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They haven’t started yet, but Chalmers fesses up to $11 billion tax cut blowout

Treasurer Jim Chalmers has confirmed stage three tax cuts will cost almost $11 billion more than previously forecast, as the government looks to rein in spending in the federal budget.

Oct 20, 2022, updated Oct 20, 2022
Budget documents have not yet been revealed but Treasurer Jim Chalmers has revealed a $11 billion blowout in the cost of the stage 3 tax cuts. (AAP Image/Mick Tsikas)

Budget documents have not yet been revealed but Treasurer Jim Chalmers has revealed a $11 billion blowout in the cost of the stage 3 tax cuts. (AAP Image/Mick Tsikas)

New estimates have shown the tax cuts would cost $254 billion over 10 years.

Previous forecasts by the budget office had forecast the measure would cost $243.5 billion over the decade.

The government had come under pressure to scrap the stage three tax cuts but Labor had promised at the election to keep them.

Chalmers said there would not be a new item in the federal budget when it is handed down on Tuesday on the tax cuts, indicating it had already been legislated.

“The budget is not going to be about those tax cuts, it’s going to be about … responsible cost of living relief,” he told ABC Radio on Thursday.

“It’s been clear to everyone … that these tax cuts make an impact on the budget, but I think the point that we’ve been making is that they come in in a couple of years, we’ve got more pressing priorities.”

The treasurer also confirmed the budget would include an extra $6.4 billion on measures that were previously unfunded but still needed to take place, such as health and Covid-related programs.

Chalmers said the additional spending was a result of the previous government.

“Our predecessors, more or less, booby trapped the budget with a bunch of spending, some billions of dollars in spending, which is unavoidable,” he said.

“We’ve had to find room for (it) and we have.”

Ahead of the budget, the treasurer warned that while it may show an improved position than previously forecast in coming years, pressures will emerge.

Chalmers said falling commodity prices or increases to aged care or health spending would make the budget more challenging in the future.

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“These are big, consistent structural spending pressures in the budget,” he said.

“We need to take a responsible approach to any revenue upgrades over the next couple of years. I think we’ve been pretty upfront for some time now that one budget can’t fix a legacy.”

ACT independent senator David Pocock called for the stage three tax cuts to be scrapped, and said there were better ways for the $254 billion to be spent.

“Everyday Australians are struggling and it makes no sense to have tax cuts coming in that are going to return hundreds of billions of dollars to some of the wealthiest Australians,” he told ABC Radio on Thursday.

“We’ve got a government talking about how tight the budget is, and yet at the same time, they’re not willing to even talk about whether or not they’re going to scrap the $254 billion of legislated tax cuts.”

Meanwhile, the Business Council of Australia has called for effective spending and fiscal discipline in the upcoming budget.

With interest rates and inflation heading up and growth forecasts going down, chief executive Jennifer Westacott said the Labor government’s budget came at a precarious time.

“The decisions we make now will have huge implications for the job security and wellbeing of families,” she said.

“We are at a critical phase of our recovery, and we must act carefully to lock in our success and shield Australians from the faltering global economy … now is a time to act carefully to protect Australia’s economic security.”

But Westacott warned against any controversial workplace relation reforms that could lead to strike action and potentially hurt unemployment.

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