Treasury analysis of the Government's income tax cuts estimates an unambiguously positive impact on participation.
Treasury analysis of the tax cuts clearly shows an estimated additional 2.5million hours of work being added to the economy each week (including 65,000 additional people in the workforce).
A report in today's Canberra Times misrepresents Treasury modelling by suggesting the tax cuts will not provide any incentive for existing workers to put in more hours.
This conclusion is incorrect.
The article misleadingly compares the number of existing workers expected to reduce hours with those who increase hours, overlooking that the absolute average change in hours worked is greater for those increasing their hours.
The analysis of the Government's tax cuts shows a positive net impact from the changing hours of existing workers on top of the positive number of new workers.
Analysis of changes in hours shows the LITO increase accounts for around one quarter of the total increase in hours from both existing and new workers, or the equivalent of over 500,000 hours a week of additional work being available to deal with labour shortages.
The Canberra Times article also claims a 'scarcely noticeable effect' from the decrease in the 40 per cent marginal tax rate. The modelling released clearly shows a substantial increase in the hours for existing workers, with this marginal rate cut accounting for over 10 per cent of the total hours increase.
Similarly, an article in Tuesday's West Australian compares the number of new workers with the number of existing workers who decrease their hours in response to the Low Income Tax Offset (LITO) increase. This comparison of numbers does not accurately represent the change in total hours. The average increase in hours for new workers is more than double that for existing workers who decrease their hours, leading to a clear increase in total hours worked.
The tax cuts proposed by the Government will enhance individual incentive and workforce participation across the Australian population. It is the overall effect and its distribution that is critical for measuring how the tax cuts improve incentives and the capacity of the economy to grow and reduce inflationary pressures.