Keating, GST, Spending Cuts, And A Budget Debate Worth Having

THE TARGET may be awry, but its objective is not: former Prime Minister Paul Keating yesterday said government spending could be slashed by $90bn per year — or 20% — to fix the federal budget without endlessly lifting taxes; Keating is not only right, but his words are a siren call to the spineless minnows on all sides of politics who live in perpetual fear of electoral doom, lest efforts to rein in haemorrhaging red ink produce so much as a single loser.

It really does say something — and render horrific judgement in passing on the 226 individuals sitting in elected sinecures in Canberra, along with their thousands of mostly useless advisers — that the clearest message to date on fixing the stinking mess that is the federal budget should come from a former Prime Minister booted out of office 20 years ago, and whose heyday and (deserved) reputation as a reformist Treasurer was at its zenith a decade before that, but there you have it: like him or not, Paul Keating can still cut through the bullshit.

I have been thinking about his remarks yesterday (predictably seized upon by the government and opposition in Question Time to try to bludgeon each other into submission) and they form a useful starting point not just for a debate about how to fix the budget, but also to consider additional reforms beyond that (and yes, I’m talking about lifting and broadening the GST) that keep it sustainable into the future whilst enabling massive cuts across the board in direct taxes and the elimination of some of them altogether.

And in that vein it says something, too, that what I say today will likely never form the basis of any mainstream political party’s blueprint; the ALP, Communist Party Greens, and all the other state socialists who think taxing hell out of everything in sight in order to shovel largesse out to “the underprivileged” as a way to buy elections is the way to perpetuate a “civilised” society will leap down my throat. Those on the Right (or who claim to be) will simply distance themselves from the points I make: for them, cutting into the Labor-woven social spending infrastructure is a path paved with peril, and these gutless types who are incapable of selling an idea (let alone come up with one themselves) will simply dismiss me as a crackpot.

But let’s look at a) what Keating has had to say; b) how his initial $90bn in savings could be redeployed; and c) how this could form just the first stage of a two-step process for comprehensive reform of Australia’s tax system, which is cumbersome, uncompetitive, labyrinthine, and ripe for evasion and abuse.

Keating’s central (and I would have thought, obvious) point is that “what the world pays us” — i.e. the proceeds from exporting things like mineral commodities — has fallen, which in turn is eating into both personal and company tax receipts, and that rather than simply jacking up taxes in whatever way possible to enable the shortfall to be covered, cuts in spending are the logical and requisite path to budget repair.

Too much has been said, on both sides of the political divide, about whether Australia has a “revenue problem” or a “spending problem” and it should surprise nobody that both sides are capable of producing immaculately sourced and referenced statistics, pie graphs, bar charts and other impressive-style (but worthless) paraphernalia to “prove” their case and debunk that of their opponent.

But as a small-government conservative with a philosophical distaste for the idea that government not only knows better than its citizens but that it should be the arbiter of what monies are spent and where, it is hardly a generalisation to suggest that too much of the money doled out by federal governments is tax revenue being stolen from the Australian public and abused in the form of electoral bribery that is tantamount to institutionalised corruption.

Federal governments pay for “black spot” road programs in local council areas in which they have no road funding responsibilities. They promise a few million dollars to help revamp a local sports stadium. They cough up $10,000 to first home buyers for a grant that makes minimal difference these days to the affordability of housing but which still soaks up billions in outlays. They provide funding to propaganda-peddling groups like this one that ought to be community-funded (or not exist at all, ideally). They gift money into low-income earners’ superannuation accounts, from a defunct tax that raised no money, for no other reason than to bribe to poor.

On and on it goes.

This is a problem that has existed for decades, but which has really taken on a life of its own in the past 20 years: ever since the Howard government introduced modest levels of so-called “middle class welfare” which in themselves have driven up the costs of everything they were meant to alleviate — the home owners’ grant is a case in point; the “baby bonus” is another; there are plenty of others — and all of it, all of it, is money taken from Australian residents and citizens to be arbitrarily pissed up against a post in whatever politically expedient fashion best suits the government of the day.

This country is in real — perhaps where its fiscal arrangements are concerned, existential — trouble, unless drastic steps are taken to bring the avalanche of unaffordable and unjustifiable spending to a shuddering halt; I’m politically pragmatic enough to acknowledge that there are limits to what might be done, and that any systemic program of cuts is more likely to be a process rather than some wham-bam-thank-you-ma’am king hit. But unless that process starts very soon, the prospect of fixing Australia’s debt and deficit spiral may well evaporate altogether.

But to go down the path Keating alludes to (and to which I’m a ready subscriber), whoever forms government in Canberra will need a few attributes that are conspicuously lacking at present: ideas that target the problem at its core, rather than reshuffle it and perpetuate it by creating “new” spending from “identifying savings” in a zero-sum game. The ability to communicate and sell those ideas in the form of policies to an understandably jaundiced and cynical electorate, which has rightly come to expect nothing from politicians in order to avoid disappointment. The backbone to take risks, to make decisions, and to pursue policies that are actually right in the knowledge that inevitably, some people will lose out. And above all, the intellectual honesty to concede publicly that governments of both political stripes have been playing fast and loose with taxpayer cash for decades, and to admit that the vicious spiral of largesse simply has to stop.

Keating talks of sitting in the Expenditure Review Committee for 10 hours per day for ten weeks of the year, looking for ways to cut government outlays and in the process slash government spending by 6% of GDP: this is exactly the approach that must be taken now, with spending running at or near historic highs. So much is now handed out by the federal government for no credible reason that Keating’s target of $90bn in annual savings should be a cinch: his target figure might be awry to whatever degree, but the sentiments and objectives that underpin it are not.

If it means a whole lot of people all lose a bit here and a bit there, then so be it; they will also get something back, as I will discuss shortly. But government isn’t meant to be your big brother or your nanny, who gives you cash and tells you what to buy with it, just like it shouldn’t tell you what to say or think or do. Government in Australia is guilty of doing all of these things, and it’s time it stopped.

So without bogging down in the minutiae (which in any case is impossible: I don’t have thousands of hours to go through the budget line-by-line on my own time), let’s accept the Keating figure of $90 billion per year is correct.

Remember, at this point, we’re talking about $90bn in expenditure cuts which won’t affect revenue in any meaningful sense; for the purposes of my point, we’ll divide that $90bn into three chunks.

The federal budget deficit is currently running at about $45bn per year: the first half of Keating’s $90bn in spending cuts eliminates it altogether. Hey presto, the budget is balanced, or even slightly in surplus over a four-year estimates period.

Of the remaining $45bn, half of it every year should go directly to paying down the principal component of Commonwealth debt; in 15 years’ time, the government debt pile is approaching zero (or, if it’s possible to renegotiate those obligations, combined with ongoing reductions in interest payments, it may in fact have reached zero). The progressively falling interest on the debt is a secondary source of budget savings that will grow over the 15 year period as it did during the Howard years.

My reasoning in setting this out over 15 years is simple; the debt burden we face today — accounting for inflation — is roughly double what the Howard government inherited in 1996; it stands to reason that it will take roughly double the time to get rid of it if the hard calls on cutting spending are made. Many people remain blissfully unaware that whilst the Howard government left the Commonwealth debt free, that milestone was only reached in late 2004: almost a decade after the Coalition was elected. 15 years to get rid of some $400bn in debt in today’s dollars seems a realistic timeframe.

The remaining $22.5bn should simply be handed back to where it came from: the taxpayer.

With such a large amount of money to play with, big changes that would otherwise be prohibitively expensive become possible. The tax-free threshold could be lifted from $19,200 to $25,000, for example; that $50 per fortnight everyone clamoured to have added to pensions and unemployment benefits a few years back might be possible. The PAYE tax scales could either be indexed to end the scourge of bracket creep and/or flattened, thresholds lifted, or the rates reduced. The options are almost endless. But for the whole thing to become possible, a government must first find a spine: and an opposition (in the present circumstances probably a forlorn if not utterly pointless hope) would need to behave responsibly, and desist from mindlessly opposing everything simply for the hell of it.

Yet even for those who say the number of losers would be too punitively high to make such a wholesale overhaul possible, I’d counter very strongly that most of those people would get back the money in their own pockets to make the decision to pay for whatever was taken away themselves; this is how it should be, and even if a zero sum game in the end, what we’re talking about — ultimately — is curbing the lethal culture of government being involved in things it shouldn’t be, and empowering people to make their own decisions on how to spend their money.

I would point out that for those who are wont to crap on about “Tory tax cuts for the rich” and similar melodramatic twaddle, I have included measures that would benefit the least well-off in my list of possibilities.

But once we get this far, I think there’s a strong case to go even further.

It is a fact — whether your political outlook permits you to like it or not — that taxes on consumption are more efficient, more sustainable and more straightforward than taxes on income; this is why many countries (not least the economically glittering jewel three hours’ flight east of Sydney and Melbourne) have in recent decades enacted the “tax switch.”

The application of Keating’s thesis, as I have theorised above, is just the first portion of what can and should be a two-tier process for a colossal overhaul of this country’s taxation arrangements.

If I haven’t lost readers just yet (and if people aren’t screaming at me for advocating, once again, a healthy dose of orthodox Tory finance), I disagree utterly with those who claim there is no case or reason not to lift the GST and to expand the base of goods and services it covers.

Most comment on the issue of broadening the GST base notes that healthcare and education should be exempt; I agree, and believe financial services (or at least that section of the financial services industry that applies to retail banking and consumer items like car insurance, home and contents insurance, personal loans and so forth) and residential rents should also be added to that list.

All other goods and services should be subject to GST — yes, that means food too — and as comment in the Courier-Mail observes today, the bulk of the GST burden on fresh food would disproportionately fall on wealthier consumers. There goes the “smash the poor” counterpoint, although in any case, I will deal with that, too, in a moment.

I think the rate of GST should be lifted to 15%; and as consensus seems to dictate, those changes would raise a further $35 billion in consumption tax receipts. A program of closing existing tax loopholes (I mean actual loopholes like deductions, not arbitrary imposts on “the rich” or other ideological gobbledygook) would probably push that pot of additional revenue billions higher still.

In return, the states could abolish stamp duty on residential property and/or payroll taxes; the company tax rate could be cut from 30% to perhaps 25%; PAYE scales could again be adjusted — one of the ideas I’m leaning to here is to align a 25% company tax rate with a 25% PAYE bracket that covers income up to $250,000 per year — thus eliminating the avenue for tax avoidance through incorporation; fuel excises could be slashed; another $50 per fortnight could be added to pensions…and of course, a fair chunk of the money would end up with the states, whose unfunded liabilities to provide health and education services should, finally, be resolved, although I must note that whether or not state governments behave responsibly, and not go on spending sprees with their newfound GST booty as they did in the 2000s with nothing in the end to show for it, is a question for them.

The end destination would be a debt-free federal government within ten years that does not throw money at everything in sight to buy it off: the sort of irresponsibility that will never be excised from electoral politics, I know, but which right now needs to be quite literally attacked with an axe.

It could see people earning less than $30,000 taken out of the income tax system altogether; it would realign Australia’s personal and company tax rates to make them competitive with most comparable countries; it would target more direct aid to those who most need it, whilst studding the system with incentive and reward for effort at the other end; and it could render redundant a raft of state taxes and charges that might be incremental in scale, but which all add up to overrun the capacity of the individual to make ends meet.

These do not need to be complex arguments, and if set out clearly and logically, do not need to sound the death knell for any party proposing them.

Indeed, I may have been a little muddled in recording my thoughts and I apologise: one, it’s already 3am and I’m tired; and two (and more to the point), I’m very passionate about this stuff, and the temptation to let it just to flow into print is one I have to temper with oversight of what the reader will see. Sometimes, that gets to be a difficult line to navigate.

One thing I would like to emphatically point out is that I have refrained from ripping into either major political party today, and to the extent I have criticised, both sides have received a bit of the treatment: today’s post isn’t to score political points, although it is obviously an expression of conservative economic principles. I just wanted to run with Keating’s comments, and apply them to some ideas for real tax and budget reform that are positive in outlook even if the hard political courage and determination to enact them is in short supply at present.

But were a program like this to be set out as a two-term economic reform strategy by, say, the Turnbull government — with the first stage presented to the electorate this year, and the second subject to a further mandate three years hence — and were that program explained clearly, sensibly and logically, and capably sold by the government’s communications people in the proper execution of their duties, then I think the reservoir of public support would run very deep indeed.

What do you think? I didn’t come down in the last shower, and I have been around politics long enough to comprehend just how hard this kind of fundamental change can and would be to implement.

But with one eye on the country’s problems and the other on the Senate (and how to get control of it at an election, or close enough to it to render it functional), if anything could kill both birds with the one stone, I think an integrated tax and budget management package along these lines is almost certainly it.



12 thoughts on “Keating, GST, Spending Cuts, And A Budget Debate Worth Having

  1. It should not be forgotten that Howard and Costello used asset sales to pay down debt and establish the future fund to cover underfunded commonwealth super and other bits and this should be on the agenda again. I’m not sure what is left to sell but it should not be too hard to find.
    I also believe that there are too many exemptions based on social considerations which means taxes are too high for the ones who pay them whereas if everyone carried a share of the load it would be much better for the economy. But politicians garner votes from those exempted so we can’t expect an end to it anytime soon. The reason GST is such an efficient tax is that politicians can’t exempt a class of voters, only a class of transaction. This should tell them something if only they could get themselves off the drug of socialist bias. I think this will not charge until anyone in receipt of a benefit other than say age or service pension is not allowed to vote while they are on the benefit. It is the modern version of ‘occupying a position in the gift of the crown’ (which is still law) and was designed to stop officials and from being able to vote themselves benefits by disqualifying them from election. Now of course they dole benefits to supporters at the expense of non supporters so that their own benefits of office continue.

  2. You still haven’t answered my questions.
    “At what percentage would you accept that the GST cannot be raised any further?”
    “What would be your reaction should a proposal be that Income and Company Taxes were raised by 50%?”
    In my opinion, you are off the Planet with this one.
    Your proposal is that the GST be raised, and “some people” are compensated for it. Firstly, how bloody long do you think that would last? Secondly, another army of Public Servants to plan and administer the “compensation”.
    With the resources and obvious expertise that you have, I’d be ecstatic if you could criticise, or even just point out, the myriad of useless committees and feather bedding that all Governments seem to be blind to.
    Might I suggest:
    Fiddling with Superannuation, and Superannuation Tax. But, it has NO effect on Parliamentary and Public Service Defined Pensions. You know what a Defined Pension is, I am sure. No one in any interview I have seen, has the nerve to ask Turnbull, or anyone of his followers, “How does Superannuation changes affect you?” (I must adt, I don’t watch too many Turnbull interviews. The man’s uppity, “FckYou” demeanour leaves me cold.)
    What is the yearly cost of this? People have tried to get an answer with FOI, but are fobbed off with, “It’s all there in the reports.”
    Are State Parliamentarians and State Public Servants entitled to TWO Defined Pensions, should they transfer from State to Federal? I believe Michael Lavarch does. Perhaps it was Linda Lavarch. (Of panties in the ashtray fame!) Perhaps it was both.
    Defined pensions are NOT means tested per se. Should the person resume a Government Salary, the Pension is stalled. However, Private Enterprise Employment earnings are not means tested.
    Question! Does Peter Beatty of Queensland collect two Defined Pensions? One as a retired Parliamentarian (Premier) and another as retired Trade Commissioner to California?
    Recent events have pointed out that a Public Servant can receive full “sick leave” for 45 weeks, then, 75% of Salary (no doubt fully indexed) until return to work, or retirement age is reached. How many are on this? I don’t know, and I don’t care. It should not be possible to do this.
    I was told by a former Queensland Police Officer, that, becase he missed out becoming a Commissioned Officer, he missed out on a Defined Pension.
    I was interested to hear – I think it was DeJersey of Queensland, and I’m prepared to admit error if it’s pointed out – that the reason Judges were so highly paid, and received a generous – generous! – retirement benefit, was so that they would be less inclined to take bribes. (True! I remember this from some time back, and somwhere) So, DeJersey basically said, “We cannot rely on Judges integrity, as we do with other employees. We must bribe them to not take bribes!”
    Not a current situation, but in Rudd’s time, I think it was 20 million dollars that was advanced to cull feral camels. The Company I worked for at the time was interested in the logistics, and investigated the cost of helicopters, approved shooters, half a million rounds of ammunition etc. But, before any tenders were called, it was all over in a few weeks. The money was gone, and not a shot was fired. The Bureaucracy burnt it all with offices, cars, computers, and “expert” help.
    Why does John Howard’s office need to be so lavish that it costs $8,000 a month? Add in Rudd’s, Gillard’s, Keating’s, Hawke’s, and please, please don’t fob me off with, “It’s a pittance compared to total Government spending.”
    These are just a tiny number of examples.
    So, instead of proposing a shuffling around of taxes, with the obvious intention of increasing them overall, then proposing the same increasing the next year, and then more increasing the year after that, someone with your expertise and resources could really dig into this sort of stuff, this sort of waste. Who knows! Perhaps you could point out to Turnbull, just how to approach Keating’s 20%!
    And, at the same time, suggest to Turnbull that he lead with example!

    • You’re entitled to your opinion, Cynic of Ayr.

      In any case, you have been reading this column long enough to know I support a 20% GST, but apparently you make the same wilful mistake most opponents of GST make in that you appear to completely ignore the massive offsetting tax cuts elsewhere, and the increases to certain welfare payments for lower income earners. You certainly parrot the emotionally manipulative formula that it’s a “50% tax rise” to get to a 15% GST, which of course sounds a hell of a lot worse than a five percentage point increase in the rate at which it is set. Linguistic BS isn’t going to convince me of anything because that’s all such shabby rhetoric is. Bullshit.

      You have missed the point, by describing this as “a shuffling of taxes,” that taxes on expenditure are growth taxes — more sustainable than the shrinking PAYE base being hacked away at by an ageing population — and it isn’t as straightforward as raising one and lowering the other for aesthetic reasons. Even many Coalition MPs and ministers are refusing to accept the deep structural hole the country’s accounts are in, and the Left simply pretends the problem doesn’t exist. Unless something is done to fix it, I wouldn’t want to be around in another five or ten years, and before you get into me for “talking the place down” I’m being realistic about this.

      It more than I can say for some.

      Meanwhile, you seem keen on fiddling around with superannuation taxes — which really need to be set in stone land left, so often are these savings measures used as a football — but I have to say most of the rest of what you are talking about is peripheral to the issue here. Contrary to popular belief, MP superannuation and pensions is a relatively small impost on the budget. You didn’t want to be fobbed off in those terms but that’s exactly my response — mostly because you can’t make changes to those kinds of schemes retrospective. That’s not to say I don’t agree with you, but that’s a whole other issue for another time.

      I may come back to your other points at another time but for now, I have answered the topline questions. Do note I’m not talking about 20% GST in this article; that’s a personal view. But there is room to shred the fat out of the budget and effect an overall reduction in the tax burden whilst including a GST rise. I support it because it’s sound economics, and because the flaws of what we’re working with right now are glaringly obvious. You are free to disagree, but I don’t have any truck with your point.

      • Firstly, the GST.
        Quoting you, “You certainly parrot the emotionally manipulative formula that it’s a “50% tax rise” to get to a 15% GST, which of course sounds a hell of a lot worse than a five percentage point increase in the rate at which it is set. Linguistic BS isn’t going to convince me of anything because that’s all such shabby rhetoric is. Bullshit.”

        May I say to you, in similar wording:
        “You certainly parrot the emotionally manipulative formula that it’s only a “5% tax rise” to get to a 15% GST, which of course sounds a hell of a lot better than a fifty percentage point increase in the rate, which it truely is. Linguistic BS isn’t going to convince me of anything because that’s all such shabby rhetoric is. Bullshit.”

        It doesn’t matter at all, what manipulation of the tax mix is. Unless Government Spending is dramatically reduced, as Keating says, (God! I’m agreeing with Keating!!) no amount of tax fiddling will make any difference to a Greek result. You can prattle on about “that taxes on expenditure are growth taxes — more sustainable than the shrinking PAYE base being hacked away at by an ageing population”. None of this will have an appreciable effect, since, as you say, some of the nominal 5% increase will be frittered away in “adjustments” to income tax and pensions, and the rest, I assure you, will just be frittered away, as Turnbull will be total unable to resist buying some popularity.

        I said, (about Defined Pensions) “please, please don’t fob me off with, ‘It’s a pittance compared to total Government spending.'” And you could not resist – you did say exactly that!

        You’ve also made it clear that you consider any Government expense, as long as it is only a Government Employees (MPs down) benefit, is merely “peripheral”

        Some info below. Of course, not a single tiny bit of this matters, because, after all, as you say, it is merely a “peripheral” and is merely “a relatively small impost on the budget.”

        News, 24th April, 2014.
        “Joe Hockey says the annual cost of delivering the aged pension will rise to a staggering $72 billion within 10 years.”;
        (C of A – What will the liability of the Defined Benefits Scheme be in ten years time?)

        The Sydney Morning Herald, 21st January 2013.
        “The unfunded pension liabilities of Australia’s six state governments have blown out by $40 billion to more than $140 billion over the past year, increasing pressure on some to inject funds into the schemes.”

        An article by Mark A Gregory, senior Lecturer in Electrical and Computer Engineering, RMIT University, 22nd October, 2013, in “The Cqnversation” (There is a “Q” instead on an “O” in the name.
        Cherry picked quotes from therein:

        “State and federal unfunded liabilities now total more than $200 Billion and this amount is rising rapidly.”;
        “An unfunded liability is a debt that is not covered by the value of assets, savings or investments that have been allocated to pay the debt.”;
        “Every year, some portion of the unfunded liabilities become due for payment. If the government cannot pay, then the only option is to borrow to pay. This adds to the overall size of the unfunded liabilities and means the cost of servicing this debt is constantly growing.”;
        “Superannuation and pension benefits are by far the largest contributors to the current unfunded liability debt.”;
        “In the early 1970s, when Gough Whitlam was Prime Minister, significant changes were made to how superannuation and pensions were funded. Mr Whitlam’s government decided to create public service and military superannuation and pension schemes that were “unfunded”, meaning that funds were not set aside as the debt occurred. The debt was to be recorded and paid out when the public service or military employee retired.”;
        “The Future Fund was created by the government led by John Howard in 2006 to “assist future Australian governments [to] meet the cost of public sector superannuation liabilities by delivering investment returns on contributions to the Fund”. As at 30 June 2012, the Future Fund reported $77 billion in assets.”;
        “Currently, Australian unfunded liabilities are growing at a rate of about $4-5 billion a year. What is truly concerning is that this growth appears to be outstripping the Future Fund by about $1-2 billion.”
        (C of A – Of course, the FF no longer exists. Rudd spent it!)
        “Superannuation and pension benefits are one of the largest costs to government and business annually. You would think that the government would do everything possible to reduce this cost to the public purse, yet Australia now has more than $200 billion in unfunded liabilities. And this amount is growing rapidly. The annual cost of servicing this debt through foreign loans is now in the billions.”

        • I’m not going to fence with you.

          1. I have LONG called for government spending to cut — the very thing you’re holding up as a precondition for a GST rise not simply being Keating’s “$35bn bone” — or are you omitting that too for the purposes of your argument?

          2. You have ignored the point that consumption taxes are more sustainable and efficient than income taxes or any of the hotchpotch of measures being clutched at by the ALP as an “alternative” (Medicare levy, “hitting the rich” on superannuation, or a personal favourite in “forcing multinationals to pay their fair share” which is a hyperbole no Western nation has resolved): you are happy to criticise, and to ignore inconvenient arguments, but I don’t hear anything in their place from you.

          3. I’m not interested in what Joe Hockey said. He wasn’t up to being Treasurer and he was a failure in the role. The Left liked him, of course, because he offered up the “evidence” to prove their monster stories about Abbott were correct. But even most of us on the Liberal Right were pleased to see the back of Hockey, who was next to useless.

          4. If you want an article on unfunded superannuation liabilities, why don’t you write one yourself? Otherwise, I will decide what goes into this column — not you. If I want to talk about GST reform (complete with all the bits you seem to be blind to, like the call for spending cuts and the rationale for supporting a GST increase) then I will. I don’t mean to be testy, but if I’m not covering the subjects you think I should be covering, then too bad. I get time for one article per day at the VERY most (and not even that much for a long, long time). It’s my party. I had a bloke on Twitter sending me links to things he thought I should discuss — all pet causes of the Left, of course — and funnily enough, not a syllable on them has been published in this column.

          There are plenty of fish to fry, and the biggest one is the dual-headed beast of a haemorrhaging budget deficit and the need to make revenue sustainable, which is why, in the bigger scheme of things, your issue of unfunded superannuation liabilities is peripheral — the headline act is more important.

          It would be helpful if more people stopped reading and hearing only the bits they want to see and hear, and started taking account of the full position put into the discussion where issues like tax reform are concerned.

  3. Gentlemen your verbal jousting aside, increasing GST to what ever level, is a strategy that the government is looking to put in place, yes to continue to tackle debt, but more importantly to put a mechanism in place to replace the ever shrinking PAYEE tax system which will continue to shrink at a similar rate as the demand on the pension system increases. As it grieves me greatly to agree with Paul Keating he has certainly hit the nail on the head this time. Good money managers, on all levels, need to adjust spending to take account of decreases in revenue, something Federal, State and Local Governments have always failed to do. Of course they never have a problem spending it.

    Increasing GST is again the easy way out for the government, that involves no justification to the Australian people what so ever and literally no effort by the government apart from the verbal diatribe you hear & see in the media. Those of you who think that increasing the GST is the panacea required to overcome previous & present government’s ineptitude in managing Australia’s coffers, are fool hardy to say the least, and yes that includes you Yale! Reason :- Simply, YOU CAN’T TRUST GOVERNMENTS. Look what was said about the abolition of various State based taxes etc. to sway the public to accept the GST in the first place. We all know what happened in reality!!! Further, a change in government brings along a whole new set of variables.

    A PROPER detailed review of expenditure is long over due. The sole objective should be to identify those Federal expenditures that are not germane to the daily running of this Country and commencing what ever action necessary to cease that expenditure post hast!!!! After a reasonable period of time, evaluation should be undertaken by the government to ascertain the effectiveness of the cuts and then and only then should consideration be given to increasing the GST, providing that all State Government give an unconditional guarantee to abolish identified State taxes.

  4. OK, fair enough comment. I am not picking any sort of fight with you.
    I omit nothing with intention. I struggle as it is to keep my replies to a readable length.
    Yes, you have LONG advocated cuts, but, quote, “you are happy to criticise, and to ignore inconvenient arguments, but I don’t hear anything in their place from you.” Is this not your very self? Do you not yourself merely push a single barrow, “Raise the GST and cut Income Tax”? Do you not ignore arguments of mine, or dismiss them outright as not worthy of your consideration? As it is your column, you are free to so, but I’m free to bitch about it.  I don’t doubt for a minute that such research and attention to detail is beyond your personal time constraints, and, after all, we’re both making comments that will, most likely, not be even read or considered by our friend Turnbull.
    It’s a bit precious to write off Joe Hockey, and everything he said, in entirety, but anyway, he left in a huff, and that’s that.
    Why shouldn’t I write an article? Well, for starters, I don’t have the skills, and I could not possibly compete with any of the articles already written on the subject, a tiny few of which I pointed to.
    Your second last paragraph is the very crux of my “discussion” with you. “why, in the bigger scheme of things, your issue of unfunded superannuation liabilities is peripheral”
    Could not each of spending cuts possibilities that are available, be considered, on it’s own, peripheral? A couple of billion here, or a couple of billion there? Any reduction in debt will be made up of many, many smaller cuts. There is no other way. I for one would be interested in any proposal, from you or anyone, for a single, or even two or three examples of cuts, that will, on their own, make any difference.
    Upon reflection, this seems to be a bit of a sore point with you. I read more in your words than mere “It’s a trifling amount, not worth fiddling with.” I detect not a single whiff of disagreement from you with the principle that “Government People” have given themselves gifts that are not available to “Private People” at “Private People’s” expense. Neither do I detect from you any sort of alarm that the system is unsustainable as people more worthy than myself have pointed out.
    This is the forte of Labor, where Union Hacks are “retired” to the Senate, and Government picks up the tab of funding their retirement. Labor and the Greens will drive the country into the ground, to continue with benefits to “The Party” and/or to “The Government”
    I don’t believe I attacked you on the content of your column, or your ownership of it. I may have suggested some material, but you are free to take it up or not. To take offense when “some lefty” suggests something or other, is indicative of preciousness. I for one, appreciate your efforts with this column, and I have posted replies in support. But if you do not want to receive comments, you don’t have to offer the facility – it’s your choice. Neither do you have to publish the comments, and I must assume you refuse to publish some.

    The spending cuts that are necessary are a thousand tiny cuts from here and there. To say otherwise is unwise, because ANY Government, forced kicking and screaming into cuts, is going to try and hide or trivialise for political purposes, any cuts they make.
    My principal disagreement with you, still not addressed, is how far can the GST be raised? As sure as night follows day, the situation of Government debt will be ever present every few short years, and every few shot years, the cry will be, “The GST must be raised”
    My second disagreement is that, and I’m sure I’ve said this, what’s the point of consumption taxing non-income tax payers, when compensating them – giving the money back, and reducing Income Tax – giving the money back, and only a fraction is left over. Which, as we all know, will NOT be used to reduce any debt. Sniper123 is correct. “YOU CAN’T TRUST GOVERNMENTS”
    I offered up the Defined Benefits Scheme as one example of a source of unsustainable debt for two reasons. One, it is a debt hat can be reduced. Two, I insanely thought that it would be a good chance for Parliamentarians, to lead by example. However, as I’ve found out, it’s peripherally trifling.
    I’m prepared to call it a day on this one. I’ll read any reply, but unless you issue abuse or insult, (not likely, I hope) I’ll not reply, or only in short, and let the matter rest.
    My regards.

    • No no, no abuse. But it frustrates me that those who disagree conveniently ignore that portion of my arguments that offsets their criticism: answering the objections they want to answer, not the ones in front of them. Sniper123 is also guilty of this on this occasion, for he/she too has made no mention of offsetting tax cuts or other measures to effect the tax switch.

      Again, however, you repeat the question of how far the GST can be raised: AGAIN, I remind you that my personal preference is a 20% GST with other revenue measures slashed to offset it. Doesn’t this answer your point?

      With regard to “government people” availing themselves of baubles at “private people’s” expense, there will be an article later today based partly on that point.

      But trimming the public service (which was deliberately bloated by the Gillard government to retain a reservoir of up-to-date operatives, well paid on the public purse, that could be drawn upon by a future Labor government) is something else I have spoken about at length here.

      And as for superannuation, pensions and so forth, I remake two points for you.

      One, I have in the past advocated the complete abolition of retirement perks for ALL MPs, save perhaps for ex-Prime Ministers (with at least three years’ tenure, including an election win), state Premiers on similar criteria, and Governors-General; in return, their remuneration during their period in office could be increased by 50% to reflect the fact that contrary to public opinion, these people are in fact modestly paid indeed when the demands of their positions are factored. There is no need for Gold Passes, business class airfares, annual pensions of sometimes six figures, et al; these are arguments that have been presented here in the past that you may have missed.

      But two — and this is where I dismiss your point as peripheral — simply hitting superannuation provisions for self-funded retirees is, in fact, peripheral; the hit would have to be obscenely hard to actually deliver enough revenue to make an appreciable difference to the budget bottom line, but not so hard at all as to force hundreds of thousands of currently self-funded people onto the pension when at this time they don’t claim one. If I ignore your arguments it is because I see no merit in them, and whilst this particular can is one the ALP is obsessed with, that doesn’t make it a) right, or b) worthy of being dignified with tacit acknowledgement of it as anything other than the class-hating, envy-driven piece of nastiness it actually is.

      • I’m sorry, I didn’t want to continue this, as I thought the discussion had run it’s course, and I, at least, got value from it. However, a couple of points.
        I acknowledge your opinion that the GST be 20%. I accept this as a valued opinion. What I don’t accept, and the point of my argument, is that the whole scenario can – and most likely will – crop up again in a few short years time. My question was never what you advocate now, but at what % point will the “raise the GST” solution be unviable, or unfair, or unelectable. It cannot be raised forever! 100% is the mathematical limit. 
        Your second last paragraph – this I did not know! My apologies, but I have been reading your blog for – I don’t know – 12 months(?) and I either did not see it, or missed it. For the little it’s worth, I mostly agree.
        I assume you also advocate that Government Employees are on the same Super footing as Private Enterprise, and it does address my concern at the present unsustainable Defined Pensions Scheme.
        I’m not all that enamored to funding ex-PMs and State Premiers for the rest of their lives! Especially as it is not in the least, Means Tested. A certain time frame might be appropriate as they tidied up any public services. Perhaps five years? (Based on present trends, another couple will most likely have joined him/her in that time!)
        I believe the PM’s retirement cap is $200,000 plus – for all intents and purposes – unlimited expenses. Almost another $100,000 alone, in the case of John Howard’s office.
        Another point here is that Gough Whitlam was retired, and paid, a substantial sum by us, for more years than he worked for us. In round figures, he served 23 years, and retired for 39 years. Hawke also, worked for us for many years less that we pay him in retirement. He served 11 years, and has been in retirement (and counting) 25 years. (+-1 as months are not in the calc.)
        I haven’t figured it ALL out, but the present five ex-PM’s, at $200,000 each, cost a Billion dollars, in cash alone, plus at least another $250,000 in expenses.
        Add to this all the Judges, ex Fed MP’s, ex “Fat Cats”, Ex Police Officers, and the sum achieves Lotto proportions. Each year! The States come in on top of this.
        My dismay was that you seemed clearly (to me) to deem the expenditure of the Defined Pensions Scheme as merely “Peripheral” and, because you deemed it so, was not worth attention. This must be a substantial, well hidden, totally (now) unfunded cost, and worthy of attention.
        This is not, IMHO, peripheral!
        Just how any “cure” for this Scheme would achieved is beyond my imagination! And, probably beyond the lifetime of the yet to be born!
        Your last paragraph, I struggle with immensely. I don’t know where I’ve written so poorly, that you developed the idea that I was all for this, “But two — and this is where I dismiss your point as peripheral — simply hitting superannuation provisions for self-funded retirees is, in fact, peripheral;”
        A review of my wordings shows, “Fiddling with Superannuation, and Superannuation Tax. But, it has NO effect on Parliamentary and Public Service Defined Pensions. You know what a Defined Pension is, I am sure. No one in any interview I have seen, has the nerve to ask Turnbull, or anyone of his followers, “How does Superannuation changes affect you?” (I must add, I don’t watch too many Turnbull interviews. The man’s uppity, “FckYou” demeanor leaves me cold.)”
        My regrets if warranted, on poor wording. I was trying to point out that Turnbull, et al, would be/ could be hell bent on affecting the value of Private Superannuation, BUT IT WOULD NOT AFFECT THEM, IN ANY WAY! (I don’t like Caps, but there is no provision for italics)
        So, to be clear, I do NOT advocate any changes to Private Superannuation, Self Funded Retirees etc, UNLESS, there was equal (at least) detriment to the absurd Defined Pensions Scheme. I.E. leadership was provided.

  5. I’m pleased to get in first. Cuts into your amusement a tad, but there ya go!
    Plainly, 5 x $200,000 Ex-PM’s pensions does not equal a Billion. It’s only a million. Admittedly Peripheral.
    I realized this a few hours after I posted, and flogged myself severely with a birch switch.
    In my defense, at 72, I’m far too young to have mastered the intricacies of whole digit addition.
    Still, the Billion dollar figure would be easily reached when all the other Ex-Gov employees are added in.

    • It’s an easy enough error to make, Cynic of Ayr.

      But broadly in response to your last reply, I think 20% GST actually represents a ceiling in terms of where the tax might ultimately be positioned. Whether it eventually is or isn’t, it seems meaningful tax reform will have to wait: Malcolm Turnbull is exhibiting every sign of backing away from biting the bullet. It amazes me that this Coalition government is so timid as to run screaming from the tough remedial measures the country needs at the merest sign of ALP/Greens obstruction and fearmongering. This time, it is a capitulation to a fairy story about wet lettuce leaves, for goodness sake. Properly calibrated GST reform (that is, with the corresponding cuts to company and personal tax, removal of other indirect imposts, and suitable compensation for low income earners, pensioners etc) is a slam-dunk to sell. But a central criticism of mine about the Abbott government is that it couldn’t sell anything to save itself. The leadership change was meant to change that, and it is becoming increasingly clear that it has changed nothing at all aside from the faces presiding over an unchanged apparatus of governance.

      The key is to cut direct taxation (ensuring the federal government actually does it) and finding some way to ensure the states don’t renege this time on abolishing whatever state revenue measures are tied up in the deal (alongside a program of reining in government spending, eliminating waste, and cutting out arbitrary recurrent expenditure typically legislated with electoral expediency in mind).

      Last time, the states (and they were, with the early exceptions of WA and SA, all Labor states) just rolled it all into a gigantic flood of money that they spent on pay rises and new public sector hires and had little to nothing to show for it in record time. Even here in Victoria, the Bracks government (which won two elections promising to build the Scoresby Freeway without a toll, and which anecdotal evidence suggests the Kennett government had left money to build when it was removed from office) spent so much money that it couldn’t afford the $2bn to build it. It had, of course, spent far more in GST receipts than just $2bn.

      Be assured that I share your sentiments on wasteful arrangements for ex-MPs, and that my description of them as “peripheral” is primarily based on the fact that where taxation reform is concerned these items are simply not top-level priorities. They are priorities in the larger scheme of things, of course, and as I noted I have railed against these before — and when those issues again become topical (and they will) I am sure we will do so again.

  6. I can live with 20% maximum, as long as that is what it sayed at. But, as you say, it can’t just be frittered away as “spending”. It must be used critically with debt reduction, tax reduction, whatever people smarter than I can prove to be the best thing to do with it.
    “This time, it is a capitulation to a fairy story about wet lettuce leaves, for goodness sake.” is very apt.
    You’re right. Turnbull would be unable to withstand a soft slap with a wet lettuce leaf.
    You’re also right in that Abbott can’t come back, but I can’t see this other bloke going forward.
    All cleared up. I believe our corresspondence on the subject has come to a fruitful end.
    (haha! Sir Humphry said that! “Minister, there are weeks of fruitful labour involved in that investigation!”
    Thank you, Regards.

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