The federal government has not ruled out scrapping stage three cuts, with tax experts claiming its implementation would result in Labor never being able to return a budget to surplus.
Subscribe now for unlimited access.
or signup to continue reading
Finance Minister Katy Gallagher would not confirm or deny whether the expenditure review committee is seeking to abolish, delay or amend the massive tax changes, which Labor backed when in opposition.
A multitude of concerns have flown over the changes, which would cut the 37c tax bracket for top income earners to 30c, would cost billions in foregone revenue and inhibit the government's ability to adequately fund critical services such as childcare, health and the NDIS.
Economist Ben Phillips from ANU's Crawford Institute believes the cuts, which predominantly benefit higher income earners, never made sense and would place added pressure on budget repair.
READ MORE:
"We need more money and probably a tax cut in 2024 of that magnitude is not really warranted," Mr Phillips told ACM.
"It's not really the time to be having what's about a roughly a $20 billion per year tax cut that mostly goes to people who probably don't really need it.
"I think in terms of the budget and trying to get somewhere back to surplus or to balance at some point in the future, it makes it difficult."
Senator Gallagher on Wednesday said the government was trying be upfront about the looming cost pressures facing the budget over the forward estimates, claiming she and the Treasurer were "trying to work through some of those challenges".
"We haven't changed our position on stage three. But we are mindful of all of those things that I've just outlined," she said on ABC.
"We're dealing with all of those pressures front and centre now - including on the spending side where we have significant structural and persistent pressure on the Budget in those areas like the NDIS, hospitals, aged care, defence and increasingly as interest rates increase the servicing of our debt, which now exceeds I think it's almost $18 billion a year and is currently bigger than what we spend on universities."
Mr Phillips from ANU outlined the implementation of stage three cuts would prohibit a number of Labor's key election promises, including a more generous childcare subsidy.
He also noted the government would face an increased interest bill as funding for services would be coming from more debt.
"It probably makes it more difficult to have more generous childcare benefits and certainly makes it difficult to have things we know we need like an increase in the JobSeeker payment," he said.
"All these things become a lot more difficult."
The Australian Greens have been pushing for the abolishment of stage three tax cuts.
Domestically, the conversation over if the reforms are feasible comes after the British government dumped its tax breaks for higher income earners, which has been spurred on by rising inflation placing greater pressure on fiscal spending.
Treasurer Jim Chalmers, following the Reserve Bank's decision to lift the cash rate by 25 basis points to 2.6 per cent, said the UK was also experiencing a challenge where fiscal and monetary policy were out of step with each other.
Dr Chalmers on Tuesday also warned the global economy had deteriorated with "probable" recessions in economies such as the United States, and poses risks for the domestic outlook.
RBA governor Philip Lowe in his statement also highlighted the global outlook did remain highly uncertain.
