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Is A 'Fistful Of Dollars' Enough To Save Malcolm Turnbull?

It's a political reboot, but will it 'keep the wolves from the door?'
Malcolm Turnbull:
Malcolm Turnbull:

CANBERRA -- It is a political reboot that the Turnbull Government desperately needs but it is one that, according to at least one respected economist, the economy and budget do not.

Middle income tax cuts are suddenly on the offer with the opposition dismissing it as smoke and mirrors and a "fistful of dollars" from Malcolm Turnbull.

"It is like free beer tomorrow, isn't it?" Bill Shorten said on Tuesday. "This bloke who just says whatever comes into his head to keep the wolves from the door."

Behind in the polls and dealing with a seemingly never-ending dual citizenship crisis, the Prime Minister has flagged middle income tax cuts in the next budget before the next election.

Anyone feel an election coming on?

The next federal election is due in 2019 and the Government has been promising to go full term but there are early election tingles.

"Well, this is going to be our focus next year," he told reporters in Sydney while wearing a hi-vis jacket. "Obviously we've got the budget coming up, as always, in May. But we are determined to make sure that there is more money in the pockets of hardworking Australians.

"Half a million Australians are not going to go into the second-highest tax bracket because of our reforms, because of our reforms to cut middle-income tax. And we're going to do more."

The Tax Institute welcomes it and big business wants broader tax reform but the middle income tax cut plan, with virtually no detail, was dropped at the end of a day where senior members of the Government including Turnbull copped a severe backlash over extraordinary plans to delay Parliament until December 4 to suit its agenda.

The opposition leader said the Prime Minister can only be trying to avoid a period of minority Government without Barnaby Joyce and John Alexander who fell foul of the citizenship debacle. The prospect of a Royal Commission into the banking sector pushed by rogue Coalition backbenchers loomed large.

"I think it is a joke that the Prime Minister, who is frightened of his own party room, he is frightened of the Parliament, he is frightened of the electorate, is just cancelling parliament for a week," Shorten told Sunrise.

Turnbull insists the Government needs to use all the time it has in parliament to legalise same-sex marriage and deal with the citizenship debacle, but the 'all or nothing' approach is not washing with Labor which has vowed regardless to attend Canberra for work on Monday with the Greens and several crossbenchers.

"Marriage equality is very important and Labor's up for voting that in a speedy fashion, but there is plenty of other business which the Parliament needs to do," the Labor leader said.

"Turnbull's just cancelling parliament because he is having a hard day at the office. I mean tradies, teachers and nurses don't get to cancel their day and pull the doona over their head. You know, it's crazy."

But the PM is describing the decision as just "common sense". He said it would allow the senate to pass a marriage equality bill in the week beginning the 27th of November and then have it sent to the House in the week starting December 4.

"That gives us the time to do, complete that important work," Turnbull said. "So that's what its about, it is about management, it's about common sense, its delivering on our commitments to the Australian people."

Labor is also incredulous at the sudden need for tax cuts, saying the Government is moving on cuts while still planning on increasing the Medicare Levy.

"They have legislation on the books to increase the tax paid by every Australian," Shadow Treasurer Chris Bowen told ABC radio on Tuesday.

"What we have here is a rather desperate and pathetic attempt to change the conversation. A fist full of dollars waved around, no detail, no plan, to try and change the conversation from the fact that the government is falling apart before our eyes."

How much of a cut? When? What is the impact on the budget? The budget remains in the red and is not expected to return to a predicted surplus of $7.4 billion in 2020-21.

Tax brackets

People earning $87,000 or less - up to 32.5 percent

People earning $180,000 or less - up to 37 percent

The 2020-21 surplus actually depends rising personal income taxes (bracket creep and an increase in the Medicare levy) to return the budget to surplus.

"We've got the business tax cuts under way, our focus now is on middle-income tax cuts. We've got to manage that so that we keep the budget back into balance," Turnbull said on Tuesday.

"We're not gonna walk away from that."

Respected economist Chris Richardson from Deloitte Access Economics is not surprised by the suggestion, saying middle incomes earners are overdue for tax cuts. But he has told ABC radio it is a "political imperative, not an economic one".

"The economy is going fine. It really is. It does not need help, if you like, from tax cuts," Richardson explained. "The budget is not going fine and tax cuts would come at its expense.

"Having said that, it is absolutely middle income earners in the firing line for tax increases in the next handful of years."

These people, hardest hit, are the people the Government deperately needs.

"It is almost, from the viewpoint of politicians, the worst of all worlds: the biggest, relative increases in tax over the next handful of years will be going to middle in come earners who are, of course, likely to be swinging voters," he said.

"That is what the Government is responding to."

So Turnbull may be promising a "fistful of dollars", but whether he can bank on keeping those "wolves from the door" is another matter entirely.

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