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10m Australians expected to benefit from tax reform
AUSTRALIAN Prime Minister Scott Morrison secured the most sweeping changes to the nation's tax system in more than a decade, delivering a major legislative victory for his newly elected government and injecting stimulus into the slowing economy.
Parliament on Thursday passed legislation that will bring A$158 billion (S$150.5 billion) of income tax relief to more than 10 million workers and fulfil a pledge that was the cornerstone of Mr Morrison's bid for re-election in the May 18 ballot.
"Today, there's very good news for millions of working Australians who will get to keep more of their own money," Finance Minister Mathias Cormann told reporters in Canberra on Thursday.
The cuts will be phased in and by 2024-25, new streamlined brackets will ensure that 94 per cent of Australians pay 30 per cent income tax or less. The package includes immediate rebates of as much as A$1,080 for low- and middle-income earners, a much-needed sugar hit for the faltering economy that will be welcomed by the central bank.
Beyond the tax cuts and previously announced infrastructure spending, the policy agenda for the third-term government looks thin, other than tackling red tape and a review industrial relations laws to crack down on union corruption. Reserve Bank of Australia governor Philip Lowe is urging the government to consider stronger action including increased infrastructure investment and structural reforms.
"There are options other than monetary easing for putting us on a better path," Mr Lowe said on Tuesday after the central bank cut interest rates to a record-low one per cent. "We will achieve better outcomes for society as a whole if the various arms of public policy are all pointing in the same direction."
Mr Lowe's sense of urgency has been stoked by a litany of data which shows that Australia is on track to record its weakest fiscal year since the last recession in 1991, dragged down by record household debt, moribund wages and two years of tumbling housing prices.
The Labor opposition is calling for the government to speed up the cuts instead of waiting until 2022-23, while there are concerns that a loss in tax revenue may result in less spending on public services, especially if economic conditions further deteriorate.
The legislation ensures that the top income tax rate of 45 per cent kicks in at A$200,000 instead of the current A$180,000, and removes the 32.5 per cent rate. By 2024-25, there will be three brackets. The Australian Council of Social Service, a group that lobbies for poverty reduction, welcomed the immediate rebate, which will see those earning between A$48,000 and A$90,000 getting A$1,080 of relief. BLOOMBERG