With a recession looming and rate hikes hurting hip pockets, a fight over tax cuts is ramping up as Labor prepares to deliver its first budget in almost a decade.

Government ministers have consistently stood by legislated stage-three tax cuts, which will largely benefit high-income earners.

But there is now speculation the government is considering changes to the tax plan that would pare back benefits for higher income earners, amid worsening economic circumstances.

Finance Minister Katy Gallagher said the government hadn’t changed its policy, but did not deny that a shift was being discussed.

She told ABC radio that the government was “looking at the lessons learned from the UK”, referencing a move by British PM Liz Truss to scrap a controversial tax cut plan earlier this week.

“We haven’t changed our position on stage three but we are being up-front about some of the challenges facing the budget,” Senator Gallagher said.

“Let’s not pretend the economic circumstances aren’t changing and haven’t changed since May.”

The stage-three cuts will flatten the marginal tax rate to 30 per cent for people earning between $45,000 and $200,000 from July 2024.

In doing so, the existing tax bracket for those earning $120,000 to $180,000 will be removed while the top tax threshold will also be lifted.

Assistant Treasurer Stephen Jones said the budget would be informed by economics, not politics.

“We are putting together a budget in a very difficult set of circumstances,” he told reporters in Canberra.

Asked about the tax cuts and whether the government was considering changes, he said: “I’m not going to get caught up in silly games of rule in, rule out”.

“We’ve made a commitment. There’s no change to our policies.”

The opposition’s finance spokeswoman Jane Hume said it was the wrong time to increase taxes or change policy while Australians were struggling with a cost of living crisis.

“They went to the election with a promise to see them through. It is now up to Labor as to whether they break that election promise,” she told the ABC.

Senator Gallagher said the expenditure review committee was mindful of international factors, including rampant inflation, when making decisions ahead of the budget.

She said the decisions would be “responsible, sustainable, affordable and targeted”.

The committee is made up of half a dozen top ministers including the prime minister, treasurer and finance minister, and is the government’s top budgetary decision-making body.

It met on Tuesday and will meet again on Wednesday and Thursday.

Greens leader Adam Bandt said Australia needed to learn a lesson from the UK prime minister backing down from proposed tax cuts for the nation’s top earners, adding that continuing with the stage-three cuts would be “economic vandalism”.

“The UK (conservative party) have looked at the global economic outlook and decided that tax cuts are political poison,” he said.

But Senator Hume said tax cuts were good for the economy as they boosted productivity and led to sustainable growth.

“They are good economic policy and shouldn’t just be considered a political price,” she said.

She also branded comparisons to the UK policy reversal as “disingenuous”, saying the situations are not analogous as Australia’s tax cuts had already been legislated and budgeted for.

– AAP