Funding for Australia’s $8 billion Medicare plan hinges on delaying personal income tax cuts, raising taxes through bracket creep.

In Short

The new $8 billion Medicare plan’s funding relies on delaying personal income tax cuts, using bracket creep to increase revenue without raising tax rates directly. Both political parties are under pressure to balance healthcare investments with ongoing public concerns about spending and tax implications.

Right at a time where Australia’s debt has ballooned, and pretty much anyone serious is warning the government its spending is causing inflation, the weekend saw both parties commit to free GP visits for almost everybody.

Except now everyone is questioning how the new $8 billion Medicare plan will be funded, with both Anthony Albanese and Peter Dutton scrambling to implement ‘free’ GP visits.

The Jobkeeper lesson

Remember Jobkeeper? Free money for everyone to stay at home. Except it didn’t stay that way. Rates went up, businesses closed, and many small businesses were chased by the ATO to pay the money back.

Repeat after me – nothing is for free.

Now, they present us with what appears to be the most prized possession within Labor’s deepest reservoir – free visits to the general practitioner. However, the funding for this plan hinges on postponing personal income tax cuts, enabling both parties to boost revenue without resorting to explicit tax increases through a concept known as bracket creep.

Which raises a rather Thatcherism conundrum – is the government better at managing your money, or are you? What if you don’t require the services of a GP? Should your tax cuts be allocated to someone who does?

Tax rates

Bracket creep results in rising incomes leading to higher average tax rates, even without changing the marginal tax rates. This is advantageous for governments seeking to raise taxes without acknowledging it publicly.

Economist Chris Richardson notes that upcoming policies could cost around $4 billion yearly, which aligns closely with the extra revenue generated from postponing tax relief. Richardson has recently pointed out Labor’s $7 billion black hole from the public service.

Liberal leader Peter Dutton has not committed to restoring previous tax cuts but says the government’s inflated spending leading to higher inflation and interest rates.

As both sides confront significant financial decisions in the lead-up to the next election, the discussion around funding the Medicare plan reveals complex tax dynamics that could impact all Australians.

This raises a significant question: Is mainstream Australia so disconnected from politics that our politicians now depend on the most basic sales tactics to capture our attention? I frequently find myself astonished at how Australian breakfast shows use gimmicks and free cash giveaways to attract viewers.

Will future politicians resort to dressing up as the Cash Cow and making surprise visits to people’s homes to garner our attention?

It may seem like a free gesture, but Australia’s politicians have a strained relationship with the word “free.”

Ahron Young is Ticker’s Founder and Managing Editor.