Millions of working Australians are set to receive cost-of-living relief in next week's federal budget, with Treasurer Jim Chalmers considering an 'earned income offset' of between $200 and $300 for every Australian who receives a wage or salary and pays tax.
One-time payment for workers
The handout applies only to the current financial year and will not deliver an ongoing tax cut for workers. The multibillion-dollar cash splash will not be means-tested but will apply only to 'earned' income paid to workers, rather than income from investments, The Australian reported.
The offset comes in addition to $3 billion in fuel excise cuts and Labor's much-touted $1,000 instant tax deduction. The measure is expected to form part of a centrepiece cost-of-living package when Chalmers hands down the budget next Tuesday.
IMF warning on stimulus
This comes despite recent warnings from the International Monetary Fund that any stimulus spending should be kept to a minimum as the government attempts to fight inflation, which has risen to its highest level in almost three years.
'Where fiscal support is deemed to be necessary to protect the most vulnerable against extreme external shocks, it should be targeted, timely, temporary, and funded within current budget envelopes by reprioritising spending and, if that is not possible, with the path to restoring fiscal balances clearly communicated,' IMF chief economist Pierre-Olivier Gourinchas wrote last month.
'Given the lack of fiscal space with still elevated budget deficits and rising public debt, any fiscal support should remain … consistent with medium-term fiscal plans to rebuild buffers. Avoiding fiscal stimulus is also critical when inflation is rising, so as not to complicate central banks' task.'
Chalmers defends tax cuts
Chalmers did not rule out further tax cuts when quizzed by reporters on Monday. 'There is cost-of-living relief in the budget in the form of a fuel tax cut, two more income tax cuts, and a standard deduction as well,' he said. 'That's in addition to all the other ways that the government is helping with the cost of living.'
'We've already got tax cuts coming. We've got a tax cut coming on 1 July, another one coming on 1 July next year.' A big part of the Budget will be the more than $2.5 billion we're spending on the fuel tax cut, and we've got the standard deduction coming as well. 'So, I've seen some speculation about tax cuts. I would just remind everyone that this is a government cutting taxes, cutting income taxes.'
The recent inflation spike has sparked fears that the Reserve Bank of Australia will hike interest rates for a third consecutive time today, placing a bigger financial strain on mortgage holders.
