Tax cuts at next federal election

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Treasurer Joe Hockey announced this week that he would like to promise tax cuts at the next federal election. Economists have been quick to react in issuing warnings to the Abbott Government, suggesting that taxes should not be cut until the budget returns to surplus or more revenue is raised.

John Daley from the Grattan Institute believes that without serious proposals to increase revenues, the budget could be put under more strain. Mr Daley also believes that without these new sources of revenue, the tax cuts would need to be funded by future surpluses.

Mr Daley noted that achieving a budget surplus by 2018–19 looks “extremely unlikely” and that further cuts to funds for state schools and hospitals would be the only way the government could cut taxes without negatively affecting the budget.

“The test for tax cuts should be not that we might be in surplus sometime in the distant future but that we are in surplus in the current budget year,” said Mr Daley.

Mr Daley’s comments were also reinforced by former Reserve Bank board member Warwick McKibbin who warned that it wasn’t a good idea to pursue tax cuts if those cuts would expand the deficit.

Read more at Sydney Morning Herald.

Opinion: Smart economics or playing politics?

Australia’s budget deficit and financial troubles compared with other OECD countries may just be a drop in the ocean, but according to financial modelling carried out by PricewaterhouseCoopers, federal government debt is expected to reach $1 trillion by 2037 unless urgent action is taken to fix the federal budget.

Australia may be at the lower end of the debt to GDP ratio by country, but a 2014 IMF survey of 17 OECD nations showed Australia’s growth in net debt is the third highest of those nations surveyed.

Treasurer Joe Hockey has shown his true colours this week in suggesting the promise of a tax cut at the next federal election. It’s time to stop playing politics and to focus on building an economically sustainable Australia for the present and for the future.

What do you think? Is it reckless of Joe Hockey to announce his wish to promise tax cuts at the next election? Or is this a tactic you have come to expect of every treasurer heading into an election?

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282 Comments

Total Comments: 282
  1. 0
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    Here we go again. Hockey delivering the next election campaign lie? Does this sound like the Paid Parental Leave bribe…which of course never happened. Funny that.
    I thought that the country was in financial difficulties and that we needed to borrow money from foreigners???? So how would tax cuts fix this problem?
    This is just the next lie for mentally challenged Australians to swallow. The only tax cuts Hockey will ever deliver is to the rich. That is what this crew do.

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      mick, you really need to stop being so negative. Have a look at the “tax switch” of the Key Government in New Zealand.

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      I wish people will stop using what other countries do an excuse to what we should do here.we have done that before and then found a few years later that the other countries have abandoned them as unworkable.

      Can’t we think for ourselves.
      i.

    • 0
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      I wish people would have some ideas of their own instead of being so negative toward the ideas of others. 🙂 It’s working for the Kiwis Wsaton, so why not look at why it is working? They are leaving us behind. Our population growth has dropped due in part by the Kiwis returning home to NZ because of all the jobs.

    • 0
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      Mick, I would probably agree with you a bit more if you stopped bashing the “rich” – ALL governments take what they can from everyone … AND they certainly don’t give to the rich …

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      Hmmm, The Australian dollar is dropping and the kiwi dollar is dropping more against the Aussie dollar.

      Apart from this countries makeups are different, what works for one doesn’t necessarily work for another.

    • 0
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      NZ jobless rate 5.8% end March qtr hardly much difference from ours. 6.9% for the north island where most people live.

      Jobless rate 3rd qtr 2014 5.4%
      Jobless rate 4th qtr 2014 5.7%
      Jobless rate 1st qtr 2015 5.8%

      Seems to me it is going up.

    • 0
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      Frank, we have an economic structural disaster ahead of us essentially created by Coalition governments of the last 20 years squandering the bonus of the resources boom on tax cuts instead of investing it for our future. Those tax benefits were principally for the benefit of the wealthy “elite”. So explain how further tax cuts will save the day, other than further insulating the wealthy from any pain.
      Old Silver Fox where have you been for the last 20 years? Over that period the Coalition governments have been taxing the lower and middle classes at a net rate of 32-38% of taxable income while taxing those on incomes of $180k or more at a net rate of 27%. During this time there have been cuts to education, health and welfare. The poor have been bashed to death, so why is it not time to bash the rich? Or at least start making them bear their fair share of the social burden.

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      Hey Mick What Cocky Hocky means is a tax cut for the TOP DOGS AND POLLIES he ain’t talking about you and me. We will have to cope with the increase in GST, just watch the food bill and see what they can say is not a necessity for eating for a healthy life style This crowd couldn’t lay straight in bed they’re so crooked

    • 0
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      I agree with a few of the well thought out comments above, especially Grumpy.
      Australia is in for tough times unless the prices of coal and iron ore bounce back. Whilst India may in the future bring this one on it is unlikely in our lifetime.
      What we have is a nation which imports most everything and which in the past 2 decades has sold off its assets to square the budgets. Blind Freddy can see that this is not sustainable. Either we begin to manufacture again and stop importing so much or we become slaves in our own country. You and Tony can put your heads in the sand Frank but that is the direction the country is heading in.
      Your retort about being “negative” Frank flies in the face of the FACTS. This government is known for its dishonesty and your mate Hockey can crow all he likes. Like you Frank Hockey and others on the front bench have no credibility with the public any more. You know the old saying: ‘you can fool some of the people all of the time and all of the people some of the time. But you can’t fool all of the people all of the time”. I’m sure your employer will not want to hear that, but these are the facts mate.

    • 0
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      Australia has become a welfare nation or if someone does work they want to be paid big wages but only pay a pittance for the goods they buy. Cheap imports and a welfare mentality have made this possible. Now very few firms can produce goods at the prices we are prepared to pay because we all want to be paid some of the highest wages in the world. We have been eluded by a mining boom that has all but completely busted and no one wants to acknowledge that the good times are over. When will we all wake up and realise that the party is over.

    • 0
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      Well said Bonny!!

    • 0
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      Bonny we also have one of the highest cost of living in the world. Need higher wages to pay for it although I think there are a lot of low paid workers who would disagree with you.

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      It’s the chicken and egg situation. Did higher wages cause our high cost of living or did our high cost of living cause higher wages? Lower wages and the cost of living will soon compensate but you can’t lower the cost of living and expect wages to compensate.

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      Bonny – frank – you’re first to try out the new 20% income drop scheme….

      For those who have no real idea – the cost of living comprises part of the annual wage claim -ergo – it is the cost of living that goes up first – always has been.. and wages are always playing catchup.

      I’ve long advocated freezing both at the same time – but that will never happen as long as everything continues to be ‘privatised’ into the hands of additional ‘ceos’ and ‘board members, all drawn from the usual suspect ban of course – that demand to be overfed on top of the already high cost.

      Right now the electricity moguls are whining that they can’t make a profit out of the current prices….. maybe they need to cut some of their own fat then.

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      TREBOR: The system world on inflation. Has in my lifetime and from what I understand hundreds of years before that: costs go up so wages rise to catch up. Then mortgages (priced in pre inflation dollars) become less as people earn more. And so the cycle goes on.
      What has happened for a long time now is that prices have been increasing without wages catching up. Even thought this has been the case you still get the spokespeople of the rich and their businesses spruiking about these high wages….whilst the increases in pay for the rich have no restraint and no limits.
      My call is that eventually, whenever that is, there will be a wages explosion to catch up. Of course the rich and their business spokespeople will cry ‘ruin’ as usual. That never changes in this ongoing game of rich against poor complete with all the lies and rhetoric. Welcome to life!

    • 0
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      A 20% drop income is not a concern to me as I’m not on any sort of fixed income.

  2. 0
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    If you believe ANYTHING this man says you are TRULY NAIVE, and this is a MILD assessment.

  3. 0
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    100% guaranteed vote buying, and as soon as the election is over, even if the LNP wins (god forbid, I hope not!), it will either be scrapped, pared back, or cancelled out by other charges. Please don’t be duped by this cynical ploy, but mind you, Labor will do exactly the same, so PLEASE consider your vote very carefully, and vote for the independent candidate who most closely matches your values.

  4. 0
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    I’m ‘gob smacked’ to think that pepole would fall for such an obvious ploy when only hours ago there was a call for an increase in tax (GST). Perhaps if the governent was to present the ‘vision of 2030’ they could be spared a massive rout in the next election.

  5. 0
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    Just because the country was left in a deficit state and trajectory by the previous government doesn’t mean that their should be a moratorium on changing anything until we are back in surplus.. I would expect that governments will continue to fine tune the taxing AND SPENDING arrangements to move towards a fair AND SUSTAINABLE BALANCE.. That COULD definitely mean tax cuts in some areas and increases in others, along with shedding expenditure that we just cannot afford at this time…like 12 months parental leave.. Which begs the question on THIS subject… Why are federal public servants allowed such generous parental leave when the rest of Australian tax payers, WHO FOOT THE BILL, cannot access such generous payouts ?? Surely such generous conditions should be retracted UNTIL those who earn the $$$$ to pay tax can actually get such “benefits” themselves..

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      I agree would be. It would seem the privileged Public Servants guard their “perks”, as a dog does with a bone, with the help of Labor.

    • 0
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      Ha, ha, ha Frank.
      Joe must have a hat with rabbits in it. A couple of weeks ago it was “we need to repair the budget” (the one this government removed the debt ceiling on so that it could borrow forever). Now tax cuts?
      Your lies are not working Frank.

  6. 0
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    What a joke, on one hand buying votes with tax cuts but drumming up acceptance of a 15% GST.

    Why would anybody believe Joe Hockey or Tony Abbott anyway? Sadly, I think some will, again…

    • 0
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      Jen, you don’t need to believe just state a position on wether you think its a good idea?
      Tax reform is badly needed and it goes without saying adjustment for bracket creep should be part of that.

    • 0
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      Jen, you stumbled on the way governments of all persuasion work….rob us with one hand and promise us cuts with the other … we don’t need increases in GST….we just need to make them STOP SPENDING

    • 0
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      Old Silver Fox, your thinking is too simplistic. It is not how much the government spends, it is what it spends it on.
      Money spent on infrastructure projects is good because it promotes jobs, tax receipts and local economic activity. Money spent on hugely enormous defence expenditure such as the F35 fighter is extremely bad. Such expenditure promotes employment and economic activity in the US, serves as a huge drain on budget expenditure for no local economic benefit. That is apart from it being a complete lemon which cannot fly within 30Km of an electrical storm.

    • 0
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      Frank: the next lie from you and your government. Tax relief will only come for the big end of town. Average Australians will get a a token decrease whilst having taxes pushed through the roof. Jen is on the money….increasing the GST will hit the poor the hardest and will more than wipe away any tax decrease.
      Tell us where you live Frank so that some in the community can investigate who employs you. I have already worked it out mate!

    • 0
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      mick unlike you, I am a concerned citizen. Where I live has no baring on my concerns for this great nation and it’s equally great people.

    • 0
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      People who have an honest concern about our country do not use the sort of rhetoric you use Frank. Nor do they lie continually or work for either side of politics whilst claiming to be an individual voice.
      As I have said to you on a number of occasions Frank give me your details and I’ll check you out and/or pop in and say g’day. That will put this one to bed. What do you say?

  7. 0
    0

    Well this is another one of the Governments tricks to stay in power,with one minute saying that we all should have a go and another saying we must catch welfare cheats,now Mr Hockey is saying he is going to cut taxes before the next election,what makes these Liberals tick,it is not there heart it is a time bomb,of course there should be tax reforms but is this the right time or just another one of their tricks to get people’s votes,there are so many things that need fixing at present but Tony Abbott passes all his promises on to some other government persons to make decision for him like Mike Baird and the G.S.T.he would not say he would do it but left it to the state leader to bring it out,how gutless is he,he has nothing to say to the people of Australia,just full of shit that dribbles out of his mouth and the mouths of all poloticans ,they do not have Australia at heart,but sell us to the highest bidder like China

    • 0
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      Yep. The old shell game. But a lie remains a lie remains a lie.

    • 0
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      Yep, on one of the few occasions I agree with you mick.
      “There will be no carbon tax under the government I lead.”
      Listen for the Labor leader to say this. He may try to wedge tail it in by calling it another name like ETS just to fool the idiots, and a few of the smart 1 million people who have no understanding of English.

    • 0
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      Don’t waste your time Frank. The normal anti Labor LNP advertisement.

  8. 0
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    Perhaps we should look at actually lowering the tax-free threshold from an all-time-high $18,000?? Or, heaven forbid, actually look at increasing our personal income tax rates to better deal with our current situation? Oh right, that could actually lose Joe & Co. votes could it not?

    • 0
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      How about we stop letting the rich ‘invent’ outs for avoiding fair tax. Or maybe close the superannuation loophole for the rich. Or maybe change legislation so that multinationals can avoid paying tax in Australia.
      Your suggestion Rob is what this government wants to do: tax average citizens and drop taxes for the rich.

    • 0
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      Mick, because we have “stepped” levels of income tax it would be very easy to simply increase personal oncome tax on higher income earners without affecting middle and lower income earners in any way at all. In regard to Corporates and Multinationals if every business operating in Oz merely paid a 10% tax on turnover alone (even with complete disregard to any profit-based basis of taxation) we would be swimming in sufficient dollars to do everything we need to do and more in this country.

    • 0
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      Robo50 perhaps you would be but only for a year or two. After that unemployment would be about the same as it is in Greece. An average business may only make around 10% profit so they would need to down size and reduce costs in order to survive.

    • 0
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      Fine Rob,

      55 millionaires pay no tax at all raising the top bracket would only make them spend more to avoid it.

      The Buffett rule is the only way to stop this.

    • 0
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      Bloody heck I wish I could make 10% profit on my savings.

    • 0
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      Well it becomes 7% after tax and that 7% is often earmarked for growth in around 20% of businesses. I suspect it simply stays in the business as unappropriated profits. The retailers may make a little more than 10% but they have the expense of being taxed on that by the landlord as well as compulsory shop fitouts. The Government did manage to get some of that stored away rainy day cash back into circulation it seems with the instant write off up to $20k. New car sales were high in May /June.
      I’m sure you could do it Wstaton if you were prepared to work a 60 hour week.
      But wouldn’t you rather earn the same from centre link by sitting on your bum complaining?

    • 0
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      Typical lib,

      For your information I have worked all my life and often worked a 60 hour week. I have paid my dues and uptodate haven’t accepted a penny of Centrelink. Sorry I have a seniors card. I don’t think that is by a courtesy of Centrelink.

      What I do know is that owners of businesses usually pay themselves a salary which then becomes an expense of the company which is deducted before profit

    • 0
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      Anyone who has been self employed,run a business or farm knows that there are a myriad of avenues available to minimise their tax burden nearly to the point of not paying any at all. All legal and above board but makes a mockery of tax equality. I’m many cases they are able to avoid a large percentage of GST on items that aren’t for their business but go down as being for their business. That’s why I keep saying if GST exemptions were removed from everything the actual rate should come down and everyone would contribute more equally to GST revenue.

    • 0
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      You’ve won me on that one mangomick. If GST exemptions were removed it should achievea similar net effect as a 10% turnover tax on business would do.

  9. 0
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    I don’t get it?
    I know economics is not my strong point but how can it be?
    When Labor were sending out cheques to voters that was strengthening the economy.
    When the Coalition provide tax cuts to workers that is weakening the economy by adding to the deficit?
    I would have thought a tax cut is a more economical way of putting extra dollars into household budgets.

    • 0
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      Frank its all about timing and context.
      When Labour sent out the cheques there was a very real risk of the global and our economies being slowed down by austerity measures which would have strangled growth for many years, with consequent social pain for all. The cheques served to promote economic growth by encouraging spending. Treasury had the money, so it could be done.
      Now however, when the effects of the skewed tax structure introduced by Coalition governments during the boom when the structures real effects could be masked by burgeoning receipts is visible, the receipts will no longer support such things, unless a fairer tax base is developed. Such a base can only be achieved by the wealthy and big business being made to bear their fair share of the total burden.

    • 0
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      Timing and context huh? Nothing to do with politics, just timing and context?

    • 0
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      Frank: Grumpy is on the money. You are on the spin.
      Look up ‘GFC’. Read about what this was. And then tell the community here about how Australians did NOT lose their jobs when the rest of the developed world was decimated.
      Whilst you continue on with the Union and Labor scapegoats your story is the normal LNP propaganda.

    • 0
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      Labor’s plan of trying to increase employment with Pink Batts and school halls while poorly executed was a good idea for quickly strengthening our economy during the GFC . Sending out cheques was plain stupid. The money could have been put to better use by being spent on a large infrastructure project but both sides of Government are so blinkered (I was going to say stupid ) that they only think about the next 3 years that we don’t have any big scale plans in place (like fast rail or irrigation schemes etc where funds can be thrown at ongoing projects to stimulate our economy quickly.

    • 0
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      mango, I disagree that pink batts created anything else but heartache and about 10,000 jobs for 6 months at enormous cost to taxpayers. It would have been cheaper to payroll 20,000 people for 12 months. I don’t know about the school halls either. Some were pulled down as fast as they were erected. As were the pink batts removed from many homes. I have no idea why they did not bring forward many of the infrastructure projects as recommended during 2008.
      I do agree however that our political system is not working well for us. Too much emphasis is placed on what is politically correct and not for the good of the nation.

    • 0
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      Pink batts weren’t the problem, the silver foil insulation was or more to the point the training/licensing supervision and lack of response from the relevant Department and Minister when problems were found. Ceiling insulation carries on saving people $$$s on heating and cooling costs as well as generating a lot of employment quickly. Same as school halls kicked the building industry along at a time when it was most needed. There were a lot of rip offs in overly inflated quotes and priorities but Government Departments are to blame for allowing that to happen. Could Australia have survived the GFC without all that, I think we would have but I’m pretty sure Labor took their advice from organisations like the IMF . But yeah, somewhere along the way our Governments have lost their way and it has become like a Vendetta against the other as each Party comes to power and honestly the worst culprit has been and continues to be Abbott .

    • 0
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      Pink batts and school halls were a quick fix infrastructure would have taken too long to plan and build. It was all a bad knee jerk reaction to a perceived problem that made some people very rich and others victims when they got in too late.

    • 0
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      “Labor took their advice from organisations like the IMF .”
      Yes sir! As if the IMF had Australia’s interest as a priority.
      Swan came back from the G20 like a sailor on first shore leave.
      Why should we have helped to bail out other economies at our expense. Rudd told us initially, we will not be affected because of our strong contracts with China. But fast forward, hold the phone!! Stop the press!! The Labor political machine kicks into gear and we suddenly have a problem and the only solution is to empty the vaults, sending cheques to Labor voters with a message to spend, spend, spend. And there’s more where that came from. With Swan’s constant reassurance that we were doing ok compared to Greece. I know why some people want these economic vandals back.

    • 0
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      I do too Frank. No bonus extra jelly beans with current fiscally responsible government.

    • 0
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      Agree with you mango. Pretty well covers it.
      The trouble with our troll Frank is that there is never anything other than crap. Pink batts may not have been the perfect solution but they kept a lot of Aussies in work as well as bring down energy prices. There was a silver lining. Had it been me I would have loved to have brought forward infrastructure projects….but you cannot do that from week to week. That was the paradox.

    • 0
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      It would have been better without the stimulus packages as we would not have kicked the can down the road and be now heading into a recession.

    • 0
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      Bonny I agree. Keating would have said let the recession happen. We were in a strong position to handle it back then. Our underlying problem was always having a government which cared more about mirror gazing. A recession would not have looked good for them politically.
      Anyway, the question is have we learned anything from our mistakes???

    • 0
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      Our underlying problem dear LNP troll is that governments on both sides of politics have used the nation’s finances as their own casino as they played their political game of waste. And then as the money was frittered away they decided that it was a good idea to sell off bits of the nation to foreigners.
      Your continued anti-Labor rants paint you for what you are: an employee of this worst of all governments.

  10. 0
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    I can’t see tax cuts benefiting pensioners or retirees myself so who do they benefit?

    • 0
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      Bonny, tax payers. The bigger the income the greater the benefit.

    • 0
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      Bonny if you don’t pay tax there are no cuts to be had. Those on the aged pension do not pay tax, nor do many SF retirees. If you do pay tax then you clearly have a large enough income and I would suggest waiting until definite proposals are brought to the voting public to see how you may be affected, and then have your say at the ballot box.

    • 0
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      They’re not meant to. Some retirees do pay tax KSS.

    • 0
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      Bonny, for once I agree with you re your’e comment ” I can’t see tax cuts benefiting pensioners or retirees myself so who do they benefit?”
      They benefit the big end of town and the big earners who get big tax relief with their Super contributions to start with, but it is just a bribe to get back into govt. You wouldn’t trust mob in a fit. They’re a bunch of lying morons.

    • 0
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      Yes the are politiicans.

    • 0
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      thommo, you’re right. First of all, income tax cuts are VERY improbable and would have very little or no benefit to most Aged Pensioners. An increase to the GST is quite likely and would effect EVRYONE. There is a possibility of a new tax – the HST (Health Services Tax) – to find similar to the Medicare Levy, or just an increase to the Levy. APRA has recommended banks increasing their capital buffers, as is being done in the U.S., and to watch who they are lending to (reminiscent of the subprime borrowers who “inspired” the GFC?). And, the RBA is seriously considering another cut in interest rates. Then there’s the new tapering rates to take effect on 1/1/2017. All-in-all, things look pretty crook for the immediate economic future for everyone.

    • 0
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      RBA will cut rates but APRA has just given the banks a good excuse not to pass it on to borrowers. Savers will probably get a haircut too. Banks will defend their profits above all else.

      If I was a betting person I’d put my money on an increase in Medicare levy as the mechanism is already in place to not effect low income earners.

      Increase in GST is probably just a red herring in all of this.

    • 0
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      Bonny: your post sounds a lot like our resident troll. But you are not too far off the money here. Banks will probably cut dividends to fund the increase in the reserve ratio.

    • 0
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      No banks have already signaled that they will make up any difference by not passing on the full future interest rate cut. Remember those running the banks have oodles of options that they will protect and optimise with rising profits and therefore dividends. With the exception of the CBA all the banks have already sorted out the new APRA requirements. eg NAB had a capital rising, WBC sold BT to it’s shareholders.

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