Malcolm Turnbull, the Parliamentary Secretary to the Prime Minister John Howard, has rejected warnings by economists that tax cuts predicted in tomorrow's federal budget will lead to inflation.
Some economists believe the Reserve Bank may have raised interest rates last week in anticipation of tax cuts in tomorrow's budget.
But Mr Turnbull, who has long been a supporter of tax cuts, says cutting tax rates will not necessarily lead to increased spending and inflation.
"If there were rate cuts, I think you would find that a large amount of that additional income would be deployed to increasing savings and actually reducing indebtedness."
"And you're actually seeing that in the figures the reserve bank's been publishing. Australian families have in fact pulled back from the spending binge somewhat and are adding to their savings."