malcolm turnbull
Australian Prime Minister Malcolm Turnbull speaks during a media conference in Sydney. Reuters/David Gray

Australian Prime Minister Malcolm Turnbull raised the prospect of personal income tax cuts in a speech to business leaders on Monday. The Aussie leader hinted that tax cuts could be available to middle-income earners before the next election.

During a speech to the Business Council of Australia, Turnbull said he is actively working with the Treasurer and his Cabinet colleagues to ease the burden on middle-income Australians, while also meeting his commitment to return the budget to surplus. Those earning $87,000 or less pay up to 32.5 percent in tax, ABC News reports.

Turnbull said the marginal tax rates are high and “bracket creep,” the phenomenon in which taxpayers shift into higher tax brackets when their nominal incomes grow, owing to inflation and/or real wages growth, must be addressed. He added that higher taxes penalise people who are trying to get ahead.

The prime minister believes that tax cuts would boost efforts to tackle cost-of-living pressures, including measures by the government to cut power bills, childcare reforms, an overhaul of private health insurance and the budget’s housing affordability measures. He said that one way to put more money into people’s pockets is to increase their disposable income through lower taxes.

But Opposition Leader Bill Shorten was quick to criticise the announcement as a promise thrown out "to keep the wolves from the door.” He said on the Sunrise program on Tuesday that “this bloke” says whatever comes into his head.

Chris Richardson, the former Treasury official, has also undermined Turnbull’s plan to pursue tax cuts for middle-income earners. He pointed that there is no strong economic case for such tax cuts and that they will come at the budget’s expense.

Chris Bowen, the shadow treasurer, said that Turnbull’s tax cut plan was only a fistful of dollars from a government that attempts to switch attention from its other problems. He told Radio National on Tuesday the government engages in thought bubbles and throwaway lines.

Last month, the Parliamentary Budget Office revealed that the plan to return the budget to surplus by 2020-21 was also reliant on personal income tax increases. According to the PBO, the government was relying heavily on bracket creep.

The PBO also said the tax rises showed a seismic shift in the taxation burden from businesses to individuals. Over 1 million Australians will likely shift into higher tax brackets over the next five years, where their average tax rates will increase.

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