Massive Australian Tax Cuts

Peter Costello announced yesterday a massive plan of tax cuts. Every year over five years they will cut tax rates and move thresholds. It will mean that anyone who earns less than $1,090,000 a year will pay less income tax in Australia.

The first $20,000 of income will be tax free. Superb. Someone earning $40,000 will pay an average 20.2% in NZ and only 8.5% in Australia. Who wouldn’t you move there? You’ll pay almost $100 a week less tax if you earn $40,000

This table shows how much tax you will pay in Australia (once fully implemented) and in New Zealand. Almost painful to compare.


In Australia they will guarantee that for at least 45% of the population, the top marginal tax rate will be 15%. Yes 15% for almost half the population. In NZ only 21% pay 15% or less top marginal rate.

So by how much has Peter Costello cut taxes and how does this compare to Michael Cullen? Well Cullen has only increased personal tax rates, and has allowed fiscal drag to over-tax hundreds of thousands New Zealanders. So let’s look at Costello:


Yes Peter Costello will abolish income tax for those earning below $20,000, and slashed it by 75% for those on $30,000 and by 65% for those on $40,000. Even those on $50,000 face income tax reductions of 51% and the filthy nasty greedy rich on $60,000 get a 45% tax cut compared to a penalty tax in NZ.

And what level of surplus does Australia have? In NZ we have had surpluses as high as 7% of GDP and Dr Cullen has still insisted there can be no tax cuts. Well the surplus in Australia is around 1.3% of GDP.

And what about inflation. To quote Costello:

Mr Costello said the tax cuts would not be inflationary and were designed to increase workforce participation by giving people greater rewards for work. “By getting more people into the workforce you will be taking pressure off inflation because you will be adding to the number of workers, getting one of the big capacity constraints out of the way,” Mr Costello told Sydney radio 2UE. “One of the problems that business has at the moment … is they are reporting, in some parts of the country, not enough workers.”

Mr Costello also said the changes would make Australia’s personal tax system more internationally competitive.

Interestingly Australia Labour have not ruled out matching the promise with a tax plan of their own.

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