Bill Shorten was always going to have the trump card on the Government when it came to tax cuts. The guy who goes first (i.e. Scott Morrison) through his numbers man, Treasurer Josh Frydenberg, was always going to have to cop the “stingier” tag on his tax gifts offered this week because he went first.
Responding last night, Bill simply offered bigger tax cuts to low-paid workers ensuring he has a real good chance of winning around 3.6 million votes. We Aussies don’t like being bribed, except around election time, and the leader with the biggest tax cut often ends up living in The Lodge. Funny that.
That said, Bill has taken a chance by saying no to the other stages of the Government’s tax plan, which would take the 32.5 cents on the dollar tax bracket down to 30 cents in 2024. This affects a lot of Labor-type voters as it’s in the income bracket of $37,001 to $90,000. I guess Bill is saying: “How many Aussies really take seriously promises from politicians, especially when they don’t materialise until 2024?
Bill has become famous (or maybe infamous) for zinger lines and this one is worth sharing with you, as it underlines what Labor’s pitch has been and will be between now and the May poll.
“We won't back a tax plan that gives a retail worker on $35,000 less than $5 a week while an investment banker pockets more than $11,000 a year,” Mr Shorten said in his budget reply. “This isn't a tax plan, it's a ticking debt bomb.”
Bill’s words have shades of that great book Animal Farm, where the slogan is: “Retail worker good, investment banker bad.”
But Bill’s “no” to these tax cuts will also affect a lot of potential Labor voters — teachers, nurses, police, long-hour working labourers, tradies and public servants, whose income is in this tax bracket or one bracket higher. They would’ve liked this drop in the tax rate.
The Coalition should play this up but, to date, they’ve shown themselves better at governing the economy while disappointing in winning the political debate and keeping Prime Ministers!
To the Shorten offer and he’s matched the Government’s $1,080 tax offset for Aussies in the $48,000 to $90,000 tax bracket. And then those workers pocketing up to $37,000 a year will get a maximum tax gift of $350. That beats the Government’s giveaway by $95.
If you’re earning between $37,000 and $48,000, you could get the $1,080 tax offset that beats the Government’s offering by a huge $500!
I won’t go into why Bill has rejected the future stages of the Government’s tax cuts as it’s too far into the future. Anyway, if the bookies are right, what the Government plans to do is unlikely to be relevant. Labor is a $1.20 favourite, while the Coalition is priced at $4.20, which suggests a future PM Shorten is, as I speculated yesterday, at Winx-like odds to win.
So what should you think about these tax cuts?
They certainly are coming when the economy needs them. They’ll help stimulate demand from consumers and encourage borrowers to show up to auctions to snare a good deal with house prices on the slide. The cuts will help arrest falling prices.
This week, all the Budget talk in the media meant 4 good economic news stories were missed by many.
1. Retail surprised in February and few of us saw this coming. “Retail trade rose by 0.8 % in February and the more consistent grouping of ‘larger retailers and chain stores’ shows that sales rose by 1.4% in the month,” said CommSec’s chief economist, Craig James. “In the space of an hour the perception of the Australian economy and its outlook changed. Data showed retail spending soared by 0.8 per cent in February. Apparently rumours of the death of the Aussie consumer were over-stated.”