Anthony Albanese’s government flags fresh tax cuts for Aussies as it warns of major economic challenges ahead

Australian workers could be in line for another round of tax cuts at the next election, with Treasurer Jim Chalmers signalling fresh relief as he prepares to unveil a stark 40-year forecast warning of major economic challenges ahead.

Chalmers will unveil the seventh Intergenerational Report on Monday, offering a glimpse of what Australia could look like in 2066 and the economic challenges expected to shape the nation over the next four decades.

‘People are under pressure, which is why we’ve delivered multiple rounds of income tax cuts, including tax cuts targeted specifically to workers,’ Chalmers said.

‘At the same time, we’ve improved the budget position, which has created more room for tax cuts into the future.’

The report will argue that tax changes announced in this year’s budget have eased the burden on working Australians and will canvass the potential for further tax cuts in the years ahead, according to excerpts distributed by Chalmers’ office.

‘Combined, the government’s tax reforms will rebalance the tax system and reduce the tax burden on workers,’ the report will say.

‘By the end of the medium term, the share of personal income tax burden on workers is expected to be 2 percentage points lower than it would have been without reform. 

‘Over time, this share is expected to fall further as an increasing share of property investment and capital gains will become subject to the new tax settings.

The report will argue that this year’s budget eased the tax burden on working-age Australians and will canvass options for further tax cuts in the years ahead. 

‘In addition, the government’s efforts to improve the budget position have created more room to provide further tax relief in future budgets.’

This year’s budget contained a new tax offset of up to $250, which will apply from the 2027–28 financial year.

It came on top of an already legislated tax cut that began on July 1, reducing the tax rate on income between $18,201 and $45,000 from 16 per cent to 15 per cent.

Independent economist Saul Eslake told the Sydney Morning Herald the prospect of more tax cuts was ‘plausible’.

However, he said he was concerned estimates showing an improvement in debt and deficits relied on ‘fanciful’ assumptions about productivity growth that were unlikely to be realised.

Beyond the debate over tax, the report will also lay bare the longer-term challenge facing Australia’s economy as the population grows older and Australians have fewer children.

The combination is expected to place increasing pressure on the federal budget, with a smaller share of working-age Australians supporting a growing number of retirees.

Australia’s fertility rate is forecast to fall sharply over the next 40 years, with the average number of children born to each woman dropping from 1.48 today to just 1.34 by 2066. 

Australia’s fertility rate will drop dramatically over the next 40 years, with government forecasts showing the number of children born to the average woman will decline to just 1.34 by 2066 

The fertility rate has remained below the replacement level of 2.1 children per woman for about 50 years, increasing the importance of migration in maintaining population and workforce growth.

At the same time, Australians are expected to live longer.

Life expectancy at birth for women is forecast to climb from about 86 years today to almost 90 by 2066, while for men it is expected to rise from about 82 to 86.