PM defends tax package after RBA ex-governor's rebuke

Prime Minister Anthony Albanese has again turned to defending the government’s contentious budget, after a former Reserve Bank governor launched a stinging critique.

The federal budget’s tax packet, including changes to negative gearing and the capital gains tax discount, along with a $250 tax offset, passed parliament yesterday after the government struck a deal with the Greens in the Senate.

But former RBA governer Philip Lowe, who now heads up the ASX’s corporate governance advisory body, called the government’s tax package a recipe for economic failure, after last week blasting the budget’s handouts and claiming the government was weak on productivity.

Albanese this morning said the criticisms of his reforms were overblown.

“Tax reform is always hard, but we’re in government to make a difference to people’s lives,” he told Today.

“And this reform will give every Australian a tax cut that is important.”

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He said nobody dared claim the existing housing market was perfect and maintained the sector needed reform to allow first home buyers a clearer entry point.

“I remember when the fringe benefits tax was brought in by the Hawke-Keating government,” Albanese said.

“People said every restaurant would close, every hospitality venue was over, everyone was going to lose their jobs. It was going to be catastrophic. Guess what didn’t happen?

“And now that these changes have occurred as well and are implemented and legislated, some of the nonsense that’s out there will dissipate because it won’t hit up against reality.”

Albanese did not directly address Lowe’s criticism, but ALP president and former treasurer Wayne Swan said Lowe was “a regular critic of the government” and that his comments had not come as a surprise.

The federal government decided against renewing Lowe’s term in office in 2023, effectively ousting him from the governorship.

“He’s also an orthodox economist, you know, who believes that we should tax investment income less than wage income, you know, and of course, that’s a recipe for lower growth and higher inequality,” Swan told Today.

“So there’s simply a difference of economic opinion here.”

He said the government had a “strong productivity agenda”.

Treasurer Jim Chalmers, speaking to ABC’s AM program, also backed in the government’s amended package.

“Every time there’s tax reform, tax reform people say the sky will fall in, people say that it is disastrous,” he said.

“But typically what happens in time is people look back on big tax reform and wonder what all of the fuss is all about, and I’m confident that will happen again.”