Budget to tackle three key tasks

Treasurer Scott Morrison has pinned down his first budget to three important tasks.

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It will support growth and jobs, make sustainable changes to the tax system and ensure the government lives within its means.

But he won’t say whether next week’s budget will deal with bracket creep – where 300,000 middle income earners are forced into a higher tax bracket just through wage inflation.

“What I’ve been talking about is ensuring that we don’t penalise Australians for doing better in this economy,” Mr Morrison told reporters outside Treasury headquarters in Canberra on Tuesday.

There are suggestions he will lift the second highest tax bracket threshold from $80,000 to help counter the immediate effects of bracket creep.

Doing so will also benefit high-income earners, on top of relief from the two per cent deficit levy ending in mid-2017.

The Australian Council of Social Services says the government should be looking at helping those on lower tax brackets to make sure people aren’t losing money for working.

Chief executive Cassandra Goldie is also disappointed by the government’s decision not to touch tax breaks for property investors through negative gearing and capital gains tax.

Mr Morrison dismissed new Grattan Institute research showing wealthy Australians benefit most from negative gearing, while offering proposals that would halve its $11 billion cost to the budget.

“It is not a concession. It is just part of our tax system and they’ve been relying on it to provide for their future and to get ahead,” Mr Morrison said.

Shadow treasurer Chris Bowen took aim at the government’s opposition to Labor’s plan limiting negative gearing to newly-constructed homes.

“They are squibbing it and engaging in cheap, dirty, Tony Abbott-style scare campaigns at the expense of good policy,” he said.

Mr Morrison also gave short shrift to a new poll conducted by the Australian National University that found more of us favour higher spending on social services over tax cuts.

“For those who want to pay more taxes then we can allow for them to go down to the tax office and they can register for themselves to pay more taxes,” he said.

Separately, Deloitte Access Economics warned the budget could be $21 billion worse-off by 2020 as China’s slowdown hits company profits.

Slow wage growth and Canberra throwing money at the states and others in an election year are also contributing to a deeper deficit.

Mr Morrison conceded there has been a “range of things” in the past six months that would have an impact on the budget, including the impact of lower forecast global growth, but insisted the government would not be spending more than it saves.