Malcolm Turnbull’s jobs and growth plan will boost national income by 0.6% at most and that benefit will take decades to happen, according to a leading economist.
A day after the Coalition accused Labor of “lying” about the economic benefits of its education spending, it stands accused of overstating the economic benefits of its $48bn 10-year program of company tax cuts – the centrepiece of Turnbull’s budget and its election campaign.
The finance minister, Mathias Cormann, told Guardian Australia on Thursday the tax cuts “would increase the economy by more than 1% over the medium term, so that is 10 or 20 years”.
That figure is based on a Treasury paper, released on budget night, but John Daley, the chief executive of the Grattan Institute, said the real economic impact suggested by the paper was “0.6% ... at most” over 20 years or more.
The government was referring to the increase in gross domestic product – the total output of the economy – found by the Treasury modelling to be 1% under the most realistic scenario considered.
But Daley said the Grattan Institute the measure of gross national income (GNI) was more relevant because it excluded the benefits the tax cuts would provide for foreign companies flowing overseas.
And the increase in GNI, according to the realistic scenario in the modelling, was 0.6% and, in the short term, Daley said, the economic effect could be negative.
“When foreign corporations pay less tax, that flows straight out of the economy from day one, although it might be gradually offset by additional investment over time,” he said.
The modelling looked at different scenarios by which governments could restore the income lost by the company tax cuts but, according to Daley, “0.6% is the highest it could possibly be” and it would take 25 years for the economy to feel the full benefit.
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