But Deloitte Access director Chris Richardson said such a move, which would cost between $8 billion and $9 billion a year, would deliver very little to about 66 per cent of all workers who earn between $55,000 and $90,000 a year. A person on $200,000 a year would be $1890 a year better off.
“Bringing forward the second stage of the tax cuts, and nothing more, would provide most taxpayers with an early tax cut of just 20 cents a week,” he said.
Mr Richardson said bringing forward the tax cuts as they stood now would still enable Mr Frydenberg to show a surplus in 2019-20 and beyond. But the small benefit to so many people would force the government into offering something larger which in turn would hurt the budget’s overall position.
“The national revenue base remains more fragile than most people realise. We’ve already criticised the existing promised tax cuts as being too much, too soon.
“Additional tax cuts of this magnitude would risk doubling up on what is already a risky bet with the national fiscal finances.”
Deloitte Access is forecasting the budget to show a $9.8 billion surplus next financial year, a $4.1 billion improvement on what was predicted in the mid-year update released in December.
In 2020-21 it believes the surplus, slated at $12.5 billion, could reach $15 billion while the following year’s surplus is forecast to be $1.6 billion better at $20.6 billion.
Across the forward estimates and including the current financial year, Deloitte Access believes the budget is $13.1 billion better off than predicted in the mid-year update, largely due to better tax collections.
Mr Richardson said the recent lift in iron ore prices and strong jobs growth had fed extra tax dollars into Canberra’s coffers despite the general economy, particularly the housing sector, showing signs of softening.
“The further out you look, the more those short-term positives run into some bad news bears for revenues,” he said.
While the government is expected to deliver tax cuts to wage earners, the corporate sector is maintaining its push for company business rates to be sliced.
A report commissioned by the Minerals Council of Australia and released on Monday found Australia’s company tax rate of 30 per cent is the fifth highest among 43 nations surveyed. It is only behind Zambia, India, Brazil and Portugal.
Once tax depreciation regimes, stamp duties and other taxes were taken into account, the report put Australia’s marginal company tax rate was 28.4 per cent, the third highest impost on new capital investment in the developed world.
Report author Jack Mintz said taking the corporate rate to 25 per cent, as the government had planned but has now abandoned, would cut the effective tax rate to 24.3 per cent. Labor’s planned Australian investment guarantee would reduce the effective rate to 25.9 per cent.
Council chief executive Tania Constable said the research showed broad-ranging tax reform, which included personal income tax cuts, had to be considered by the parliament.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.