Treasurer Scott Morrison said a 0.5 per cent Medicare levy increase to fund the National Disability Insurance Scheme (NDIS) is no longer needed because the Australian economy has strengthened.

Ahead of an official announcement by the federal government today, Morrison confirmed the government is ditching the levy hike announced in the 2017 Federal Budget due to a $4.8 billion tax revenue increase.

“It’s good news because we are fully funding everything for the NDIS and we are doing that because we have a stronger economy,” he told Channel Nine’s Today Show this morning.

“It’s good news for taxpayers because we can do it without increasing the Medicare levy. And it’s good news for all Australians because we are able to do this and keep track to bring the budget back to balance.”

Federal Labor has argued the Medicare levy increase would unfairly impact low-income households.

Shadow Treasurer Chris Bowen announced the party is abandoning its proposal to restrict the Medicare levy increase to anyone earning more than $87,000 per year.

“With the government dropping the Medicare levy increase, Labor will not be pushing ahead with the levy on those earning above $87,000,” he told Sky News.

Under the government’s initial plan, the average taxpayer would have paid an extra $375 in tax from July 2019 to fund the NDIS.

The Australian Medical Association (AMA) has backed an increase to the Medicare levy to ensure the disability scheme is properly funded.

“As long as this means the NDIS has robust and sustainable funding, we are agnostic about where that money comes from,” AMA president Michael Gannon told the ABC.