Australia Can Afford Only A Small Tax Cut, Economist Suggests

by Mary Swire, Tax-News.com, Hong Kong

29 April 2004

The much anticipated Australian income tax cuts may be a lot less substantial than many commentators are expecting, a recent report has indicated.

According to Dow Jones Newswires, a research paper by Andrew Pease, chief economist at JP Morgan Securities Australia, has suggested that the government will deliver tax cuts amounting to A$4 billion.

Should this be the case, Pease calculates, it will mean that Australian taxpayers are unlikely to receive tax cuts above A$9 per week (US$6.57) when Treasurer Peter Costello unveils the 2004/2005 federal budget on May 11.

Other economists have been forecasting a much larger tax cut of around A$10 billion based on a bigger than expected government surplus, strong GST and company tax receipts and a healthy dividend from the Reserve Bank of Australia.

However, Pease is reported by DJ Newswires to be somewhat less optimistic, stating that tax revenues are unlikely to be strong enough to fund significant tax cuts, and predicting a “disappointingly small” central bank dividend.

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