Hockey said the starting point for changes to the personal income tax system must be addressing bracket creep – the phenomenon whereby inflation and rising wages pushed people into higher tax brackets – arguing this blunted the incentive for hard work.

In his speech, Hockey was due to say there was “no denying” the fact the government still had a budget to fix but this would be “managed through continued discipline on spending decisions” and cutting government waste.

If Hockey gets his way and personal income tax rates are massaged to give higher earners some more breathing space, the gap in funds will have to be filled somehow, and given the government’s history it’s pretty likely people less well-off will end up getting slugged more – either at tax time, or just while doing the shopping.

Mr Hockey and Prime Minister Tony Abbott have ruled out a GST increase without the unanimous approval of all the states and say any increase it must be part of a tax reform exercise, rather than raising extra revenue.

Following a speech in Sydney on Monday in which the Treasurer made the case for income tax cuts, he left open the possibility of broadening the base of the GST as an option to be presented in the initial response to the tax white paper process.

For Mr. Abbott’s supporters, including Mr. Hockey, a focus on tax relief and growth offer the hope of scoring victories against Labor, which is less trusted by voters on economic management. “If they do increase their interest rates then you will see movement of money from equity markets, probably into bond markets”, he said.

He likened any such extension to the agreement with state treasures last week to apply the GST to low value imports purchased online.

“With the government bereft of any positive agenda, the treasurer is now desperately trying to start a tax cuts arms race”, Bandt said. “We’re working on the tax mix, I don’t want to say more than that”.

NSW premier Mike Baird recently proposed a rise in the GST – which is a Commonwealth tax but with all the revenue going to the states – to finance growing health costs.

However, the Australian Chamber of Commerce and Industry welcomed the speech. “No substance and no strategy means no jobs”, said chief executive Alex Malley.

Hockey highlighted the problem of “bracket creep” as a driving factor behind the slowing economy, saying the issue would only get worse unless it is addressed.

“Back in 1996-97, under the Howard government, the tax burden was less concentrated, with the top 25% paying a majority of income tax”.

The report said it will be at least six years before the tax-GDP ratio hits 23.9 per cent, the accepted maximum, after which, there would have to be tax cuts.

But Opposition Leader Bill Shorten said it was “somewhat suspicious” the government was talking about tax cuts when there was a West Australian by-election on the horizon in the seat of Canning but no explanation how they would be paid for.

Mr Hockey argues that our tax system relies too much on high income earners. “He looks like a Treasurer who has given up”, he sad.