Anthony Albanese has continued to raise expectations of further cost-of-living relief as some backbench MPs debate the possibility Labor could modify stage-three income tax cuts to pay for new measures.
On Monday the prime minister said “if we can find ways to put extra dollars in people’s pockets, particularly those low and middle income earners who are doing it tough, then we’re prepared to do so”.
Albanese confirmed that by Wednesday’s caucus meeting the government will have received advice about “how we can take pressure off cost of living”, reiterating that it had “always said that will continue to look for ways to assist people”.
“We’ve been working away throughout January and what we’ll be looking at [on Wednesday], of course, is the advice that we’ve received about how we can take pressure off cost of living,” Albanese told Sky News.
While backbench MPs are pleased at the renewed focus on the cost of living for low and middle income earners, Labor is divided between those who want to see a renovation of stage-three tax cuts to improve fairness and those who warn this would arm Peter Dutton with a potent argument that the government has breached an election promise.
The tax cuts, passed by the Morrison government in mid-2019 with Labor support after it failed to split the bill, begin in July 2024.
They remove the $120,000 to $180,000 tax bracket, increase the top tax bracket to $200,000 and reduce the marginal rate of tax for everyone earning between $45,000 and $200,000 to 30%.
The stage-three tax cuts reduce tax revenue by $320bn over 10 years, and could be renovated to save the budget up to $130bn while still delivering bigger tax cuts to 80% of income earners, according to the Australia Institute.
On Monday 2GB Radio reported that the government is considering increasing the tax free threshold to benefit low and middle income earners, and making the stage three cuts less generous for high income earners by retaining the $180,000 threshold for the top bracket. A government spokesperson said “the government’s plans have not changed”.
On Wednesday Albanese said that “tax cuts will happen in July” but did not specifically recommit to stage-three, instead observing that “at the moment, these cuts cut in at $45,000”.
One Labor MP said although they didn’t think it was in Australia’s “best interests” to have committed to tax cuts, which predominantly benefit high income earners, before the election, “we’ll never hear the end of it” if Labor breaks its promise.
The MP said the government should “stick to what we said we’d do”, although it might be possible to cut out the “top one or 2% of income earners who don’t need it”.
“The average person wouldn’t complain about that,” the MP said. “I’m not sure how brave we’ll be – we’ll find out on Wednesday.”
Others were more adamant that any modification on stage-three would be electorally costly – particularly if it turned the 2 March Dunkley byelection and 2025 federal election into referendums on deviating from repeated promises to maintain the cuts.
Another MP said it was “problematic” to see “everything through the prism frozen in time” at the point the cuts were passed because “the world is changing so rapidly”.
“Surely there is capacity for a sensible government to tweak the tax cuts appropriately,” the MP said.
“There are a lot of people who need it more than income earners on politicians’ wages.”
Labor would probably not need Coalition support to amend stage-three tax cuts, given the Greens and key crossbench senators Jacqui Lambie and David Pocock have all called for them to be reformed.
But on Thursday, Dutton, the opposition leader, warned that Albanese’s leadership would be “over if he abandons the stage-three tax cuts because Australians have seen this movie before and they don’t reward leaders who go to an election with an ironclad guarantee, and then knowingly break it”.
“There will be a lot of people who make the application to the bank at the moment, maybe to refinance, try and lock in a lower interest rate over the next couple of years if they can find one, and they will be relying on that additional income coming into their budget,” Dutton told 2GB Radio.
Labor MP Brian Mitchell, who pushed the treasurer Jim Chalmers to speak to backbenchers about the rising cost of living back in November, is one of a number of MPs who want more done for middle income earners.
Mitchell said Labor had done “done well for those on low incomes and concession card holders” who benefited from energy relief, but that people “are being squeezed in the middle”.
Labor MP Maria Vamvakinou said changes like an increase in jobseeker and rent assistance would be “useful and relevant to middle Australia and lower [socioeconomic status] households”.
“I do have renters in my electorate but a large part of households are in newly acquired homes. Interest rates have made a negative impact on their ability to keep up.”
On Monday Albanese argued that the total of $23bn of cost-of-living relief already delivered had been “designed to provide assistance but also [put] downward pressure on inflation”, citing cheaper medicines, fee-free Tafe and energy price relief.
An extension of energy price relief passed in December 2022, which included caps on coal prices and rebates for some consumers, is considered among the measures most likely to be adopted to help households.
The energy bill relief remains a popular move among Labor MPs, but several claimed voters were not necessarily giving major credit to the government for that change, since the help reduces bills before they reach the consumer.
The climate change and energy minister, Chris Bowen, refused to comment on the possible extension of energy price relief, telling reporters in Sydney he would not pre-empt cabinet and caucus deliberations.
