Tax Cuts “Won’t Add To Inflation Pressures”

In his speech at the National Press Club, PM Albanese said that the tax cut all taxpayers will receive was “broadly revenue neutral” and “won’t add to inflation pressures”. RBA Governor Bullock was consulted on the new tax package and apparently she doesn’t expect any implications from the changes to RBA forecasts. New projections are published on February 6.

• The PM said that the government decided to change the package it promised to implement because of continued inflation pressures on households and to encourage an increase in labour force participation with greater take-home pay. Changes in the economic situation were behind this.
• The subsequent increase in the labour supply is then expected to keep a lid on inflation pressures presumably by limiting wages growth. The PM said this increase was important given labour shortages, but with the more cautious approach to hiring seen in the data and the increase in immigration, this no longer seems an issue.
• The plan will provide the first increase in the threshold for the top tax bracket since 2008 but maintaining the 37% tax band will mean that there will be $28bn of additional revenue from bracket creep over 10 years.
• It will be interesting to see the next opinion poll to see how voters have interpreted the change in position on the stage 3 tax cuts.