Households key to best stimulus: Treasury

Payments to low and middle-income households would stimulate the economy more than tax cuts to higher earners, Treasury officials have told a Senate inquiry.

The federal government has flagged it is considering bringing forward tax cuts that are due in 2022.

The changes include raising the threshold of the 32.5 cent bracket from $37,000 to $45,000 and the threshold of the 37 cent bracket from $90,000 to $120,000.

Treasury deputy secretary Luke Yeaman says there are a range of reasons the government is eyeing tax cuts, noting it wouldn’t provide the most stimulus for the economy.

“From a purely stimulatory perspective, payments to low income households would provide a relatively larger fiscal multiplier – if I can put it that way – than broader forms of tax cuts at the middle and upper end of the spectrum,” he said on Thursday.

“We certainly think that any form of tax relief across the various income tax scales would still provide a stimulatory effect through the economy.”

Australia is battling its first recession in 30 years due to the coronavirus pandemic.

Labor has said it would help the government lift Australia out of the recession, but want the coalition to focus on a jobs plan.

Recent modelling by think tank the Australia Institute has found men on high incomes would be the main beneficiaries if the already legislated tax cuts are brought forward.

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