“If the federal government wants to have full employment, it must immediately remove tax and red tape barriers preventing willing pensioners, veterans and students from working,” said Saxon Davidson, Research Fellow at the Institute of Public Affairs.
This morning on ABC Radio National, Federal Treasurer Jim Chalmers said he welcomed debate on the definition of full employment, saying he viewed it as an opportunity to “find common ground”.
“You cannot accurately declare full employment when there are potentially hundreds of thousands of Australians that tax and red tape barriers prevent from getting into work,” said Mr Davidson.
Currently, there are over 431,000 job vacancies across the economy, and almost a quarter of Australian businesses cannot find the workers they need. This represents a 235 per cent increase in the last three years.
IPA research has repeatedly found that removing tax and red tape barriers is an effective and low-cost solution to Australia’s worker shortage crisis that will allow willing pensioners, veterans, and students to get the work that best suits them.
“Only 3 per cent of Australian pensioners work compared to 25 per cent in New Zealand where such barriers do not exist. Leading surveys show 20 per cent of all Australian pensioners would consider re-joining the workforce if tax and red tape barriers were removed, representing over 515,000 potential workers,” said Mr Davidson
In December 2022, the federal government passed minor pension work bonus reform that only allows age pensioners and veterans to earn $226 per week. Beyond this they face their benefits being reduced by 50 cents on the dollar and an effective marginal tax rate of 69 per cent.
“Since these inadequate pension changes were enacted, job vacancies have only decreased by 3 per cent, which is a clear demonstration that comprehensive reform is needed once and for all,” said Mr Davidson.
Similarly, students on the Youth Allowance can only warn $240 per week before they face an effective marginal tax rate of 69 per cent, should they earn over $288, they face a tax rate of 79 per cent. Currently, less than half of this cohort is currently in the workforce.
Analysis by the IPA has also found Australia’s worker shortage crisis is costing Australians $32 billion in foregone wages and the federal government $7 billion in foregone income tax revenue.
“This is revenue that could be invested in roads, schools, and hospitals, or be used to help pay off our spiralling national debt,” said Mr Davidson.
“Removing all the tax and red tape barriers preventing Australian pensioners, veterans and students from getting back into the workforce is a simple and effective policy measure that is good for them and good for our nation.”