'Unfair, unrealistic': young Aussies bear budget burden

They would also provide an economic dividend, incentivising income earners to work more hours, Dr Chalmers claimed as he introduced the tax changes to parliament on Wednesday.

"They return bracket creep, they boost workforce participation, and they incentivise people to take up that extra shift, which could push up hours worked in our economy by 1.3 million hours, mostly driven by women's workforce participation," he said.

But the budget documents revealed government spending was projected to grow 5.5 per cent per year on average until 2028/28, with deficits stretching into the middle of next decade. 

Even with the cuts, personal income tax will still rise to 54 per cent of tax revenue, as young working age Australians bear a larger share of the tax burden.

Without further tax cuts, income earners will lose an increasingly higher proportion of their wages to the tax man as inflation pushes them into higher brackets.

"Over the next decade, the tax to GDP ratio is set to increase and in the absence of serious tax reform, bracket creep will be relied on more and more," said KPMG chief economist Brendan Rynne.

Underlying deficits are predicted to total $179.5 billion over the five-year forward estimates period before eventually shrinking as spending declines.

But it is unclear how this will be achieved in practice.

Major expenses such as the National Disability Insurance Scheme, health, aged care, defence and interest on debt are projected to grow significantly faster than the economy over the next decade.

And that's before you add on $104 billion in off-budget spending over the next five years. These "investments" still add to public debt.

AMP chief economist Shane Oliver said the rising burden on Millennials and Gen Z to boost revenue through bracket creep is unfair and unrealistic.

"Politicians will eventually want to give some back as 'tax cuts'," he said. 

"So how will we get back to surplus then?"

Independent economic research body Prosper Australia called for structural reforms to rebalance the tax burden from younger income earners onto unearned wealth.

"The next government must commit to a tax reform process during its term to transform how we collect tax in Australia," said the institute's advocacy director Rayna Fahey.

"There is a broad consensus among economists, business leaders, and the community that Australian workers shoulder an unfair tax burden." 

Treasury forecast that tax as a proportion of GDP would come down to 23.1 per cent, well below the coalition's proposed 23.9 per cent cap.

But this is dependent on economic growth forecasts which Chartered Accountants ANZ chief economist Richard Holden thinks are overly ambitious.

Economic growth is anticipated to grow at 1.5 per cent in 2024/25, 2.25 per cent in 2025/26 and 2.5 per cent in 2026/27 - speeding up while the economies of major trading partners China and the US slow down.

"This is arguably rather bullish in a world marked by global uncertainty with US President Donald Trump set to announce a new wave of tariffs on April 2, on top of the existing disruptions to global supply chains that have already occurred, and the substantial uncertainty about European security arrangements," Professor Holden said.

Despite sinking back into deficit, Australia maintained its AAA credit rating with S&P Global Ratings, which noted the federal government's net public debt of $556 billion remained modest by international standards.