Jim Chalmers flags fresh tax cuts, warns of ‘confronting’ news in economic outlook

Treasurer Jim Chalmers has flagged a desire to deliver Australians a fresh round of tax cuts as he prepares to release a 40-year economic forecast that he warns will contain confronting findings about the nation’s future.

Chalmers will release the seventh intergenerational report on Monday as the Coalition promises to cut fuel costs when global prices spike in a bid to appeal to voters concerned about the cost of living, a move slammed by the government as economically irresponsible.

The intergenerational report, which forecasts how the nation’s economy and population will develop over the next four decades, will say this year’s budget lowered the tax burden on working-age Australians and it will float opportunities for further tax cuts.

Treasurer Jim Chalmers said the government’s decisions had created scope for future tax cuts.Alex Ellinghausen“Combined, the government’s tax reforms will rebalance the tax system and reduce the tax burden on workers,” the report will say, according to excerpts distributed by Chalmers’ office.

“By the end of the medium term, the share of personal income tax burden on workers is expected to be 2 percentage points lower than it would have been without reform.

“Over time, this share is expected to fall further as an increasing share of property investment and capital gains will become subject to the new tax settings.

“In addition, the government’s efforts to improve the budget position have created more room to provide further tax relief in future budgets.”

Chalmers said: “People are under pressure, which is why we’ve delivered multiple rounds of income tax cuts, including tax cuts targeted specifically to workers.

“At the same time, we’ve improved the budget position, which has created more room for tax cuts into the future. ”

This year’s budget contained a new tax offset of $250, to begin next July, and reduced the tax rate for those in the lowest tax bracket.

Independent economist Saul Eslake said the prospect of more tax cuts was “plausible” but he said he was concerned that estimates of improved debt and deficit figures were based on “fanciful” assumptions of productivity improvements that were unlikely to be delivered.

Chalmers told reporters on Sunday the report would contain some “confronting” findings and that it would show “that we are dealing with serious risks to our economy and serious pressures on the budget, but that we’ve got substantial advantages as well”.

The report will reveal that the nation’s fertility rate will drop dramatically over the next 40 years. The government forecasts the number of children born to the average woman will decline to just 1.34 by 2066, down from 1.48 currently.

Fertility has remained below the replacement rate of 2.1 children per woman for about 50 years, leaving governments few options other than increasing overseas migration to fuel economic growth.

Chalmers will say in his speech launching the report: “The world is becoming more dangerous, more unpredictable, more unequal and more divided.

“These are not just individual threads but part of a bigger fraying of that intergenerational promise, of better times.”

Excerpts released over the weekend show life expectancy at birth is forecast to reach almost 90 for women by 2066, up from about 86 years now, while life expectancy for men is expected to rise from 82 to 86 over the next four decades.

The report will say that artificial intelligence will be the “defining influence” on the economy over the next four decades. Chalmers says the new tech will come with “very substantial risks”.

Opposition treasury spokesman Tim Wilson said the government had attacked aspiration by scrapping negative gearing and cutting the capital gains tax discount for future investors.

“Jim Chalmers is kneecapping young Australians before they get their first foot on the ladder of opportunity with higher rents and inflation outstripping wealth and wages,” he said.

“Young Australians are already struggling to save for a home, invest and build something of their own. Now Labor is hitting them with higher taxes on housing, investments and small and family businesses.

“No one believes the treasurer’s spin even if he repeats it 50 times over because Australians are living the biggest drop in living standards in the advanced world.“

Opposition Leader Angus Taylor on Sunday released a plan, called the fuel price shield, that would halve the fuel excise when the global price of Brent crude oil averages $US100 a barrel over two weeks, slashing around $15 off the average tank of petrol.

“The fuel price shield would provide certainty. When a serious oil shock hits, the tax comes down automatically. When oil prices return to more normal levels, the ordinary rate is restored,” Taylor said.

Chalmers rubbished the fuel policy as “uncapped and unfunded”, telling News24’s Sunday Agenda that the policy was aimed at winning back voters from One Nation.

“I think what we’ve seen overnight from Angus Taylor is more about polling numbers than petrol prices,” Chalmers said.

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