Australia unveils huge tax cuts

The move takes advantage of an unexpected windfall for government finances from a minerals market boom.

Treasurer Peter Costello unveiled income tax cuts worth almost 37bn Australian dollars ($28.6bn; £15.3bn) - the biggest in the country since 2000.

Further measures proposed included raising spending on defence and tax changes to encourage retirement saving.

Mr Costello said the decision to cut income tax should help to reduce unemployment in the country, which is already at record lows.

"These changes... will provide more incentive for those outside the workforce to re-enter it and those in part-time work to take additional hours," he said.

Surplus

Mr Costello added that the cuts should not trouble government as it had posted a healthy surplus and inflation was under control, easing below the 3% level.

Mr Costello added he expected a budget surplus of A$10.8bn and economic growth of 3.25% over the coming financial year.

Experts said the move would prove popular with voters currently struggling against high petrol and mortgage costs.

But they did add it was unlikely to trigger a further increase in rates which currently stand at 5.75%.

Parliament must approve the plans. However, as Prime Minister John Howard's centre-right party has a majority in both houses of the Australian parliament, the plans are widely expected to be passed.

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