Personal income tax cuts are still on the table for the upcoming federal budget in May, Treasurer Scott Morrison says.
The relief was first flagged in November when Mr Morrison and Prime Minister Malcolm Turnbull singled out low and middle income earners.
But the treasurer played down speculation the cuts were likely to start small and be phased in over a decade, as the federal budget returns to surplus.
“It is not informed speculation at all. It’s just people trying to read between the tea leaves,” Mr Morrison told Perth radion 6PR on Thursday.
The upcoming tax cuts will be mostly funded by better-than-expected tax revenues and lower government spending since the mid-year budget update in December.
The cuts will also occur in tandem to the government’s 10-year business tax reduction plans.
Shadow treasurer Chris Bowen wants to see the make-of the 2018/19 federal budget to assess how the cuts can be supported.
“I don’t jump at shadows,” he told Sky News.
But Greens leader Richard Di Natale is concerned there could be a possible bidding war between the government and Labor on personal income tax cuts.
“What the treasurer should be doing is recognising that we need comprehensive tax reform,” he told Sky News.
Grattan Institute think tank head John Daley says if the cuts are small and staggered, a 10-year plan for personal tax cuts doesn’t sound like much of a tax reduction “at all”.
He calculates bracket creep – which pushes people into higher tax through wage inflation – adds about two percentage points to the average tax burden over a four-year budget cycle.
“That means you need to cut income taxes by about two percentage points every four years simply to keep people where they are, because of the way brackets work,” Mr Daley told Sky News.
So if, for example, the government promises a tax cut of two percentage points over a 10-year period, bracket creep will more than offset the reduction, he said.