I’ve prepared a table below showing what the net income will be for graduates with , after the changes take effect, and comparing them to the impacts of tax cuts.

 Income Apr-08 Oct-08 Apr-09 Oct-10 Oct-12 Increase \$10,000 \$8,470 \$8,750 \$8,750 \$8,775 \$8,775 \$305 \$20,000 \$16,278 \$16,898 \$16,898 \$17,050 \$17,032 \$754 \$30,000 \$23,178 \$23,798 \$23,798 \$24,162 \$23,944 \$766 \$40,000 \$29,838 \$30,698 \$30,698 \$31,274 \$30,856 \$1,018 \$50,000 \$35,538 \$36,398 \$37,358 \$38,141 \$37,523 \$1,985 \$60,000 \$41,238 \$42,098 \$43,058 \$44,027 \$43,209 \$1,971 \$70,000 \$46,338 \$47,798 \$48,758 \$49,913 \$48,895 \$2,557 \$80,000 \$51,438 \$52,898 \$53,958 \$55,509 \$54,291 \$2,853 \$90,000 \$56,538 \$57,998 \$59,158 \$61,105 \$59,687 \$3,149 \$100,000 \$61,638 \$63,098 \$64,358 \$66,701 \$65,083 \$3,445

The six columns are:

1. Net income after tax and student loan deductions in April 2008 before tax cuts
2. Net income after tax and student loan deductions in October 2008 after Labour’s first round of tax cuts
3. Net income after tax and student loan deductions in April 2009 after National’s first round of tax cuts
4. Net income after tax and student loan deductions in October 2010 after National’s tax switch package. To recognise the increase in GST, a 2% deduction is made from net income.
5. Net income after tax and student loan deductions in October 2012 (presumably) after the student loans repayment rate lists from 10% to 12%. Note this still includes the GST adjustment.
6. The difference between Oct 2012 and April 2008, before tax cuts started to occur.

This shows that all graduates will have higher net incomes than in April 2008, even after the repayment rate increases. In fact they will also have higher net incomes than in October 2008 and in April 2009.  So all graduates will still have higher net incomes than before the tax switch, and considerably more than before the other tax cuts.

The other factor of course, is that you keep the tax cuts for ever. The additional student loan repayments means you pay the loan off quicker, and end up paying the same amount – just over a shorter time-frame. It will means things are tighter for graduates while the loan is repaid, but still not as tight as if we hadn’t had tax cuts.

The Greens have suggested that the repayment rate should increase as income increases. I think there is some merit to this. You could have a 12% repayment rate from \$20k to \$70k and say a 15% rate above \$70k.