Today marks the 40th anniversary of an historic moment for Australian income tax payers

US president Jimmy Carter and Australian prime minister Malcolm Fraser meet in 1977. Photo: Brian Alpert/Hulton Archive/Getty Images

1977 was a key moment for Australian taxpayers that 40 years on, contains plenty of familiar themes haunting national politics to this day.

On August 16, Malcolm Fraser’s treasurer, Philip Lynch, presented the 1977–78 budget.

The numbers weren’t pretty. Unemployment was rising, inflation too, and amid that stagflation Treasury was worried about real wages rising faster than productivity.

But Lynch wanted “to get Australia going” before the government went to the polls in December and of course the tried and true way to appease voters is tax cuts (the government still controlled interest rates, and a standard variable home loan sat at 9.88%).

So the treasurer announced “revolutionary” changes to the income tax system that continue to this day, by cutting the number of personal income tax scales from seven to just three.

The new income tax levels were at 32%, 46% and a top bracket of 60%, to begin in February 1978. Unfortunately for business, the company tax rate was increased, but even then the budget deficit was expected to be a staggering $2.2 billion. The government also introduced tax indexation, but at 50%, because of inflation.

Lynch’s budget also foreshadowed a resources rent tax (sound familiar?) and phasing in import parity oil pricing.

The next day, as many focused on the death of Elvis, Lynch fronted up to the National Press Club, he inadvertently introduced a new phrase into Australian political life.

Asked about the impact of the tax cuts on budget estimates, he described the figures as “rubbery”.

And thus the description “rubbery figures” was born.

Just a few months later, Lynch resigned because he was using a family trust to minimise his tax and his job went to a young Sydney lawyer, John Howard.

An inquiry cleared him of any impropriety and Lynch, later Sir Philip, would spend his final five years in politics as the industry and commerce minister, helping add another familiar phrase to Australian political life when he chaired Fraser’s Committee of Review of Government Functions, which became known as the “Razor Gang”.

Sir Philip resigned from politics in 1982 due ill-health and died two years later.

The income tax system he set up lives on to this day.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.