Pressure builds on Labor to pass tax cuts

Labor MP Peter Khalil on Thursday called on Labor to support the three-stage, 10-year package if the government refused to split it, less than two weeks before the Labor caucus is due to formally declare its position on the issue.

His public intervention came as Reserve Bank of Australia governor Philip Lowe urged Parliament to get on with governing, saying fiscal policy needed "to be kept in mind" as the central bank forecasts further interest rate cuts and runs low on monetary policy ammunition.

Mr Khalil's comments to the Herald Sun were backed by a senior Labor frontbencher, who said they "agreed" it was best to pass the package both to take it off the agenda and because voters supported it at last month's federal election.

Another Labor MP, who is yet to decide his position, said there was "no doubt some within the caucus" backed Mr Khalil's sentiments, but said his intervention was a symptom of "relevance deprivation" after the Melbourne MP missed out on a place in the shadow ministry.

The departure from the party line is being framed as a shift from the command-and-control structure that characterised Labor under former leader Bill Shorten, with MPs given more licence under Mr Albanese.

Labor senator Kimberley Kitching backed Mr Khalil's right to speak out.

"These are serious matters to be addressed and we do need people to express their views," she said.

Another group of Labor MPs is urging the government to bring forward stage two of the tax cuts to July, so that most workers would get more than $2000 extra in their tax returns - double the amount scheduled under stage one.

"The $1000 offset is not likely to create much stimulus," Senator Kitching said.

"If the government was really concerned about stimulating the economy it would actually reach out to the opposition to have a proper discussion."

Another proposal being discussed among Labor MPs is to pass the whole package and then pledge to repeal it if elected in 2022, taking away tax cuts worth $95 billion - two-thirds of the legislated package - due to come into force from 2024. Labor has publicly opposed stage three to date because most of the benefits flow to high income earners.

Shadow treasurer Jim Chalmers, who is due to give his first major address since taking on the portfolio early next week, had indicated Labor would consider an accelerated stage two proposal. Labor sources said they expected a policy decision to be made early next week.

If the Coalition fails to pass the cuts, workers could miss out on the tax cut in July, with the Tax Office forced to send out extra payments later in the year.

The urgency has been ramped up by a run of poor economic data, exacerbated by evaporating consumer spending, household consumption and low wage growth.

The RBA cut interest rates to a record of low of 1.25 per cent in June and is set to cut again in July or August to stimulate the sagging economy, which fell to its slowest rate of growth in almost a decade in the year to March 31.

Dr Lowe said it was "important though to recognise that monetary policy is not the only option" and there were limitations to what could be achieved.

"As a country, we should also be looking at other ways to get closer to full employment. One option is fiscal policy, including through spending on infrastructure," he told the Committee for Economic Development of Australia in Adelaide on Thursday.

"Another is structural policies that support firms expanding, investing, innovating and employing people."

Labor's financial services spokesman, Matt Thistlethwaite, said all MPs would express a view in the party room and caucus would collectively come to a decision.

"We will do that on Monday, July 1 on the eve of Parliament sitting," he said.

Treasurer Josh Frydenberg said Labor should learn from the election result.

"It would be futile of them to keep promoting a high-tax agenda given the Australian people have sent a very clear message that that is not something they want," he said.