If you reduce the after-tax return from working, people will do less of it. Not everyone; some people are motivated by more altruistic desires when it comes to work. But most people factor in the monetary returns; just ask a working mum doing the sums on whether work is worth it after taxes and childcare costs.

The news on this front isn’t great. Even with stage three cuts taken into account, Australia is still on course to have the highest average income tax take in decades, thanks to the constant phenomenon of “bracket creep”. That’s the tendency of rising incomes to push people into higher income tax brackets.

Our heavy reliance on income taxes is due, in part, to our relatively low reliance on taxing other things, such as land and consumption activity. The money has to come from somewhere, and the easy – but by no means optimal – answer seems to be taxing incomes.

So, yes, there are good economic arguments in favour of reducing the tax burden on incomes. Exactly whom you reduce the burden for, and by how much, is less a question of economics, and more one that comes down to fairness and political orientation. So the treasurer can’t quite get off that easily.

The other basis on which you could mount an economic argument for or against the cuts is at the macro level, with regard to managing swings in the business cycle.

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Viewed through this lens, tax cuts are clearly inflationary as they add to demand – the amount of money people have to spend. When people have more money, they can pay higher prices for goods and services.

Notably, however, the stage three cuts are less inflationary than the previous two stages. Why? Because people are more likely to save rather than spend extra cash – their needs and wants are already probably met.

But using tax cuts as a policy tool for managing short-term swings in the economy is likely to be a frustrating exercise indeed. Mostly it’s a question of speed. Things move fast when it comes to managing demand in the economy. Perhaps we need to scrap the tax cuts to manage demand. Or, perhaps we’ll need them if, as some fear, we’re heading into a recession caused by too-high interest rates.

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Which is it to be? Only time will tell. And when it does, it’s our central bank who will be best placed to manage the cyclical fluctuations of the business cycle. Changing one central bank interest rate is much easier than completely redesigning the tax system every time you want to deliver a boost or reduction to demand.

We’ve been through a period recently in which governments have been unusually active in using fiscal policy (the tax and spend decisions of government) to manage the short-term swings in the economy. But in normal periods, it’s a job best left to the Reserve Bank.

It’s worth noting the bank already takes tax policy settings into account when making monthly decisions. In comments last month, governor Phil Lowe, taking note of the broad setting of fiscal policy leading into this budget (which would include the legislated tax cuts), remarked, “I have no particular concerns”.

Lowe did raise the prospect that taxes might need to rise in the longer term to balance the budget. But if you asked Lowe for a specific list of taxes he’d increase, I doubt he’d start with income or company taxes, but rather with land and consumption taxes (that’s the GST to you and me).

That’s the real economic debate we need to have.

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