Ten million low and middle-income earners face a tax increase as the federal government debates whether to extend its $1080-a-year tax offset in next month’s pre-election budget or risk adding to growing inflation pressures that could force the Reserve Bank to lift official interest rates.
The measure, which costs more than $7 billion, had been widely expected to be extended to the 2022-23 financial year as an election sweetener in the March 29 budget. Financial markets are already pricing in four interest rate rises by year’s end, taking the cash rate beyond 1 per cent. If passed on by banks, that would increase monthly repayments on a $500,000 mortgage by almost $300.
The Grattan Institute’s Brendan Coates says a new round of tax cuts would be adding fuel to the inflation fire.EY chief economist Jo Masters said monetary and fiscal policy would be working in opposite directions if the government delivered tax cuts while the Reserve Bank was increasing interest rates.“Tax cuts are clearly stimulatory given the boost to disposable income.
Government spending was on a higher plane than before COVID-19 due to extra expenditure on aged care, the National Disability Insurance Scheme and on defence.
Flaming heck, is Josh so unconnected to the average working person that he thinks this is a good move ?
the lnp offset for tax cuts is ,,wait for it ,,reduced services and puneative measures for the poor ,