Senior Liberal frontbencher Michael Sukkar has warned Treasurer Jim Chalmers against heeding Reserve Bank Governor Philip Lowe’s advice to raise taxes this term.
The RBA Governor on Friday flagged the drastic need for a boost in government revenue, suggesting Labor employ tax cuts in the near future.
Labor repeatedly ruled out raising taxes during the election campaign, instead deferring to its plan to target multinational tax avoidance as its primary source of increasing government funds.
Mr Sukkar said the government could not capitalise on Dr Lowe’s statement and “revert to type” to rapidly increase taxes.
“We know that’s in Labor’s DNA,” Mr Sukkar told Englishheadline Australia on Sunday.
“They went to the election very solemnly telling Australians that they wouldn’t raise taxes that they’d match the Coalition and they should live up to that commitment.
“We know they always do this, they chase higher spending which therefore means they need to tax Australians more.
“It would be a very very serious breach of their commitments.”
Dr Lowe said Australia’s current budget deficit required Labor to boost government takings or begin cutting expenditure.
He said the Australian community expected a “whole range of services” but despite 50-year record unemployment, the government was struggling to afford it.
“Taxes, cutting back and structural reform – we have to do one of those three things, maybe all three of them, if we’re going to pay for the goods and services that the community wants from our governments,” Dr Lowe said.
“I would hope during this term of Parliament, that you could start addressing probably each of those three things.”
In his first appearance in front of the Senate Economics Committee since the election on Friday, Dr Lowe also conceded it was a “narrow path” to fighting inflation via cash rate rises to avoid a recession.
The Reserve Bank has raised the cash rate four consecutive times from 0.1 per cent to 2.35 with the RBA expected to announce another hike this month.
But the governor flagged the rate rises would slow from its current 0.5 percentage point to a more reasonable 0.25.
“The fact that we’ve raised interest rates by quite a lot already increases the strength of the argument for smaller increases going forward,” he said.
“We’re closer to a normal setting now, which means that the case for large adjustments in interest rates has diminished.
“The alternative, though, of allowing higher inflation to become entrenched would be even more difficult and it would damage our economic prospects.”