Not enough people understand the maths behind Hecs. If we did, we would all shudder.

Not just on behalf of students, but for the whole economy.

On Monday the Hecs repayment threshold income was slashed to just $45,881 – the largest percentage drop in 23 years, the second-largest since Hecs began.

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It came in a week when the Reserve Bank told the country to, essentially, please spend more. The government has now passed huge income tax cuts aiming at achieving the same thing – to put more money in wallets and to get people to use it.

The catch? For hundreds of thousands of workers the benefit of that tax cut will be wiped out by the Hecs change. Completely. We’re back to the beginning.

There are two parts to the problem. The first is simple – lowering the threshold removes the point of the tax cut for everyone the new threshold touches.

The old threshold was $52,000. The government’s tax change has added $550 to an already legislated tax cut of $530. So for a salary of $50,000, you would have received $530 but paid no Hecs. Now you get $1,080 and pay $500. That’s your benefit gone.

The second part is that the Reserve Bank wants you to have a pay rise. The problem is that Hecs eats voraciously into it.

People seem to forget that Hecs has a different bracket structure to tax. Bracket creep under Hecs is brutal – it makes income tax brackets look weak. You can get a pay rise but end up repaying more than you received.

It affects your take-home pay, at a low income, when you – and the economy – need it the most

It’s simple but pernicious maths. Hecs applies a flat percentage to the whole of your earnings. As you earn more, that flat rate goes up. It’s not like income tax – where only the increase is hit with a higher rate.

Say you are on $51,000 a year. You’ll now be paying 1% to Hecs, which is $510 a year.

Then you get a $2,000 raise. That puts you to $53,000. You are now paying 2% Hecs, but it’s applied to your whole $53,000 earnings, not just the raise.

So you’re now paying $1,060 to Hecs. That’s $550 more, out of a $2,000 raise – and that’s not even counting the extra tax. That’s $650 more.

You’re left with only $800 of your $2,000 raise.

The bracket creep-fearers and the high-income earners who say “What’s the point of making more if just means more tax” would faint if that happened to them.

In a more extreme case, if you earned $52,500 a year and got a $500 raise, you’d go from paying $525 in Hecs to $1,060. You’re actually now $35 worse off.

In the conversation about bracket creep, which is essentially the reason for stage three of the tax cuts, nobody ever mentions Hecs. But Hecs has one of the most oversized footprints on a person’s marginal repayment rate – and it hits you when you’re starting out, not when you’re ready to retire.

Many people will point out a flaw in this argument. That Hecs is not a tax, and the two shouldn’t be confused. That’s true. Wealth isn’t being taken from you when you pay Hecs, it goes to something you already needed to pay down.

But the issue is that it affects your take-home pay, at a low income, when you – and the economy – need it the most.

People will also say that Hecs is something you should pay back quickly, without complaining, and that education isn’t free (any more).

But why lower the threshold now, in the headwinds of a recession, when the Reserve Bank is asking for wages to rise and for spending to increase? When the government’s tax cut is explicitly for “working Australians to keep more of their money”?

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Everybody – from the Business Council to the RBA to John Howard – is saying that to revive the economy we need to keep disposable income in the hands of low-income households. On Monday we did the opposite, slugging our lowest income earners, young people just starting in the workforce, $9 a week at minimum.

And people on $45,881 are more likely to tighten their spending than those on $52,000 and $56,000.

Back in 2017, the Hecs threshold was lowered as a budget-saving measure. To restore it to $56,000, as it was two years ago, would cost the government $345.7m.

But giving out tax cuts is the same thing – it’s the government choosing to pass up a payment it was scheduled to receive, because it’s better off staying in the economy. The new tax cuts costs the budget $8bn.

What would Philip Lowe do for that $9 a week to be back in the economy, or for that $2,000 raise to stay intact, circulating, keeping things afloat? Lowering the Hecs threshold on Monday has undone a lot of what good the tax cuts could have done.

• Naaman Zhou is a reporter for Guardian Australia