Australian workers could be in line for another round of tax cuts at the next election, with Treasurer Jim Chalmers signalling fresh relief as he prepares to unveil a stark 40-year forecast warning of major economic challenges ahead.
Chalmers will unveil the seventh Intergenerational Report on Monday, offering a glimpse of what Australia could look like in 2066 and the economic challenges expected to shape the nation over the next four decades.
‘People are under pressure, which is why we’ve delivered multiple rounds of income tax cuts, including tax cuts targeted specifically to workers,’ the Treasurer said.
‘At the same time, we’ve improved the budget position, which has created more room for tax cuts into the future.’
The report will argue that tax changes announced in this year’s budget have eased the burden on working Australians and will canvass the potential for further tax cuts in the years ahead, according to excerpts distributed by Chalmers’ office.
‘Combined, the government’s tax reforms will rebalance the tax system and reduce the tax burden on workers,’ the report states.
It forecasts that by the end of the medium term, workers will shoulder two percentage points less of the personal income tax burden than they would have without the reforms.
That share is expected to fall further over time as more tax is collected from property investment and capital gains under the government’s new tax settings.
Jim Chal;mers (pictured) will unveil the seventh Intergenerational Report on Monday, offering a glimpse of what Australia could look like in 2066
The report will argue this year’s budget eased the tax burden on working-age Australians and will canvass options for further tax cuts in the years ahead
‘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 the government’s efforts to strengthen the budget had opened the door to more tax relief in the years ahead.
This year’s budget contained a new tax offset of up to $250, which will apply from the 2027–28 financial year.
It came on top of an already legislated tax cut that began on July 1, reducing the tax rate on income between $18,201 and $45,000 from 16 per cent to 15 per cent.
Independent economist Saul Eslake told the Sydney Morning Herald the prospect of more tax cuts was ‘plausible’.
However, he said he was concerned estimates showing an improvement in debt and deficits relied on ‘fanciful’ assumptions about productivity growth that were unlikely to be realised.
Opposition treasury spokesman Tim Wilson accused the government of undermining aspiration, pointing to its decision to restrict negative gearing on future property investments and overhaul the capital gains tax discount.
From July 2027, negative gearing on residential property will generally be limited to new builds, while existing investments will be protected under the current rules.
‘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,’ Wilson told the SMH.
‘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.’
Australia’s fertility rate will drop dramatically over the next 40 years with government forecasts the number of children born to the average woman will decline to just 1.34 by 2066
‘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.’
Beyond the debate over tax, the report will also lay bare the longer-term challenge facing Australia’s economy as the population grows older and Australians have fewer children.
The combination is expected to place increasing pressure on the federal budget, with a smaller share of working-age Australians supporting a growing number of retirees.
Australia’s fertility rate is forecast to fall sharply over the next 40 years, with the average number of children born to each woman dropping from 1.48 today to just 1.34 by 2066.
The fertility rate has remained below the replacement level of 2.1 children per woman for about 50 years, increasing the importance of migration in maintaining population and workforce growth.
At the same time, Australians are expected to live longer.
Life expectancy at birth for women is forecast to climb from about 86 years today to almost 90 by 2066, while for men it is expected to rise from about 82 to 86.
