While there has been much talk of a four-year tax hike to help reduce the budget deficit this would be a serious mistake and is hopefully just pre-election...

While there has been much talk of a four-year tax hike to help reduce the budget deficit this would be a serious mistake and is hopefully just pre-election kite flying. An increase in the top two marginal tax rates would seriously dent household spending and threaten the economic outlook, further reduce incentive to work and participate in the labour force at a time when we need to boost productivity and participation. Australia is a long way from the sort of budget crisis that Europe and the US face and near-term nominal growth is likely to be higher than assumed in the mid-year fiscal outlook which should result in a slightly faster decline in the budget deficit than currently projected for this year and next. So right now the key is to put policies in place that bring long-term spending growth under control, as opposed to adopting too much austerity. (VIEW LINK)