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Labor’s fiscal stimulus earns $16.2 billion in extra tax revenue

Labor’s fiscal stimulus policy at the height of the global financial crisis will net the Federal Government an additional $16 billion in tax receipts from those who would have otherwise been unemployed.

TaxOver a quarter of the debt the Federal Government accrued through their fiscal stimulus programs will be repaid from the taxes of those who would have otherwise been unemployed, according to a Lateral Economics study released today.

“As our economy turned down in late 2008, Australians’ spending kept other Australians in work. And those kept in work repaid the favour – by continuing to pay their taxes.” said Nicholas Gruen, CEO of Lateral Economics.

“So for every dollar the government spent, tax revenue to Australia’s governments rose by around 22.5 cents, leaving just 77.5 cents to be repaid. The total windfall to the budget – and to the community – of the additional tax revenue from the cash transfers is around $6.7 billion. This money and the production of all those people and all that capital kept in employment are the riches of good economic management – the only kind of free lunch we know of.

Infrastructure spending fared even better than the $900 cash bonuses paid to Australians when it came to generating additional tax income for the Government.

“Where some of the cash payments were saved, all of the infrastructure spending went straight into the Australian economy. And with larger ‘multipliers’ than consumer spending, every $1 of government infrastructure spending increased output by $1.20 generating 36 cents of government revenue.

“Counting the effects of both the cash transfers and the infrastructure spending to the financial year just ending, tax revenue increased by $16.2 billion from additional employment. These economic benefits are in addition to any social benefits including improved physical and psychological health from lower unemployment. Dr Gruen said.

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David Olsen

David Olsen

An undercover economist and a not so undercover geek. Politics, business and psychology nerd and anti-bandwagon jumper. Can be found on Twitter: <a href="http://www.twitter.com/DDsD">David Olsen - DDsD</a>

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