The Albanese government is about to have to make a really important decision.
It's going to have to decide what's more important: supporting Australians who are financially under water, or keeping an election promise.
And it'll have to do it soon. It's already working on its May budget, now just six months away.
That choice will affect almost every Australian, and it could shape whether you're thousands of dollars a year better off - or not - from July next year.
When Labor took office in May 2022, Australians were doing well. Consumer spending and economic growth were on the up and up, and mortgage rates and rents were only starting to climb.
A promise to keep the proposed multi-billion dollar Stage 3 tax cuts - announced but not implemented by the Coalition back in 2018 - seemed worth making to clear away any reasons any voters might have not to vote Labor.
Household budgets are shrinking
Since May 2022, just about everything has got worse for "ordinary" Australians - those on typical incomes, which are about $85,000 for full-time workers and $43,000 for adult part-time workers.
The best measure of the buying power of after-tax incomes is real household disposable income per capita. During the past year, it shrank 5.3 per cent, which is more than it shrank in either the early 1990s recession or the global financial crisis.
On my calculations, it's the worst collapse in 40 years.
From those incomes have to be taken rents and mortgage payments.
This means when you go to the supermarket and find you can't afford what you used to, you're not imagining it. It hasn't been like this in decades, and it's about to get worse.
The Christmas bonus is missing
This year, it's gone. It means middle-earners' pre-Christmas tax refunds will be up to $1500 smaller or replaced with bills. Taxpayers who normally have a tax bill will get a bill up to $1500 bigger.
An estimated 10.5 million Australians submitted their tax forms by October 31.
Most of them - most of those earning up to $90,000 and previously eligible for the full $1500 offset - are about to find themselves a good deal worse off.
Average earners will lose
The very expensive Stage 3 tax cuts (costing $20 billion in their first year, and $313 billion over 10 years) were meant to come to the rescue. They begin next July.
Speaking notes prepared for Treasurer Jim Chalmers and released under freedom of information laws say they will provide relief to low and middle earners and kick in at $45,000.
That's right, a typical full-time worker will get relief of $1000 from the Stage 3 tax cuts in return for losing the axed tax offset of $1500.
Much higher earners will do much, much better. An Australian earning twice as much as is typical - $190,000 - will get $7500. An Australian earning a bit more than that again - $200,000 - will get $9000.
Labor has been handed an opportunity
Handing $9000 to a high earner but only $1000 to an ordinary full-time earner is an indulgence that might have seemed okay when it looked as if ordinary earners were doing alright, or wouldn't notice.
What if it kept the tax cuts, but reoriented them to Australians who actually needed them - to the more than 80 per cent of Australians who earn less than $120,000 a year - while still providing generous cuts to those who earned more than $120,000?
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That's a task Matt Grudnoff and Greg Jericho set themselves at the Australia Institute, coming up with four options. Each of those four would cost less than Stage 3 cuts; deliver more to Australians on less than $120,000 - and even fund a $250 per fortnight increase in the JobSeeker unemployment benefit.
Jericho's punchline, delivered to the revenue summit at Parliament House last month: "I actually wish it was harder than it was".
His point wasn't that this is the best option. It was that there are options, many of which give the bulk of Australians - the stressed ordinary voters Labor and the Coalition will need in the next election - much more than Stage 3.
What's wrong with making 80 per cent of the electorate better off at a time when they desperately need it, and cutting future budget deficits by $70 billion?
Only that it would break a promise, and Prime Minister Anthony Albanese likes keeping promises.
But when asked in an Australia Institute survey what was more important - keeping a promise or reacting to changing economic circumstances - 61 per cent picked reacting to changing circumstances.
Even among Coalition voters, 56 per cent supported reacting to changing circumstances.
- Peter Martin is economics editor of The Conversation and a former economics editor of The Canberra Times. He is a visiting fellow at the Crawford School of Public Policy. This article was first published in The Conversation.