s priority would be formulating a plan that would bring down inflation.

“I think the priority, to be honest, is to get inflation down, to get interest rates down and to support jobs in the economy, because I think we’re coming into a difficult period,” Mr Dutton told ABC radio.

“The government’s on a spending spree at the moment, which is why inflation’s high and it’s why interest rates are staying higher for longer, and the Reserve Bank governor has pointed this out.”

One Liberal MP expressed disappointment to The Australian about the lack of policy bravery coming from Mr Dutton on the economy.

But other Liberal MPs said it would be inconsistent to criticise Labor for spending too much and driving inflation while promising tax cuts that would pump more money into the economy.

Liberal National MP Garth Hamilton – who earlier this year called on the Coalition to go to the election promising bigger tax cuts – said Mr Dutton was right to keep the focus on inflation.

“We have got to make sure we have the right settings for the right time,” Mr Hamilton said.

“There is a time and a place for a stimulatory budget, not in the middle of an inflationary crisis.”

Jim Chalmers attacked the policy inconsistency of the Coalition, claiming the opposition was divided over its tax agenda.

The Treasurer claimed there was a risk Labor’s stage three plan – which benefited lower income earners – would be rolled back under a Dutton government.

“They are hopelessly divided on this. They are all at sea on this question of income tax,” Mr Chalmers said in Sydney.

“We’ve made our policy clear. We legislated it, we explained why we came to that view. We’re very pleased and proud that those tax cuts are rolling out in our community right now.”

Veteran budget watcher Chris Richardson said the “dollars simply aren’t there” to deliver bigger income tax cuts.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar urged Labor and the Coalition to reduce Australia’s reliance on income taxes, which were “built on bracket creep”.

“Every once in a while, politicians pretend they’re being generous and hand back some of that bracket creep by changing the thresholds, but it doesn’t keep pace with inflation,” Mr McKellar said.

“The reality is, over time, taxpayers are getting ripped off. There needs to be a fundamental rebalancing of the system.”

The federal budget is forecast to increasingly rely on personal income taxes in the future. Its proportion of the overall commonwealth tax base was expected to soar to almost 60 per cent by 2063, up from its current level of 49 per cent, according to the latest Intergenerational Report.