Opportunity Cost: At Least 160,000 Jobs Lost by Backing Tax Cuts Over Investment

The $16.9 billion spent on the early introduction of tax cuts in financial year 2021-22, as announced in the Budget, would create at least 160,000 fewer jobs than investing the same amount into healthcare, education and other public services, new analysis tonight from The Australia Institute has found.

Key findings:

  • According to the Government, the tax cuts announced in the Budget will cost $16.9 billion next financial year alone and create 50,000 jobs.
  • Investing $16.9 billion evenly across the employment intensive sectors of university education, childcare, healthcare, aged care and the creative arts would create 210,506 jobs, which is 160,506 more jobs than the 50,000 jobs the Government claims the tax cuts will create.
  • However, Australia Institute research shows the actual number of jobs that a $16.9 billion tax cut could realistically be expected to create is far lower than the Government’s estimate of 50,000.

“Tax cuts are a remarkably inefficient way to create jobs,” said Matt Grudnoff, senior economist at The Australia Institute.

“Every job created by handing money back to taxpayers comes at the cost of many times more jobs that could have been created from direct investment in services by the Government.

“Investing in employment rich services will always deliver maximum bang for buck and create many more jobs than handing out tax cuts.

“This budget represents an extraordinary missed opportunity to both create jobs in the short term and boost Australia’s productivity by investing in health, education and the arts over the long term.”