Consumers unsettled by budget, poll timing

Australians were already unsettled by the prospect of an early federal election before Malcolm Turnbull floated the idea of allowing the states to levy the incomes of taxpayers.

Consumer confidence dropped 1.3 per cent in the past week in reaction to the prime minister bringing forward the budget by a week to May 3 to make room for a possible early election on July 2.

ANZ head of Australian economics Felicity Emmett said the lead-up to an election always has the capacity to weigh on confidence, and this would have been heightened with the prospect of a double-dissolution election - the first since 1987.

"The government's decision to bring forward the commonwealth budget is likely to put the issue of strained public finances firmly at the front of consumers' minds," she said.

Mr Turnbull has also confirmed a proposal that would see the federal government reduce its income tax by an agreed percentage and allow state governments to levy an income tax equal to that amount as a way of funding hospitals and their other needs.

CPA Australia chief Alex Malley said such an extraordinary move is too complicated to put to voters in an election year.

Labor frontbencher Jason Clare said this just confuses what tax package Treasurer Scott Morrison will bring down on budget day.

A promised personal income tax cut has been shelved, there is talk of a company tax rate cut and now there is the possibility of states setting their own income tax rates.

"For Australian workers out there, the company they work for is going to get a tax cut and they're not, and instead they are going to be slugged by their state governments," Mr Clare told Sky News.

"People will think 'What the hell is going on?'"

What Mr Morrison won't be doing is adopting the views of a national think tank that would bring the budget back to surplus within two years.

A Committee for Economic Development of Australia report released on Tuesday recommended several options to raise revenue by $15 billion and cut expenditure by $2 billion that would return the budget to balance in 2018/19, two years earlier than the government's forecast.

But the treasurer said you don't tax your way back to a surplus.

"You don't go to the tax supermarket and take every tax off the shelf and put it up as a way of managing the economy," Mr Morrison told reporters in Sydney.

He said the responsible way to balance the budget is by getting expenditure under control and ensure things are done to help grow the economy which in turn produce revenues.