The federal government is facing mounting calls to rethink its stage three tax cuts and embark on far-reaching spending and revenue reforms to tackle soaring Commonwealth debt and strengthen the budget.
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The Grattan Institute think tank has joined other groups and organisations including the Council for the Economic Development of Australia, the Australia Institute and the Greens in urging the government to modify or scrap the $244 billion tax cuts and use the money to pay down debt or fund other priorities.
In a report on the government's finances, the Grattan Institute warned the budget's structural deficit was on track to grow to $70 billion a year by the end of the decade and deficits were likely to persist for at least the next 10 years without a change in the budget's settings.
As a result, it said, the government's interest bill would almost double to 1.7 per cent of gross domestic product over the next 10 years.
The institute said the government's revenue take had remained relatively stable at around 24 per cent of GDP while spending was growing as expectations for government services increased and the population ages.
![Treasurer Jim Chalmers. Picture by Elesa Kurtz Treasurer Jim Chalmers. Picture by Elesa Kurtz](/images/transform/v1/crop/frm/202296158/28006b38-0ae7-4797-9937-69b97d15f160.jpg/r0_98_5538_3212_w1200_h678_fmax.jpg)
"Continually adding to national debt by running sizeable deficits asks future generations to foot part of the bill for today's spending and may reduce the government's room to respond to future shocks," it said. "Now is the time to start the heavy lifting of budget repair."
Grattan has proposed a range of measures it argues will help put the budget on a sustainable path.
Its suggestions include redesigning the stage three tax cut to retain the 37 per cent tax bracket, which would save $8 billion; scrapping the Western Australia GST deal ($5 billion); rein in tax concessions on super, capital gains and negative gearing ($21 billion); wind back fuel tax credits ($4 billion); increase the GST to 15 per cent ($6 billion) and redesign the Petroleum Resource Rent Tax (up to $4 billion).
"None of these options are easy, but if the government is serious about budget repair it will need to embrace at least some of them," Grattan chief executive officer Danielle Wood said.
"To those who rush to reject these policies out of hand, I say: What's your solution?"
But the government has consistently ruled out tinkering with or scrapping the stage three tax cuts and Treasurer Jim Chalmers reiterated the position as he prepared to depart on Wednesday to Washington DC for a series of meetings with the International Monetary Fund, the World Bank and other G20 finance ministers.
"Our position on those stage three tax cuts hasn't changed," Dr Chalmers said on the Today show. "They'll be in the budget."
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Instead, the treasurer said next month's financial statement would include $1.5 billion of electricity bill assistance for households and small businesses.
"That will be a centrepiece of the budget when it comes to cost of living," Dr Chalmers said. "We're working with the states so that the Commonwealth is kicking in one and a half billion and the states are also kicking in their fair share, so that people are getting a little bit of help with what is probably the biggest part of this cost-of-living environment that we're facing right now."
The government has indicated limited appetite for tax reform, at least in the near-term. It drew considerable criticism for its modest move to reduce the tax concession on earnings from superannuation balances in excess of $3 million and has flatly ruled out any change to the WA GST deal.
But Dr Chalmers said the government was aware of the fiscal challenge it faced and the budget would be "responsible and methodical".
"There will be a premium on what's sustainable and what's affordable - the budget pressures warrant that and the global circumstances demand that," he said.