Australia Treasurer confident July 1 tax cuts won't stoke inflation

Australian Treasurer Jim Chalmers poses for a photograph as he arrives to attend a G20 finance ministers' and Central Bank governors' meeting at Gandhinagar, India, July 18, 2023. /Amit Dave/File Photo

SYDNEY - Australia's Treasurer Jim Chalmers said on Sunday he was confident cuts to income taxes from Monday would not exacerbate price rises, as the nation suffers a cost-of-living squeeze amid stubbornly high rates of inflation.

The consumer inflation rate reached a six-month high of 4.0% in May, adding to pain for families battling soaring living costs and lifting the chances of another interest rate hike this year from the Reserve Bank of Australia.

The central bank has held interest rates steady at a 12-year high of 4.35% for five meetings, but has raised rates 425 basis points since May 2022 as inflation runs beyond its 2% to 3% target band.

Addressing media in Queensland state capital Brisbane, Chalmers said the government was "confident but not complacent about inflation in our economy" when asked about the impact of the tax cuts, which trim benefits to the wealthy and give low-income earners more breaks.

The tax cuts were about "ensuring that Australians earn more and keep more of what they earn," Chalmers said, according to an official transcript.

"Our strategy here is to provide substantial, meaningful and responsible cost-of-living relief at the same time as we fight inflation," he said.

Under the centre-left government's policy, people earning up to A$135,000 ($88,763) will fall into lower tax brackets from July 1. Tax breaks for some high-income earners will nearly halve, with the savings redirected to those on low incomes.

Labor Prime Minister Anthony Albanese said in January that the Treasury informed the government that the tax breaks were broadly revenue neutral, supportive of jobs, and would not stoke inflation.

Source: Reuters