In October, I reported that the promised tax cuts would be inflationary. I stated:
Now, it seems that Access Economics has confirmed that view. They also point out that finding cuts might be politically unpopular, and mentioned "middle-class welfare" as one area where cuts could be made. "Middle class welfare" is a term often used to describe Federal Government houndouts that are not means tested, and provided to people who are not in need of the money. It is a policy that was heavily used by the Coalition Government to win votes. Cutting it will be fraught with political danger, even if it is tapered and means-tested.
"(tax cuts) by themselves, they will be inflationary. The economy will have to produce nearly $50 Billion of EXTRA GDP. It is already groaning under the strain of other pressures such as the US sub-prime mortgage market, rising oil prices, rising food prices, and rising prices of other goods ... We need responsible economic management, not inflationary tax cuts."
Treasurer Wayne Swan has a difficult task to deliver ANY tax cuts, and still find sufficient extra savings to fund them, and increase his budget surplus from 1% to a more responsible 1.5% of GDP.