'Economically irresponsible': Labor won't back Coalition's full $158b tax plan

The Coalition will refuse to split its $158 billion, 10-year tax plan, wedging Labor into opposing thousands of dollars in tax relief for workers in July.

The government now has less than a week to convince the crossbench to pass the three stage package or workers could see a delay to a $1080 offset designed to stimulate the economy and offer some relief from anaemic wage growth.

Labor will ask the Coalition to split the package and accelerate part of stage two of the cuts to deliver a $1350 benefit to workers in July, $300 more than originally planned by the government.

Labor leader Anthony Albanese said it was "economically irresponsible to pass legislation which wont occur until the next election or potentially the one after that".Credit: AAP

But it remains strongly opposed to stage three, which will cost $95 billion when it is implemented from 2024. It has asked the government to defer debate on that stage of the tax cuts, which will see one flat rate of 30¢ in the dollar applied to income between $40,000 and $200,000 and most of the benefit go to higher income earners.

Labor leader Anthony Albanese said it was "economically irresponsible to pass legislation which won't occur until the next election or potentially the one after that".

"This is Labor leading from opposition but being prepared to partner with the government to have constructive outcomes in the national interest," he said.

The decision from shadow cabinet follows weeks of internal debate about Labor's position on the policy.

Opposition MPs Peter Khalil and Joel Fitzgibbon urged shadow cabinet to support the full package if the Coalition refused to split it.

Finance Minister Mathias Cormann immediatley ruled out such a move on Monday.

“Labor have still not learnt the lessons from the election," he said. “Our plan prioritises low and middle income earners, takes the bracket creep monkey off people’s back, is economically necessary and fiscally responsible and, importantly, it is what Australians voted for.”

Shadow treasurer Jim Chalmers said it was "unfortunate" that the government's highest priority was stage three of the tax cuts, which do not come into force for another five years.

"If the government comes at this solution that we're proposing, we are prepared to get stages one and two through the Parliament quickly if they agree to defer consideration of stage three to a subsequent sitting," he said.

In a speech to be delivered at the National Press Club on Tuesday, Dr Chalmers will argue the economy is "floundering" on the Coalition's watch.

"Middle Australia is struggling, and the Reserve Bank is hurtling towards the end of the monetary policy runway, with coherent fiscal policy from the Liberals nowhere in sight," he will say. "There couldn’t be a worse time for a government which has no idea how to turn things around."

In a shift away from the top end of town rhetoric that charecterised the election campaign,  Dr Chalmers will say Labor understands the need for budget discipline and the job-creating role of business.

"One focused on growing the economy and rewarding effort and relieving pressure on middle Australia," he will say.

The first sign of that compromise was revealed in Labor's pitch to the governmnet on Monday, which proposed bringing forward part of stage two of the tax package at the cost of $3.7 billion to stimulate a sagging economy.

That stage would accelerate an increase of the 37 per cent threshold from $90,000 to $120,000, due to start in 2022, to July this year, and specificallly target middle income earners.

The government forecast a surplus of $7.1 billion in 2019-20. Bringing part of stage two forward would cut that in half.

Mr Albanese also urged the government to bring forward infrastructure investment to get the economy moving across Sydney, Melbourne and south-east Queensland.

He cited the Melbourne Metro and Link Field Road in Brisbane's northern suburbs as examples of projects that could have "shovels on the ground".

"We know that projects like that are necessary now and we think that a bring-forward of the government's proposed infrastructure investment would assist the economy, create jobs right now [and] help to boost productivity into the future," he said.