Australians earning low to middle incomes will be hardest hit by rising average tax rates over the coming decade, new analysis has found.
The Parliamentary Budget Office says the average tax rate will increase for Australians across all income brackets over the next 10 years but the boost will be steepest for those in the low to middle group.
Rates will go up largely because as wages rise, people will pay more tax on their increased income.
The budget office says the phenomenon will occur despite the personal income tax cuts introduced by the federal government this year, though they will slow the process.
The report - looking at how the 2018/19 budget is likely to fare over the coming 10 years - says Australians collectively paying more tax will be the most significant contributor to the federal government achieving a $16.6 billion budget surplus in 2021/22.
Less government spending will be another important element.
Though the Commonwealth will be putting more money into the National Disability Insurance Scheme, it will be contributing less when it comes to a number of other large payments.
The family tax benefit, pharmaceutical benefits and the disability support pension will be among them.
Fewer dollars will go towards government administration and there will also be a drop in road and rail spending.
Things going according to plan will hinge on above-trend economic growth for much of the coming decade and wages growth at least approaching trend levels, the budget office said.
Other risks include continued weakness in the government's tax revenue from a number of products such as alcohol, tobacco and fuel.
Despite switching leaders ahead of an election, which is due by May 2019, the government would also need to avoid any new spending initiatives.
"The spending restraint seen over the past few years may be increasingly difficult to maintain with an improving budget outlook," the budget office found.
But the report found the government ditching its tax cuts for big business will likely give it a "more significant buffer" against any weak economic conditions.
Labor spokesman Jim Chalmers said the report shows the government isn't managing the economy in the interests of middle Australia.
"At a time when wages are growing at record lows and households are struggling to keep pace with the cost of living, now is not the time to be prioritising tax relief at the top end," he said.
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