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Morrison Government tax cuts to come at a value, analysis shows

The Morrison Government’s promised tax cuts are so large it will have to cut spending by $40 billion a year by 2030 if it wants to deliver budget surpluses at the same time, according to new analysis.

Bill Shorten has seized on the revelation, claiming it proves the Coalition is planning “secret cuts” to schools and hospitals in coming years so it can afford its tax cuts.

But Prime Minister Scott Morrison has dismissed the analysis as “complete rubbish.”

New analysis from the respected Grattan Institute think-tank – first reported by the Australian Financial Review – shows the Coalition’s budget assumes Government spending will fall from 24.9 per cent of GDP in 2018-19 to roughly 23.6 per cent by 2029-30.

In the last 40 years, such a low level of spending has only been achieved six times by a federal Government.

The Grattan Institute says if the Government plans to reduce spending to just 23.6 per cent of GDP, while handing out hundreds of billions of dollars in tax cuts, while also delivering budget surpluses, it will have to cut spending by $40 billion a year by 2029-30.

Danielle Wood from the Grattan Institute says the Coalition’s income tax plan plan will cost the budget about $298 billion in foregone revenue over the next decade, with $230 billion coming between 2024-25 and 2029-30.

Labor’s plan – at the moment – is much cheaper at about $63 billion over the same period. Labor opposes the later stages of the Government’s plan.

Ms Wood told the West Australian the Coalition’s budget is assuming a decline in real expense growth to just 1.3 per cent over the next four years – half the already-low level seen from the Government – with large spending cuts in key areas.

She said over the next four years, health spending is assumed to grow in real terms by just 0.7 per cent a year (compared to 3 per cent annually for the last four years).

Defence spending is assumed to grow by just 3 per cent annually (compared to 6.2 per cent for the last four years).

And social security and welfare spending growth is assumed to slow too, despite the likely ramp up of the National Disability Insurance Scheme over the next decade.

However, she said the budget does not provide much detail about spending cuts beyond the next four years, and those years will have to see dramatic cuts in spending to meet the Government’s plans.

Labor leader Bill Shorten has seized on the news, saying the “whistle has been blown on the Government’s secret cuts to spending.”

“This Government is promising tax cuts in five years’ time for some people, but it’s doing it on the basis of $40 billion worth of cuts,” Mr Shorten said today.

“The secret’s out, this is a government with secret cuts to spending in its Budget to fund its promises on the never-never, for tax cuts.

“What this means for every day Australians is that the problems we’ve seen with increasing costs of healthcare, longer waiting lists, underfunded schools – the Liberals have form,” he said.

But Mr Morrison has rejected the Grattan Institute’s analysis.

“It’s absolute, complete rubbish,” Mr Morrison said.

He reiterated that the Coalition was on track to return the Federal Budget to surplus while delivering tax cuts at the same time.

“We have a very positive plan that we’re taking to this election. That positive plan is 1.25 million jobs,” Mr Morrison said.

“That plan is to ensure that we can put the budget in surplus, as we have for next year – the first time in 12 years – to pay down Labor’s debt. And we’re going that without increasing taxes. We’re doing it by lowering taxes,” he said.

The budget is forecast to return to surplus in 12 months.

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