The Coalition is proposing a bold change to the tax system that would combat bracket creep and leave the average taxpayer with $1,000 a year more in their pocket.
Liberal leader Angus Taylor delivered his Federal Budget reply speech and outlined how his government would automatically index tax brackets to inflation each year based on the Consumer Price Index.
'This is generational tax reform. It's fair, simple, and honest. It will back Australians to work hard, take risks, and invest in their future. It will force government to respect your money,' Mr Taylor told parliament on Thursday night.
Bracket creep - where standard pay rises to keep up with inflation push workers into higher tax brackets even though their purchasing power has not increased - , results in a tax hit for workers.
Under the change the tax brackets would not remain static as they currently do, but shift with inflation, delivering a typical worker a $250 tax cut in the first year, which would rise to $1,000 by the fourth year.
The change would have two stages. The first would focus on the lower tax brackets covering about 85 per cent of workers, before a second stage that would focus on higher tax brackets.
Taylor also focused on immigration with a plan to cut overall numbers and claw back billions of dollars in savings by cutting welfare for non-citizens.
The National Disability Insurance Scheme would be for Australian citizens only, he said, and argued Australia should only bring in as many people as it can house.
Angus Taylor has delivered his Budget reply speech in Parliament on Thursday night
Under his plan, a limit would be placed on net overseas migration, equivalent to the number of homes built in the previous year.
Net overseas migration is the difference between the number of people arriving in Australia and the number of departures, and also includes temporary migrants like foreign students.
Tuesday's budget forecasts the figure at 295,000 for the current financial year, dropping to 225,000 in 2027/28.
That's well below the post-pandemic high of more than 550,000, when a flood of migrants re-entered the country as borders reopened, but still higher than pre-COVID levels.
In the 2024/25 financial year, about 175,000 new homes were built.
Mr Taylor's budget reply speech sets up a fight with Labor over housing policy, after the federal government revealed plans to scrap tax concessions for property investors in a bid to help more young people buy a home.
Labor minister Clare O'Neil said housing was a complex issue but migration was only one piece of the puzzle.
'If you think you can solve Australia's housing challenges just through the migration system, you've got rocks in your head,' she told ABC TV.
Labor Housing Minister Clare O'Neil said cutting migration was not an easy fix to increase housing supply (pictured with Prime Minister Anthony Albanese)
'That is a completely piecemeal approach to what is a big and complicated challenge facing the country.'
Greens deputy leader Mehreen Faruqi slammed both Labor and the coalition as they 'pander' to One Nation policies.
'It is pathetic that the Liberals are willing to sink so low trying to out-racist One Nation,' she said.
'Newsflash for Angus Taylor, migrants are entitled to the same safety net as everyone else.'
Opposition home affairs spokesman Jonathon Duniam denied the policies in the budget reply were anti-immigration.
'Anti-immigration is when you can't cater to the people that come here,' he said.
'I'll tell you what's anti-immigration: not building houses for people to live in in Australia.'