As published in The Australian on Monday, 15th January, 2024

Australians deserve an unambiguous commitment to stage three tax cuts. Trust is a crucial part of our democracy. We must be able to trust our governments to act in the country’s best interests and to make difficult decisions for the greater good.

Unfortunately, it has become difficult to trust the Albanese Labor government. The first 18 months of this government have been full of broken promises.

Labor has broken its promise to make life cheaper and easier – speak to any Australian and they will tell you their budgets are being stretched to the absolute limits. Labor promised to cut power prices by $275 a year. But since it came to power, electricity has gone up by 23.1 per cent and gas by a whopping 29.5 per cent.

Labor has repeatedly broken its promise on limiting tax increases to multinational companies – raising taxes on everything from franking credits, retirement savings, small businesses and Australian companies.

Labor has an unprecedented wealth tax on unrealised capital gains before the parliament, and the Treasurer’s Productivity Commission review into charities is targeting religious charities and non-government schools next. And now it appears Labor has been considering another broken promise, this time on stage three tax cuts.

Last week, the Prime Minister was asked to guarantee the legislated tax cuts will not be amended in the May budget. He failed to do so. We’ve also recently learnt through a freedom of information request (by Capital Brief) that the Treasurer sought advice from his department about changing the policy.

This shouldn’t come as a surprise though, because Labor was never committed to the stage three tax cuts. In opposition, the Treasurer and Prime Minister said so themselves. When the tax cuts were legislated, they moved and voted for amendments to abolish them. The Treasurer did so twice, saying “we must remove stage three” from legislation and that it was the “right, responsible and constructive thing” to do.

The Prime Minister is once again playing weasel words around not changing his position, but his record of broken promises makes it difficult to believe him.

What Australians need right now is an unambiguous commitment. The reality is, during this cost-of-living crisis, the stage three tax cuts are absolutely crucial.

Australians are being burnt at both ends under Labor. On the one hand, Australia has the most entrenched inflation in the world and one of the highest core inflation rates of any advanced economy, with prices rising by almost 10 per cent since Labor came to office – the equivalent of doubling the GST. On the other, after 18 months of inaction, Labor has plainly decided the way out of inflation is to tax Australians more. This might help the macroeconomic indicators in the budget papers, but Australian households lose out. You can’t tax and spend your way out of inflation. You can’t spin your way out either.

National Accounts data, released before Christmas, showed that in the first 18 months of Labor’s time in office, personal income tax had increased by a record 27 per cent.

Analysis of tax and ABS statistics shows the number of Australians in the top tax bracket has doubled in the 16 years since it was introduced, while middle-income earners have seen their effective tax rates increase significantly from 17, 10, even five years ago.

Bracket creep, driven by rampant inflation, is the thief in the night. It is the tax increase Australians never voted for. And it will continue to erode Australians’ pay packets. It is why delivering the Coalition’s stage three tax cuts is essential.

Combined with the corrosive impact of inflation, households are struggling under Labor’s taxes. On Labor’s watch Australians’ real household disposable income has fallen more than any other advanced economies. This is crucial context when considering the future of the Coalition’s stage three tax cuts. The tax cuts ensure most Australians will know they keep at least 70 cents of every dollar they earn – whether starting a business, taking a second job or putting their hand up for a promotion. That is an unbelievably compelling proposition that rewards effort, innovation, risk-taking and investment.

Australians deserve a simpler and fairer tax system – one that boosts productivity by rewarding aspiration and productivity, not punishing it. One of the key factors fuelling our inflation problem is low productivity, which has collapsed under Labor. The collapse is unprecedented and among the very worst of any major advanced countries.

For middle Australian households that have been waiting 18 months for the government to take action on the cost of living, a decision the Coalition made five years ago offers the first glimmer of hope. It is essential Labor stand by this tax cut and make fiscal headroom in its budget to allow for it. The government has spent an extra $209bn since the election – that’s more than $22,000 per household.

Labor has the levers to manage its budget in a way that is consistent with delivering the stage three tax cuts and putting downward pressure on inflation. But it will require spending discipline Labor has yet to demonstrate. The tax cuts are a good start in giving back the money stolen from hardworking Australians through bracket creep. Lower taxes remain a core goal of any good government.