Young working Australians face a challenging financial landscape, with expectations of significantly higher taxes over the next decade. According to a report released by the independent Parliamentary Budget Office, the burden of these increased taxes will primarily fall on younger generations, as the Albanese government navigates politically sensitive choices between providing tax relief and implementing deep spending cuts.
The report indicates that while the current state of Australia’s finances is deemed sustainable, personal income tax is projected to rise steeply. Treasurer Jim Chalmers is under increasing pressure to address budgetary concerns that are likely to persist through 2035-36. The final numbers for the 2024-25 budget are anticipated by the end of the month, with Chalmers expected to announce a budget deficit for the last financial year that will be in the single-digit range, rather than the previously forecasted $27.6 billion.
In the March budget, Chalmers introduced two tax cuts for all workers, set to take effect in mid-2024. Despite these measures, the Parliamentary Budget Office forecasts that the average personal income tax rate in Australia will climb from less than 25 percent this year to more than 27 percent by 2035-36. This increase highlights a growing reliance on personal income tax, which is expected to account for 47.7 percent of total government revenue this financial year.
As the decade progresses, the burden of taxation will increasingly shift toward working individuals, with projections indicating that personal income tax will contribute to over 53 percent of government revenue by the middle of the decade. The report attributes this trend to a phenomenon known as “bracket creep,” whereby individuals pay a larger proportion of their income in taxes as their earnings rise. This will disproportionately affect younger Australians, who are already facing a challenging economic environment.
Over the same period, the government is expected to gradually restore budget balance, largely driven by a remarkable 90 percent increase in personal income tax collections, which are forecast to reach nearly $682 billion. The rising tax rates and their implications for younger Australians could lead to discontent among this demographic, which may feel they are bearing an unfair share of the financial burden.
As the Albanese government grapples with these fiscal challenges, the choices made in the coming months will have lasting ramifications for young workers. Balancing the need for essential services with the economic realities of taxation will be critical as Australia looks to navigate the complex landscape of budgetary reform.
