Kiss tax cuts goodbye

The AFR is reporting today that the Abbott Government’s long-term goal to provide tax cuts to income earners is in jeopardy following the large hit to national income owing to the collapse in the iron ore price:

Budget experts said weaker wages growth would pose a significant barrier to the Coalition government’s longer-term goal of personal tax cuts.

They say collapsing commodity prices – particularly for iron ore, which is at a five-year low – will weigh on company profits, household wages and jobs and make it harder for the Coalition to unwind “fiscal drag” that could push the average wage into the second-highest tax bracket by 2015-16.

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About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.