Josh Frydenberg says Coalition is 'fully committed' to further tax cuts
Josh Frydenberg has “absolutely” recommitted to $130bn of middle and high-income tax cuts due to begin in 2024, despite the Coalition opting not to bring them forward in last week’s budget.
Speaking on the ABC’s Insiders, the treasurer said the Coalition wanted government to act as a “catalyst” for recovery by allowing some businesses to fail while others grew and took advantage of tax concessions in the budget to hire and invest.
The first polling on Tuesday’s budget, released on Sunday by the Australia Institute, suggests a majority of Australians believe it will benefit the economy, although most plan to save more than half their share of the $18bn income tax cuts.
The budget brought forward stage two of income tax cuts, worth about $47 a week for high-income earners and provides a one-off $21 cut for middle-income earners in 2020-21 due to the extension of the low- and middleincome tax offset.
According to the poll, with a sample of 1,005, 58% believe the budget will be good for the economy, and almost half (47%) think they will personally be better off.
But in a troubling sign for the planned recovery from the Covid-19 recession, Australia’s first in 29 years, more respondents said they would save about half their tax cut (25%), save about three quarters (13%), or save it all (39%).
Just 17% said they would spend it all, with a further 5% planning to spend about three quarters.
The government decided against bringing forward the already legislated third stage of tax cuts, which will flatten tax brackets so that income between $45,000 and $200,000 is taxed at the rate of 30%.
On Sunday Frydenberg explained: “We wanted the biggest bang for our buck and that was bringing forward the stage two tax cut.”
The stage three tax cuts were “more structural reform”, he told Insiders. “There is absolutely bang for buck, but that is a big structural reform.”
Frydenberg said the Coalition was “absolutely fully committed” to delivering the third stage – worth $130bn of the $158bn of cuts passed in July 2019 – because they would “create a stronger, fairer tax system”. He noted the top 5% of earners would still pay about 30% of all income tax.
Anthony Albanese seized on the concession that stage three tax cuts were not “bang for buck” and questioned why the Coalition had introduced them.
He told reporters in Adelaide that Labor had tried to remove stage three but was “unsuccessful”, refusing to say whether Labor would retain them if elected.
Earlier, Frydenberg conceded that some businesses would inevitably fail due to the Covid-19 recession and the end of jobkeeper wage subsidies in March 2021.
He said the Coalition viewed the government as a “catalyst for the economic recovery, not the solution” because businesses would have to be the ones to decide whether to hire more workers.
“The solution lies around every kitchen table in every Australian household. The solution lies in every factory floor, in every farm, in every shopfront.”
Tuesday’s budget contained business tax concessions worth more than $30bn, including the ability for businesses to fully deduct capital expenses, carry back losses to claw back tax paid, and $4bn in wage subsidies for hiring workers under 35.
“Some businesses will not survive and obviously some jobs will be lost,” Frydenberg said. “But what we are focused on is giving every business and every job the best possible chance of getting to the other side, and there will be a restructure across the economy.”
The treasurer said jobkeeper wage subsidies had “adverse incentives” because they “prevented the reallocation of workers to more productive roles across the economy”.
“So we want to ensure there is enough dynamism in the labour market.”
Frydenberg defended targeting hiring subsidies at young people rather than women or older workers, pointing to existing retraining programs to help their employment chances.
He said although women represented 54% of the jobs lost at the start of the pandemic, they accounted for 60% of the jobs that had come back.
The treasurer struggled to explain why the Coalition had cut the intake of people on humanitarian visas and capped it at 13,750, saying only that it was “appropriate” because it provided “certainty”, and was fewer than that arrived last year.
Frydenberg said the audit office’s reduction of $14m of funding was mostly caused by $12m less carried forward from earlier years, and just $600,000 was due to a cut in departmental funding.
Earlier, on Sky News, the shadow treasurer, Jim Chalmers, defended the centrepiece of Labor’s budget reply, $6bn to increase childcare subsidies.
He said families earning up to $500,000 would be eligible for higher subsidies because the policy “isn’t a welfare measure, it’s a productivity measure ensuring more women can participate in work”.
Chalmers said Labor would make clear how its policies were funded before the next election, but the government could no longer lecture it about “fiscal responsibility”.
“The time of the government dusting off all of the old scare campaigns about the budget has been once and for all torpedoed by the fact the government racked up more than $1tn of debt and has very little to show for it.”