Anthony Albanese has no remorse for broken stage three tax cuts promise

If Anthony Albanese was serious about changing economic policy with the times, he should have announced revisions to the stage 3 tax cuts two years ago, writes Joe Kelly. Picture: NCA NewsWire / Martin Ollman

Anthony Albanese has embarked on a dubious start to the political campaign to sell his revamped tax cuts by refusing to admit the obvious point – that he breached faith with the Australian people.

This was the Prime Minister who pledged to conduct politics differently and restore trust and integrity to government.

But Albanese has fallen short of this standard. Explaining his tax backflip, which will leave those on incomes greater than $146,500 relatively worse off, Albanese is not conceding he broke his promise or expressing remorse.

There must be doubts over whether he can maintain this position over the long-term.

He also pretended the reasons for the backflip were the result of the pandemic, the first recession in three decades and the consequences of the Ukraine war, which disrupted supply chains and sent energy prices soaring.

But all of these factors were known before the 2022 election.

“When economic circumstances change, the right thing to do is change your economic policy,” Albanese told The National Press Club in Canberra. If Albanese was serious about changing economic policy with the times, he should have announced revisions to the stage 3 tax cuts two years ago and taken them to the election to win a mandate.

He did not. There must be serious questions about whether he would have won office if he did.

Albanese had opportunities to change his position in the October 2022 budget and the May 2023 budget.

But he is asking Australians to believe the government was not satisfied that economic circumstances had sufficiently changed until Christmas last year when it approached Treasury.

The “changed economic circumstances” justification lacks credibility. And it risks being seen by the Australian people as another deception.

An examination of the stage 3 rewrite suggests the overhaul had nothing to do with changed economic circumstances, but was fundamentally political.

They have been reworked to appeal to low and middle-income earners several weeks before a crucial by-election and pick a fight with the Coalition.

By retaining the 37 per cent tax bracket for middle-income earners and lowering the top tax rate threshold to $190,000, Albanese’s tax shake-up is almost $30bn less generous over the next 10 years because of the effects of bracket creep. But this pain is felt by ­higher-income earners. Under Labor’s stage 3 rewrite, it will take bracket creep six years to eat up the tax cuts for the average Australian worker on a wage of $73,000, versus four years under the already legislated tax cuts.

Fiscal drag is slowed down for lower-income earners under Labor’s revisions, allowing the government to argue it is returning bracket creep where it is doing the most damage to people’s living standards.

But it also involves a major redistribution of tax relief, which will punish aspiration. This is the trade-off.

Albanese should consider removing the 37 per cent tax bracket and simplifying the tax scales once economic conditions have changed and the cost-of-living crisis is over.

This is consistent with his commitment to change policy when economic conditions change.

But when asked if he would consider revisiting the tax brackets later on, Albanese replied: “We are focused on the here and now.”