Labor do not want the Goods and Services Tax (GST) to apply to healthcare, saying that move would be “terribly regressive.”

On Monday, Mr Hockey said the Government would unveil personal income tax cuts before the next election, in response to bracket creep, when inflation drives up wages, pushing a greater number of Australians into higher tax brackets.

He left the door open to broadening the base of the GST to help pay for it.

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“There’s no doubt that with the exemptions in place in relation to the GST, the GST’s base is narrowing,” Mr Hockey said.

“Particularly with the growth in the healthcare sector, which is essentially GST free.”

Labor’s health spokeswoman Catherine King accused the Government of planning to pressure the states to agree to apply the GST to health care.

“There was a very good reason that health services were left out of the GST in the first place, and that’s because we knew as a country if would fall disproportionately on people who could least afford it,” Ms King said.

“It would be terribly regressive health policy to see the sickest and the poorest having to pay more and being punished for being sick.”

Any change to the GST would need the approval of the states.

Earlier this year, New South Wales Premier Mike Baird proposed increasing the GST from 10 to 15 per cent, but not broadening the base, leaving fresh food and private spending on health and education GST exempt.

On Monday evening, a spokesman for Mr Baird said the Premier “remained an advocate” of increasing the rate, but not extending the base of the GST.

On the matter, Opposition leader Bill Shorten said in Brisbane on Tuesday: “This government has no plan for the future.

“This is a government who when they sniff an election, make promises.”

Leading economist says growth not enough to fund tax cuts

Grattan Institute chief executive John Daley dismissed the suggestion tax cuts could be funded by revenue from increased economic growth.

“It’s very unlikely that simply by cutting taxes that the the Commonwealth can create enough economic growth that it will cover the reduction in taxes,” Mr Daley said.

“That’s something the United States government has tried and it doesn’t work.”

The budget estimates in four years time the cost of returning bracket creep, from today’s tax rates, would be $15 billion a year.

Mr Daley said even if the Federal Government managed to convince the states to broaden the base of the GST, it would not be left with enough revenue to pay for significant cuts to income tax.

He said after the Commonwealth compensated low income earners and the states, “there’s not going to be a huge amount left over for tax cuts”.

“There’ll be something, but they’re not going to be enormous tax cuts similar to those that we saw under the Howard government, when the budgetary situation was a much happier one,” he said.

– ABC