Under the new policy, people earning up to A$135,000 ($88,763) will fall into lower tax brackets from July 1. Tax breaks for some high-income earners will nearly halve, with the savings redirected to those on low incomes.

"Our government will deliver a tax cut for every single Australian taxpayer. All 13.6 million taxpayers, not just some. Everyone who works and who pays tax will benefit," Prime Minister Anthony Albanese said in a speech.

"This is a plan for middle Australians that delivers for every Australian taxpayer right up and down the income ladder."

Addressing concerns the move could add to price pressures, Albanese said the Treasury has informed the government the revised tax breaks would not stoke inflation, with the policy being broadly revenue neutral and supporting jobs.

Treasurer Jim Chalmers has discussed the changes with Michele Bullock, the governor of the Reserve Bank of Australia, who expects there would be no implications from the tax changes on the central bank's inflation forecast, Albanese added.

Opposition leader Peter Dutton said Albanese had "completely and utterly destroyed his credibility" for breaking an election pledge that he would not modify the tax policy which was legislated by the previous government in 2019.

"The Australian public won't support a liar as prime minister," Dutton told radio station 2GB.

Albanese defended the shift in policy saying more people, especially those in low-income groups, would benefit. A person on an average income of around A$73,000 will get a tax cut of A$1,504, which is A$804 more than prior estimates.

Australian households are under broad financial pressure from high inflation, which spiked as high as 7.8% in December 2022, before slowing to 5.4% in the third quarter of 2023.

That has dented Albanese's ratings since his 2022 election win. Two polls out last month showed his disapproval ratings outstripped his approval numbers.

($1 = 1.5209 Australian dollars)