KEY POINTS:
Australian Prime Minister John Howard threw a giant tax carrot into his re-election campaign yesterday by announcing a five-year tax-cut plan worth A$34 billion ($39.67 billion).
In an attempt to seize the agenda in the first week of the campaign, his Government threw down the gauntlet to the Labor Party to release its own tax policy.
The plan would involve five years of progressive reductions in income tax, with the tax system eventually reduced to four tax brackets - 15c, 30c, 35c and 40c in the dollar.
Mr Howard's deputy, Treasurer Peter Costello, said ordinary wage earners would get tax cuts worth $20 a week from next July.
The tax-free threshold would be raised to $14,000 next year, while the lowest tax rate would kick in on earnings over $34,000.
In following years, the top tax rates would be lowered while the tax-free threshold would be lifted again.
Mr Costello has said the goal of the restructure was to arrive at a tax-free threshold of $20,000, with only four marginal tax rates and the top rate set at 40c in the dollar.
Tax thresholds for lower-income earners would increase and the percentage of tax paid in the top two tax categories - 40 and 45 per cent - would be reduced.
Mr Howard said the tax plan would involve major restructuring.
"It represents and most certainly is a major announcement in a series of announcements which are designed to lay out our plans to improve incentives for workforce participation, to provide the opportunity for people who are feeling cost-of-living pressures in the community to receive some assistance," he said.
"We believe work is infinitely preferable to welfare.
"[The tax plan] is eminently affordable."