17 April 2024
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Albo’s losing friends & voters, so tax cuts are coming!

Peter Switzer
15 January 2024

The 2024 Budget is still a long way off but with the Prime Minister’s rating with voters on the slide and even Peter Dutton gaining support which few pundits would have predicted, the promised stage three tax cuts look certain to be the centrepiece of what Treasurer Jim Chalmers puts to us from Canberra on May 14.

And it’s bound to come when there’ll be a notable slowdown in the economy, so Dr Jim will have good economic reasons to add a bit of tax cut cheer into an economy that will be holding out for the first interest rate cut after 13 rises since May 2022, which has taken the cash rate to 4.35%. The average variable rate home loan is now around 6% after being closer to 3% a year and a half ago.

The pressure from the cost of living now has the PM and his chief number cruncher promising that they will address these cost concerns. Over the weekend the Daily Telegraph revealed the following:

  1. More Australians are becoming unsatisfied with the way Labor has handled the cost-of- living crisis.
  2. New polling by Freshwater Strategy shows two-thirds of Labor voters don't expect any budget relief in the next six months.
  3. 80% of those surveyed believe the PM has failed to address the crisis.
  4. Half of voters believe reaching renewable targets by 2030 will only increase costs, despite Anthony Albanese's election pledge to reduce energy bills.
  5. Mr Albanese still remains the preferred Prime Minister over Opposition Leader Peter Dutton, at 47% to 38%.

All this says Albo can’t be complacent and needs to repair his relationship with voters before next year’s election due around May.

So, surprise, surprise, The Australian’s Simon Benson tells us today that: “Millions of average wage earners will be returned almost six years of bracket creep worth up to $1300 under the stage-three tax cuts despite unions, crossbenchers and some of Anthony Albanese’s MPs calling for them to be abolished or scaled back.”

How does he know this? Well, simple, the Government is leaking the news to start a comeback for its popularity.

Benson’s work also reveals that “…almost 700,000 workers fall into the highest tax bracket – triple the number of those captured above the highest threshold when it was last raised to $180,001 in 2009.”

But wait, there’s more with “…even after the stage-three tax cuts, due to come into effect on July 1, the analysis conducted by the opposition suggests the tax rates for average full-time wage earners would remain higher than they were under the Howard government.”

How has this happened because there haven’t been big announcements of tax increases over that time and in fact there have been tax cuts? Well, it’s all because of bracket creep, which means Treasurers gain tax collections when our incomes increase but tax brackets aren’t changed. “In Labor’s first 18 months in ­office, income taxes have gone up by over 27 per cent according to National Accounts data. It is clear Labor wants to tax their way out of inflation and Australian families are paying the price,” Opposition treasury spokesman Angus Taylor said.

Following years of good income growth, bracket creep has not only increased the tax take, but it has also helped create the budget surpluses that we’ve seen in recent years, when deficits were expected after covid lockdowns.

Benson also revealed that “…in 2023 the mean full-time wage was $98,050, which attracted an effective tax rate of 22.78 per cent. Under stage 3, the effective tax rate for the average earner would be 21.42 per cent, according to the analysis. A median full-time wage earner will receive $955 in tax relief while the mean full-time wage earner will receive $1326 in relief.”

So, if you’re struggling with home loan repayments, Dr Jim could be offering you tax cuts from around $955 to $1,326 a year. While this is better than nothing, it mightn’t be enough to make those unhappy with Labor and Albo because of cost-of-living slugs, to forgive and forget come next year’s election.

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