Tax cuts that would largely benefit high-income earners in Australia need to be reconsidered due to the worsening state of the country and the world's finances, economists have said.
The plans were outlined four years ago, but remain in play ahead of this month's budget despite a change of government to Labor, and the shock brought by the COVID-19 pandemic.
Economist Danielle Wood, CEO of the Grattan Institute, said the rationale and assumptions no longer held in today's economic environment, adding: "We would certainly like to see the plan reworked. It was conceived of in very different economic and fiscal time.
"Remember this was from before COVID, when governments were forecasting we're going to be seeing budget surpluses for the whole of the decade. Instead, we've come out of the COVID recession with very high levels of public debt, and structural budget deficits for the forward estimates and beyond."
What are the stage three tax cuts?
The seven-year timetable for personal income tax cuts over three stages was laid out by then treasurer Scott Morrison in the 2018 federal budget.
Already legislated, the plan would abolish the 37 per cent tax rate, putting in place a 30 per cent flat tax rate for anyone earning between $45,000 and $200,000.
It would cost the budget $244 billion over 10 years.
Taxation expert professor Helen Hodgson at Curtin University said tax reform is needed to ensure middle-income earners are not being impacted heavily by stagnant wages.
She added: "It was justified in 2018 to say bracket creep was going to push people into higher tax brackets. But in fact, we've had wage stagnation in that interim. And we're only just now reaching a point where inflation is kicking in.
"The predictions that it was based on in 2018 haven't actually come to pass - and it needs to be rethought."
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What turmoil did tax cuts for the highest paid spark in the UK?
Treasurer Jim Chalmers said there will be difficult decisions to make in the federal budget due to be handed down on 25 October.
"As we finalise the budget, we will put a premium on what is affordable, what is sustainable and what is sufficiently targeted to deal with the economic cards that we have been dealt," he said after .
He said the fallout in the UK from a failed push to pursue tax cuts for the wealthy right now is a "cautionary tale".
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"What has been happening in the United Kingdom has been I think a cautionary tale when it comes to dealing with the substantial turbulence brought about by high and rising prices; whether it is energy or food security - or in other important ways."
The UK government has backpedalled on a plan to allow tax cuts for top earners that would have cost £2 billion ($3.5 billion).
The plan was announced a week ago and was poorly received, resulting in the British pound falling to an all-time low against the US dollar.
Chancellor of the Exchequer Kwasi Kwarteng said "we listened to people" and scrapped the plan because it had "become a distraction from our overriding mission to tackle the challenges facing our country".
'Trickle down' economics debunked
Economics Professor John Quiggin at the University of Queensland said there are useful lessons to draw from the UK's experience.
"The UK is different [country], but it has important similarities with Australia. And one similarity is that it's concerned about inflation, central bank interest rate increases," he said.
He said the UK example shows the now-debunked idea of the benefits behind so-called "trickle down" economics that gained traction under Margaret Thatcher and Ronald Reagan and held sway for decades in Western economies in Europe, the US, UK and Australia.
"That whole idea, I think, was discredited by the failure of austerity policies, particularly in Europe, after the global financial crisis [of 2008]."
