Average full-time workers to be $1000 a year worse off under Labor


“I do not understand what the point would be of working hard under a Labor government. Why would you bother? Because the better you do, the harder you work, the more Bill Shorten puts his hand in your pocket,” he said on Friday.

Labor has vowed to repeal the second stage of the tax cuts, which will see the 32.5 per cent tax bracket increased to incomes of $90,000 along with a $95 billion third stage in 2024 that will flatten the tax rate for those earning between $40,000 and $200,000 to 30¢ in the dollar.

Based on current policy settings, someone earning up to $120,000 a year would pay an extra $2430 a year in tax after 2022, according to the NATSEM modelling, which showed their total tax paid would be $35,797 under Labor and $33,367 under the measures announced by the Coalition in Tuesday’s budget.

Labor is expected to offer alternative tax cuts and relief from bracket creep if it wins government.

Ben Phillips and Matthew Gray at the Australian National University Centre for Social Research and Methods estimate Labor has an extra $39 billion in tax revenue over the years to 2024 to deliver tax cuts or fund other programs.

Labor has said the 4.5 million workers earning between $48,000 and $90,000 workers will be better off under their tax plan, but is yet to release the details.

While the typical Australian (median) full-time worker earns $78,268 a year, according to the Grattan Institute, those on higher incomes pull the average earnings of a full-time worker up to $90,300 a year. When all workers, including part-time employees and casuals are taken into account the average is much lower at $67,243 a year.

Associate Professor Phillips and Professor Gray said Labor’s plan so far, which includes low-income tax offsets of more than $1000 a year, would “very modestly lower income inequality” while the Liberal plan “will modestly increase it,” particularly after 2024, when high-income earners get the largest share of the benefits because they pay more tax.

They said Labor’s plan was “clearly more progressive but smaller”.

Labor leader Bill Shorten said the Liberal plan did not do enough for 2.9 million Australians who earn less than $40,000 and said they would provide a bigger tax-refund for low income earners.

“We will not be signing-up to the Liberals’ radical, right-wing, flat-tax experiment, way off in the future,” he said.

“It is neither fair nor responsible to lock-in these billions of dollars in tax giveaways flowing disproportionately to a relatively few Australians.”

On Friday, international ratings agency S&P backed Treasurer Josh Frydenberg’s first budget by reaffirming Australia’s AAA credit rating and noting the “economic growth prospects remain sound”.

The budget forecast a $7.1 billion surplus in 2019-20, the first since the global financial crisis a decade ago.

S&P said the tax cuts “could provide some support to the household sector” but warned that while house prices were currently unwinding in an orderly manner – a larger surplus would also be a strong buffer to absorb the consequences of an abrupt weakening of the housing market.

The ratings agency said it did not belive the federal election would significantly change the trajectory of Australia’s budgetary position.

Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.

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