Australia’s Budget Surplus Masks Looming Tax Burden, Economist Warns
Canberra – Despite Treasurer Jim Chalmers celebrating a projected return to surplus, a leading economist warns Australia’s budget relies on a steadily increasing tax burden on workers, potentially creating a “boiling frog” scenario for future generations.The budget forecasts a near-zero deficit within the decade, but this relies heavily on “bracket creep,” where inflation pushes taxpayers into higher tax brackets without corresponding income increases.
The analysis, stemming from commentary by economist Robert Yeaman, reveals a structural challenge within the budget – escalating spending commitments funded by an ever-increasing tax take, disproportionately impacting younger workers. While Australia’s current fiscal position appears strong compared to other similar economies, Yeaman cautions this positive outlook shouldn’t overshadow the long-term implications of relying on rising income tax revenue to balance the books. The Parliamentary budget Office projects the average worker’s tax rate will climb from 25% currently to 27% by the mid-2030s, with personal income tax increasing as a share of overall government revenue from 48% to 53% over the next ten years.
Yeaman argues the international comparison should serve as “both a comfort for today and a warning for tomorrow,” highlighting a essential imbalance. “it is the boiling frog,” he stated, emphasizing the gradual nature of the problem. “there is still at the heart of the budget a structural challenge that is not being met. And the people who will bear the consequences will be future generations.”
The budget repair is predicated on workers paying a greater percentage of their wages in income tax. To maintain current service levels, the government – or its successors – will eventually face a critical decision: raise taxes further or reduce spending. “Ultimately there’s a choice to be made,” Yeaman concluded.
