July 2, 2019 / 12:53 AM / 22 days ago

Australian government poised to secure $110 billion tax cut plan

SYDNEY (Reuters) - Australia’s conservative government is close to securing enough votes to pass sweeping tax cuts after independent lawmakers said on Tuesday they were poised to strike an agreement with Prime Minister Scott Morrison.

FILE PHOTO: The new Australian Prime Minister Scott Morrison shakes hands with the new Treasurer Josh Frydenberg after the swearing-in ceremony in Canberra, Australia August 24, 2018. REUTERS/David Gray/File Photo

Australian Treasurer Josh Frydenberg proposed in April A$158 billion (87.28 billion pounds) in tax cuts over the next decade, primarily aimed at middle-income earners. That was on top of tax cuts of A$144 billion last year.

The plan, widely sought amid a slowing economy, needs the support of three independents and minor parties to become law after the main opposition Labor party said it would oppose the legislation in Australia’s upper house Senate, where the government does not have a majority.

Senator Stirling Griff said his Centre Alliance party was close to committing the final two votes the government needs to pass the bill.

“It’s getting close,” Griff told Australian Broadcasting Corp. Radio. “We’re 100% behind income earners getting an extra boost in their pay packet.”

A conservative independent lawmaker has already committed to supporting the legislation.

About 10 million middle- and low-income earners will receive a rebate worth up to A$1,080 per person should the legislation pass this week.

The tax cuts would be a welcome relief to Australia’s central bank, which has said government action was needed to boost consumer spending in order to revive an economy that is growing at its slowest pace in a decade.

Economists have estimated the tax breaks would inject about A$7.5 billion into the economy over 2019/20, pleasing the Reserve Bank of Australia (RBA). The RBA cut interest rates on Tuesday for the second time in two months.

The rate cut is a shot in the arm for the economy but Australia’s top central banker has repeatedly said monetary policy is no longer the most effective tool to boost economic growth.

The successful passage of the tax cuts would also mark a major legislative victory for Morrison, with the tax plan the centrepiece of his re-election campaign. Morrison said after retaining power in May, in what he described as a “miracle”, that the tax legislation was his government’s priority.

Reporting by Colin Packham; Editing by Paul Tait

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