The Queensland deputy premier has demanded that federal Labor explain why it is cutting infrastructure spending to fight inflation rather than revisiting controversial tax cuts for high income earners.
Steven Miles has upped the pressure on the Albanese government over looming infrastructure cuts in an opinion piece in the Courier-Mail, arguing it is “too late” to cut projects to fight inflation and urging it to reconsider stage-three tax cuts instead.
On Monday the infrastructure minister, Catherine King, confirmed that some of the 250 projects that have not begun construction in the $120bn infrastructure pipeline will need to be cancelled or delayed to pay for at least $33bn in cost overruns.
Last week the International Monetary Fund warned that a spending boom on infrastructure projects, mainly from the states, was a major factor pushing Australia’s economy beyond full capacity and fuelling inflation.
But Miles argued that “inflation got out of control late in 2021 – before the last federal election”.
“Obviously, all government spending contributes to demand in the economy,” he wrote.
“That makes it incumbent on the Australian government to justify why funding earmarked for infrastructure should be prioritised for cuts, as opposed funding allocated to other priorities – tax cuts for wealthy households, for example.”
The stage-three tax cuts, passed by the Morrison government in mid-2019, begin in July 2024. They remove the $120,000 to $180,000 tax bracket, increase the top tax bracket to $200,000 and reduce the marginal rate of tax for everyone earning between $45,000 and $200,000 to 30%.
The Greens and crossbench have urged Labor to reconsider the stage-three tax cuts, which will reduce tax revenue by $320bn over 10 years, citing the fact that the greatest benefit flows to high-income earners.
The federal treasurer, Jim Chalmers, has insisted there is no change to Labor’s plan to leave the tax cuts in place, arguing that they help return bracket creep as income earners face higher rates of tax as they move into higher tax brackets.
Miles argued that investment in “productivity-enhancing infrastructure is likely to reduce pressure on inflation in the longer term”.
“When comparing options for budget austerity, the problem with looking to infrastructure is you can’t cut projects already under construction, only future projects.
“So any effect on total demand is likely to be years down the track, to be followed by a negative effect on productivity.”
Miles said this was “especially true” of Queensland, experiencing “extraordinary population growth” in part due to what he called the federal government’s “plans to massively expand immigration”.
The Albanese government has only increased the permanent migration intake by 35,000 to 195,000 – but Australia has experienced a surge in net overseas migration due to borders reopening after Covid restrictions were eased.
Queensland has been lobbying the federal government for permanent 50:50 funding for the Bruce Highway, a major national road which connects the south-east with the regions, and heavy rail for the Sunshine Coast. The Morrison government undercommitted funding for the heavy rail project and the Albanese government has pushed back against filling in overrun funding gaps, leading to a standoff with the Queensland government.
On Monday King committed to continue building 300 projects that are under construction but said a further 250 faced cancellation or delay as a result of the infrastructure review to be released “shortly”.
King said the federal government was “in negotiations” with the states, welcoming their help in cleaning up the “mess” left by the Morrison government.
She refused to rule out cuts in particular states, noting “the entire pipeline has not been managed well by the previous government”.
Guardian Australia contacted Chalmers and King for comment.
