Are Australian taxpayers $7,200 better off, or $7,000 worse off under Anthony Albanese’s government? It depends on who you ask, and it’s likely both claims are based on cherry-picked evidence.
In his press conference launching the federal election campaign this morning, the prime minister claimed: “If Peter Dutton had had his way and his opposition to our cost of living measures had been put in place, Australians today would be $7,200 worse off, on average.”
It appears that curious figure comes from Treasury analysis dropped by Jim Chalmers’ office to certain news outlets in late January.
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Nine newspapers reported at the time: “Fresh Treasury analysis from Chalmers’ office suggests the average dual-income household in Australia would have been $7,200 worse off without the government’s cost of living measures, which the government says were largely opposed by the Coalition.”
The Treasury analysis made a number of assumptions: it assumed wages would have continued to grow at 2.2% per year under a Coalition government, rather than 4.9% under the current government. It also assumed the changes to stage three tax cuts would not have taken place under the Coalition, even though it did support them last year. That would have amounted to $6,900 in lower earnings for an average dual-income household.
The analysis also assumed the same households would have lost a further $300 under the Coalition because they opposed an energy bill relief policy brought in by Labor.
AAP Factcheck reported in February the claim was “misleading”, quoting economists as saying the calculations were flawed because they weren’t adjusted for inflation and made unrealistic assumptions about the pace of wage growth.
“It fails to recognise that inflation has been higher under Labor,” Macquarie University’s honorary professor of economics told the newswire. “As a consequence, the purchasing power of average weekly earnings has been eroded.”
University of Western Australia economics expert Jakob Madsen said his own calculations, which he arrived at by adjusting Australian Bureau of Statistics average weekly earnings figures adjusted for inflation, showed real wages were essentially unaltered under both Labor and the Coalition.
Meanwhile, in his budget reply speech last night, Opposition Leader Peter Dutton claimed: “The average taxpayer is now paying $3,500 more tax this year alone — or, for a dual-income household, $7,000.”
That claim appears to be based on Parliamentary Budget Office numbers the Coalition requested and then crunched ahead of Tuesday’s budget.
In a statement on March 17, opposition treasury spokesman Angus Taylor said the $7,000 figure for the average dual household was based on information gleaned from Labor’s tax cuts and the previous federal budget.
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“The average taxpayer [is] this year alone forking out $3,500 more in tax compared to when Jim Chalmers became treasurer. That’s $7,000 more in tax for a dual-income household,” Taylor said.
“Treasury analysis of Labor’s changes to the stage three tax cuts showed that over the decade, taxes would increase by $28 billion by 2034 compared to the original policy.”
UNSW Business School Professor Richard Holden said the increase in taxes being paid was due to bracket creep.
“The real income is not rising over that timeframe, but nominal income is. Because the tax brackets aren’t indexed, you get bracket creep,” he told Crikey.
“It’s a design flaw in our tax system, but neither side of politics have said they would index the tax brackets, despite calls from numerous economists to do that.”
According to tax preparation firm H&R Block, Labor’s stage three tax cuts had the same overall cost as the previous system, only distributed more widely.
“As originally designed, the tax cuts delivered most of the benefit to those on high incomes … they are now focused on low and middle income taxpayers, who were previously not well served by the tax cuts,” an analyst with the firm wrote in a blog post.
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