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15th May 2024
New analysis of Stage 3 tax cuts reveals they will have little impact on areas in Western Sydney hardest hit by cost-of-living pressures, again showing it is where you live that matters.
Research by the Centre for Western Sydney shows the Albanese Government’s revamped tax cuts in Tuesday’s federal budget further entrench inequity between Sydney’s east and west.
Under the changes to begin on 1 July this year, workers living in Western Sydney will receive an extra $1,524 a year on average – or $29 a week – compared to an additional $2,037 a year – or $39 a week – for earners in the Rest of Sydney.
"Where you live matters and our place-based analysis reveals that high-income regions benefit most from the Stage 3 tax cuts," the Centre’s Chief Economist, Professor Neil Perry said.
"The tax cuts are primarily aimed at correcting historical bracket creep rather than providing direct cost-of-living relief. They are no match for the effects of inflation where it is biting most," he said.
Western Sydney is the epicentre of the nation’s cost-of-living crisis, especially in local government areas like Fairfield where two-thirds of workers earn less than $800 a week, which is less than the minimum wage.
Under the tax cuts, workers from Fairfield will take home an extra $1,197 a year – or $23 a week – compared to those on Sydney’s North Shore. For example, earners from Mosman, on average, will receive an additional $50 a week in their pay packets, or $2,612 a year – that’s more than double the tax cut of people in Fairfield.
Professor Perry said, "The fundamental reason Western Sydney receives less in tax cuts in absolute terms is that Western Sydney has lower incomes than the Rest of Sydney.
"The lower incomes also mean that residents in Western Sydney have been hit harder by interest rate rises and inflation. The Future Made in Australia policy will help here by shifting resources and incomes to Western Sydney."
Professor Neil Perry
The Centre’s analysis highlights that men will receive a larger tax cut compared to women in Western Sydney (women $1,287 compared to $1,736 for men) and the Rest of Sydney (women $1,766 compared to $2,297 for men).
The tax cuts formed part of Treasurer Jim Chalmer’s tactical pre-election budget. Western Sydney remains an intense election battleground with the rise of local independents, focussing voter attention on 'kitchen table' issues, fairness, and integrity.
The Centre’s Unlimited Potential project is examining how the three leaps of future industries, skills and communities can work together to transform Western Sydney’s economy into a global powerhouse.
Coordinated action across all levels of government is needed to attract international investment, create new industries and boost skills development to capitalise on the once-in-a-generation projects underway in the region, including the Western Sydney International Airport.
The Centre argues infrastructure spending needs to improve transport connections in Western Sydney. In addition, the government needs to support local businesses to take advantage of the Future Made in Australia funding by providing incentives to scale up and enter global supply chains.
"In this way, the government can help to attract investment and turn Western Sydney into a core rather than a peripheral economy and increase local, well-paying jobs," Professor Perry said.
Download the issues paper Double or Nothing? The Great Sydney Tax Divide.
