Both the Treasurer and the Prime Minister have claimed that the $31 billion package will boost employment and provide an “incentive” for existing workers to put in more hours.
But the Treasury documents, released to the West Australian newspaper under Freedom of Information laws, reveal that the incentive will work in two directions.
The Treasury says that while an estimated 32,284 Australians will be induced to work more hours as a result of the package, a greater number – 32,895 will decide to work fewer hours...
Most of the Australians who cut their working hours will do so in order to ensure they get the full Low Income Tax Offset which will double in size over time from $750 to $1,500 and become available at a higher income.
The Treasury documents predict that a net 6,317 single women will cut their hours to take advantage of the new tax arrangements, as well as a net 2,662 married men and 1,298 single men.
Married women are the most likely to work extra hours as a result of the tax changes with a net 5,934 expected to put in more time, as well as a net 2,694 single parents.
On balance the Treasury documents say the change in the Low Income Tax Offset will cut the number of hours worked by existing workers while increasing the number of low-income Australians in work. The net result will be “a small overall increase in average hours”.
The Treasury says the decision to increase the 30 per cent income tax threshold to $37,001 over time will bring around 34,828 extra Australians into work, and the decision to boost the Low Income Tax Offset will bring an add an extra 28,568 Australians.
By contrast the decision to cut the 40 per cent tax rate to 37 per cent will have a scarcely noticable effect, increasing employment by just 724 people.
Independent calculations prepared for the Canberra Times suggest that the cost to revenue of creating each of the 724 jobs that would flow from the cut in the 40 per cent tax rate would exceed $3 million per job per year.
The Treasury says that taking all of Labor’s proposed tax changes together, the net increase in working time should total around 10 minutes per person per week.
It says that the increase “could amount to an additional 2.5 million hours of labour supplied each week - roughly equivalent in size to reducing the unemployment rate by around two thirds of a percentage point”.
The calculations performed for the Canberra Times suggest that each of those extra hours of work would be bought at a cost to public revenue of more than $70.