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.

 

Newspoll And GST: Summer Break Ends With Coalition 53-47 Lead Intact

THE FIRST NEWSPOLL for 2016 finds that whilst Bill Shorten’s personal ratings are up slightly, his party would be poleaxed at an election; Malcolm Turnbull retains a whopping lead as preferred PM, and although finding resistance to tax changes, the poll confirms that despite high visibility over summer there is no enthusiasm to elect Shorten. At the start of an election year, Labor appears to remain on course for a belting at the ballot box.

An interesting feature of the social media ecosystem is that traffic from one site to another brings readers to this one from all sorts of places; one of those today — and here’s a link — is William Bowe’s excellent Poll Bludger blog in the Crikey! portal, and whilst I don’t have much time for Crikey!‘s usual blatantly biased left wing view of the world, Bowe’s aggregator of polling and his application of it to electoral movements to predict likely outcomes is a valuable resource indeed.

One of his commenters last night posted a link to The Red And The Blue, stating they’d love to come here and see what “real frothing apoplexy” looks like if Labor were to win government later this year, and surely enough, all the lefties have obediently been trotting in to get a pre-emptive look at my site; regrettably for them, there will be no “frothing apoplexy” this year — at least none that emanates from a Labor federal election win.

I am increasingly certain, GST changes or not, that the government will be re-elected, although that comes with the very big asterisk that the longer Prime Minister Malcolm Turnbull takes to announce an election date, the less certain such an outcome will grow.

But for now, the highly reputable Newspoll has posted its first results for the year in The Australian and the numbers provide little succour for opposition “leader” Bill Shorten, with the Coalition retaining unchanged the 53-47 result, after preferences, that it recorded prior to Christmas.

Numbers first, and then some comment.

Newspoll finds primary support for the Coalition running at 46% (up one point from its survey in early December, two months ago); it find the ALP also up a point to 34%, with the Communist Party Greens and “Others” both down a point, to 11% and 9% respectively, to produce the headline 53-47 figure that closely mirrors the 2013 election result.

53% (+1%) of Newspoll respondents approved of Turnbull’s performance, which is somewhat remarkable given he chose to lie low over the break, only resurfacing in the public eyeline in the past week during his trip to Iraq and the US, with 31% (+1%) disapproving; by contrast, 25% (+2%) approved of the way Shorten is doing his job, with 60% (-1%) disapproving: and as Shorten has done the opposite to Turnbull — maintaining a very visible presence throughout the summer — one would have to say that he might have been better off eating and drinking and spending time with his family than bothering voters at a time they traditionally eschew politics.

On the “preferred PM” measure, Turnbull (59%, -1%) continues to head Shorten (20%, +6%) by almost 40 points, and I would make the observation that almost all of the improvement in Shorten’s number comes from the “undecided” pile rather than taking support from Turnbull, which suggests the rise comes exclusively from intending Labor voters anyway and could hardly be feted as any kind of triumph.

There are two things I want to discuss in relation to these figures, the first being the Newspoll from the same point in the electoral cycle in 2013, which found — unbelievably — that the then-Gillard government had all but closed out a much bigger deficit than Shorten now faces to trail the Tony Abbott-led Coalition by a 49-51 margin; it seems we might have missed commenting on it at the time, although I clearly recall dismissing it as a rogue result in articles following the poll’s publication: and so it proved to be, a fortnight later, when Newspoll saw Labor slip back to 44% on the two-party measure of voting intention.

The reason I raise it is that during the Christmas/New Year break of 2012-13, Gillard and a coterie of her colleagues spent as much of the silly season trying to blaze their way onto the front foot and to seize back some electoral turf as Shorten has done this year; an unkind reading would be to suggest that both enterprises were a waste of effort, given Gillard was dumped in favour of Kevin Rudd five months later (and Labor at an election in a landslide shortly after that), and given Shorten seems destined to suffer one of those ignominiously terminal outcomes later this year.

But however unlikely the Gillard bounce was (and notwithstanding the obvious point that the January 2013 Newspoll was indisputably rogue), some kind of movement in Labor’s favour, however fleeting, seems in hindsight to have been generated from the flurry of activity that took place that year.

By contrast, Shorten’s heavily political “Christmas message” — the man will never learn, as the Kenny Rogers song proclaimed, that there’s a time to know when to hold ’em, and to know when to fold ’em — followed up with a carefully cretinous campaign of accosting supermarket shoppers to talk about lettuce leaves and the GST has delivered, in round terms, absolutely nothing.

It’s just a thought, mind. But the traditional silly season period, historically, is better for (and better used by) the ALP, which in years past has made an artform of translating pictures of its MPs in hardhats and festive costumes at community events into at least transient — if fleeting — support.

Shorten has done very badly, at a time the government had lost a minister (Jamie Briggs), stood another aside pending Federal Police investigations (Mal Brough), and was starting to grapple publicly with the fraught but necessary issue of tax reform, which by its nature will require a recalibration of the GST arrangements as part of any attempt to refashion the national tax base to make it more efficient, more sustainable, and which ignores regressive and piecemeal Band-Aid type “fixes” like airy-fairy hits on “the rich” and allegedly miscreant multinational companies.

This brings me to the second point I want to make in relation to today’s Newspoll.

The survey carried the question “if the government were to introduce tax cuts for all income earners and compensation to low-income-earners (sic) and welfare recipients as part of a package of tax reform, would you be in favour of or opposed to raising of the GST from 10% to 15%?”

37% of respondents were in favour, with 54% opposed; 9% were undecided, and whilst at first blush this appears to sound the death knell on any move to alter the GST, it bears remembering that similar surveys from mid-1997 onwards — when then-Prime Minister John Howard announced an intention to take a tax reform package, including a 10% GST, to an election — found even greater opposition to a GST than these numbers do (from memory, support for the idea sat stubbornly in the low 30s for most of the time until the 1998 election).

It remains to be seen what kind of fist Treasurer Scott Morrison might make of any attempt to sell a GST reform package; changes to taxation arrangements (and the looming budget) will, in the absence of a March or April election, represent his first major tests in his new portfolio.

And it remains to be seen whether the defective communications apparatus that so badly cruelled the Abbott government’s ability to sell anything has been swept away or not (and either way, my door is open where selling GST changes is concerned — I’m very happy to make myself available for that task).

But there are two very big advantages the Turnbull government has in hand from the outset where selling GST change (and corresponding cuts to PAYE and company tax, and compensation for low-income earners and welfare recipients) is concerned.

One is the hard fact that when the GST was introduced in the first place, the sky didn’t fall in; most voters quickly realised they hadn’t been duped or lied to, and notwithstanding the fact that some states reneged on commitments to abolish “nuisance” indirect taxes — nothing to do with the Howard government at all — the vast bulk of precisely what was promised was delivered: and the apocalyptic consequences peddled for years by Labor under Kim Beazley never materialised.

It’s a precedent the Coalition can own, sell, and turn on Shorten like a blowtorch if correctly handled.

And two, only the most rusted-on Labor supporters (and Greens, of course) deny that there is anything other than a massive structural chasm in the federal budget that has to be repaired, and repaired quickly; people are coming to accept — even if grudgingly by some — that either spending has to be cut, or taxes lifted, or a mixture; and with the government already being quite explicit about the fact it does not seek to increase the overall tax burden, it is obvious that budget repair will be achieved (or at least, attempted) through spending cuts: and this means nightmare scenarios of the GST impoverishing people and seeing them thrown onto the street are simply vicious lies.

Just like they were in 1998.

Of course, it remains to be seen what shape the government’s tax package takes, and I suspect it will be a couple of months before this is known irrespective of when an election might be held.

But broadly, and with some knowledge of all of the options being examined, the bottom line is that for almost all voters, a higher and/or broader GST will result in no overall change to their personal circumstances at all.

The two groups of people who will experience change are the very richest people who spend the most — the group Labor has spent years in a mouth-foaming fury of hatred pursuing — who will pay more tax the more they spend; and the poorest people (be they on welfare or just not earning much) who will end up a bit better off once the compensation measures and pension increases filter through.

The challenge Turnbull and his team face is to communicate those basic realities simply, clearly and persuasively, and even with this poll showing 54% of respondents opposed to any change, we already know — from 1998 — that such opposition (or worse) is no bar to winning an election.

Especially against arguably the least suitable candidate to pitch for the Prime Ministership since the 1950s, and against a party whose most recent time in office was marked by sheer fiscal incompetence and an inability to respond to changing economic realities that occurred on its watch, preferring instead to boobytrap the federal budget to cause its conservative successors an exacerbated version of the problems it refused to tackle itself.

One thing I know is that wandering around supermarkets with slogans like “lettuce be free of GST” and claiming that lettuce that is tax-free is delicious, whereas lettuce that is taxed is inedible, is probably not the smartest way of doing things if you aspire to be the Prime Minister of Australia.

Personally, I think the only distinction between Shorten’s lettuce “jokes” and the awful “things that batter” gaffe committed by Alexander Downer in 1994 is the lack of any allusion to domestic violence on Shorten’s part. His performance over summer was that bad. And whilst poor Alex paid for his unfortunate slip with his chance to be Prime Minister himself, Shorten doesn’t have any excuse for offering such vapid arguments, or for interfering with people when they want to get on with their holidays.

In truth, most people would prefer to be mugged with a wet lettuce leaf than see Shorten “leading” the country, and today’s Newspoll contains very little indeed to encourage the ALP that those sentiments will change at any time soon — if at all.

 

 

Newspoll: The Bell Is Tolling For Bill Shorten

WHILST SUPPORT for Malcolm Turnbull has settled in the latest Newspoll, Coalition support has risen again; cleared of criminal wrongdoing at the Royal Commission into the unions and with debate over GST increases in full swing, Shorten Labor has fallen further behind nine months from a scheduled election. Electoral sentiment on Shorten now seems final. An election to lock him into position would be an astute move by Turnbull.

Whether you support Malcolm Turnbull or not — and whether you believe his Prime Ministership will be a success or a sellout to soft liberal policies that sit counter to the majority of the Liberal Party base, which is more conservative than liberal, or not — the inescapable fact is that the Liberal leadership change seems to have not just had its intended effect in retrieving the government’s standing in opinion polls, but that effect is starting to appear more durable than many, including among Turnbull’s most enthusiastic backers, believed or dared or hoped.

The latest Newspoll, in today’s issue of The Australian, continues the stunning recovery of support for the Coalition that has taken place since Turnbull replaced Tony Abbott as Prime Minister eight weeks ago, and whilst personal support for Turnbull appears to have plateaued (at levels nonetheless unseen for a leader or Prime Minister since the early days of Kevin Rudd’s initial stint as PM), the government continues to pull further ahead.

What appeared as a certain Coalition defeat under Abbott seems to have been recalibrated to indicate a certain Coalition victory, and this column believes an election — announced today for 12 December, or within the next week to utilise the final practicable election date this year of 19 December — should be called to capitalise on the hapless, hopeless Shorten’s complete lack of appeal to voters and to lock in the government’s new-found ascendancy over the Labor Party.

But first things first: since its previous survey a fortnight ago, Newspoll finds primary vote support for the Coalition rising one point, to an almost ridiculous 46%; it finds support for the ALP and the Communist Party Greens each declining by the same degree, to 34% and 10% respectively; and support for “Others” up one point to 10%.

On a two-party basis after preferences (based, importantly, on flows at the 2013 election), this equates to a one-point increase to 53% to lead the ALP , with 47%, by six points.

The reason I think preference distinctions between the 2013 result and these figures (if replicated at an election) are important is that the Coalition primary vote, based on this survey, is obviously more solid than the 45.6% recorded under Abbott at the polls two years ago; moreover, there is no discernible major threat to the Liberals and Nationals on their right flank — for now at least — with anecdotal evidence across all polling suggesting that “Others” contains a Palmer component of a solitary point at most, and the Katter Party probably lucky to account for even that.

And the reason I raise it is because despite bluster about electing the government on his party’s preferences, Clive Palmer’s presence in 2013 actually retarded the Coalition performance; a careful analysis shows his claim to be completely baseless, and whilst wiser heads on psephological questions than I would give a more decisive opinion (like Kevin Bonham or the ABC’s election guru, Antony Green), my best estimate of the overall flow of Palmer’s preferences in 2013 was a 60-40 split in Labor’s favour: hardly the handiwork of a jocular, avuncular conservative fellow traveller trying to carve out a niche of his own in friendly competition to the established conservative parties.

Palmer, of course, was anything but, and the effects of this subtle augmentation of the ALP result obviously dissipate further and further the lower his vote goes. And in my view, the spawn of ridiculous minor parties that has followed the Palmer Party’s implosion — the Jacqui Lambie Network and the even sillier Glenn Lazarus party — won’t matter a tin of beans when the votes are eventually counted.

In terms of personal approval, Turnbull has slipped by two points in Newspoll to 56%, with disapproval rising one point to 24%; Shorten, by contrast, sees the record low personal approval score recorded last time rise by a solitary point to 27%, with those dissatisfied with his performance declining by the same increment to 57%. The ratings for Shorten are within the range of some of the worst figures ever recorded by his arch-nemesis and supposedly most unpopular major party leader of all time, Tony Abbott, and no varnish can be applied to the fact they remain nothing short of abominable.

On the “preferred Prime Minister” measure, Turnbull (61%, -2%) continues to head Shorten (18%, +1%) by a wide margin of well over three to one.

Whichever way you cut this, the findings for Labor and for Shorten are nothing short of dire, and continue the trend that has seen the Coalition slowly but ceaselessly draw level with the ALP since the leadership change, and then pull further and further in front.

What spells mortal danger for Shorten’s prospects as a “leader” (and, of course, for Labor’s at an election) is the fact that having quickly accrued significant political capital in all major opinion polls, Turnbull has begun to spend some of it: the prospect of GST rises as part of a wider package of reforms has been ruthlessly seized upon by the ALP and its stooges, and used as the basis of a thoroughly dishonest campaign that insists the GST will simply rise and makes no mention of the tax cuts or increases to welfare benefits and pensions that would accompany it, and insulate the poorest Australians from its impact.

That campaign has singularly failed to bite, and the Coalition vote now sits above its winning 2013 level on primaries, and near it on a two-party basis that might even understate the result if the Newspoll figures reflected the result of any election.

Not insignificantly, the fieldwork for this poll took place after Shorten had been cleared of criminal misconduct by the Royal Commission into the unions: and even if one accepts Shorten was somehow deprived his stipend of good press from this development by the release of the news at 8pm last Friday, the ensuing ruckus kicked up by him and those around him well and truly ensured everyone was aware of it by no later than Saturday.

If GST scares (against a backdrop of actual consideration of GST changes) and Shorten getting off the hook at TURC can’t retrieve his standing it is impossible to envisage anything credible that might do so.

It does rather look as if people couldn’t care less whether Shorten is charged or not, and a sentiment I have heard freely expressed in the past few days is that even if he didn’t break any laws, Shorten remains a very iffy figure in people’s minds. They don’t like him. Critically, they don’t trust him an inch. Shorten is to Labor what Tony Abbott, under the stewardship of advisors completely out of their depth, had become to the Coalition — an utter turn-off and a clear vote-loser. These judgements appear to be final.

These judgements are also consolidated and validated by every other reputable opinion poll; the polls have moved almost uniformly over the past eight weeks, and the scale of those movements has been virtually identical across all of them.

A single poll mightn’t be worth much as a meaningful predictor of likely electoral behaviour, but a basket of them is: and this Newspoll comes in bang on the average of the lot of them, which is a 7% swing to the Liberal Party in just eight weeks. The consistency and scope of the rejection of Shorten Labor and concurrent embrace of Turnbull is simply too overwhelming to ignore.

With concrete evidence of leadership machinations at the ALP taking place away from the glare of public scrutiny, there is really only one course of action to suggest: an immediate election, for both Houses of Parliament, before the end of the year.

Turnbull might not as yet have a reform blueprint finished to place before the electorate, but the debate on tax reform is far enough advanced for some firm parameters to be quickly decided and included in the Coalition’s pitch that leave ample room for the detail work to be finalised after polling day, and a package presented to Parliament with the imprimatur of an electoral mandate.

I don’t think Turnbull has anything to fear from facing Tanya Plibersek or Chris Bowen as leader at this time; Albanese might put up more of a fight, and I understand he is the primary prospective replacement for Shorten following Plibersek’s stupid and illiberal edict that ALP MPs should be forced to vote to legislate gay marriage. And beyond those three, Labor has nobody worth talking about as a potential leadership candidate at this time.

But as insulated from the risk of a Labor leadership switch as Turnbull might appear, why risk encountering it? Why not seek a mandate for a further three years when nine months is all that is left on the clock now? The argument that Turnbull is a new leader at the head of a new government is a compelling one. And as we have discussed many times, unlike Julia Gillard he is well known around the country, and has been for decades. Voters would already know the man they would be asked to endorse at the polling booth.

A double dissolution now — with a Coalition primary vote edging toward 50% — would also offer an opportunity to increase numbers in the Senate (even if still falling short of controlling it) that will evaporate if and as support for the government ebbs, as it inevitably will. Better to go now, with close to half the country ready to provide a first preference vote, than to wait for some months and potentially face a shitfight just to be re-elected.

Yet whether an election is announced in the next seven days to lock Shorten into his post and capitalise on the excellent Coalition position or not, the message from this — and every other — poll is very, very clear.

And that, simply, is that voters have written Bill Shorten off; his standing this year has collapsed, and has now consolidated at disastrous levels. This poll finds just 18% of respondents see him as the preferable candidate for the Prime Ministership. Ominously for Shorten and for Labor, there is every chance that figure could decline even further.

The bell is tolling for Bill Shorten; at the very minimum his colleagues are readying to put him out of his misery; and whether they do it this week or not, Turnbull could act decisively to finish him off once and for all by calling an election: and virtually guaranteeing re-election in a landslide in so doing.

 

Neanderthal Shorten Readies To Scuttle Reform Debate

ECONOMIC NEANDERTHAL and vapid opportunist Bill Shorten has taken predictable aim at musings over tax reform — centred on the GST — emanating from the Turnbull government and some states, including those run by the ALP; unable to advance credible alternative policy ideas and wedded to mythical fixes that are neither workable nor capable of fixing the country’s finances, the best thing ordinary Australians can do is to ignore him.

Federal Parliament resumes this week, with momentum and community debate growing around Prime Minister Malcolm Turnbull’s call for a thorough consideration of a sweeping reform of taxation arrangements; the discussion of tax reform is something this column has resolutely and relentlessly championed since its commencement in early 2011, and whilst any outcome is likely some months away and even then subject to the verdict of the electorate at the ballot box, the fact Turnbull is prepared to countenance the subject at all contrasts sharply with his predecessor, for whom meaningful talk of tax reform or industrial relations reform dissipated at the first sign of opposition from the ALP.

Speaking of that, the week also sees opposition “leader” Bill Shorten return to Canberra facing uncertainty over his tenure in that post; as we revealed two weeks ago, there are moves afoot to enact change at the top of the ALP, and cleared of criminal wrongdoing at the Royal Commission into the unions as he may have been, decent, ordinary folk will have trouble accepting that whilst it won’t lead to him being prosecuted, what went on at the AWU on Shorten’s watch was anything less than unethical, amoral, deeply unprincipled, and plain wrong.

For as long as he remains visible in politics, the poor standing of Shorten (and Labor) is unlikely to recover.

But for now at least, he remains “leader” of the Labor Party; and with that in mind, Shorten’s flat Earth, Neanderthal-like approach to just about anything at odds with the “modern” Labor tradition of killing incentive, punishing “the rich” and pandering to vested interests and gnomes on the Senate crossbench and at the Communist Party Greens has been presented with a very big target in the form of Turnbull’s preparedness to evaluate big reforms.

It comes as signs people have had enough of petty, small-minded politics are everywhere, writ large in all of the major opinion polls: deprived of key electoral asset Tony Abbott (and more particularly, the flat-footed and inept cabal that surrounded him), Shorten has been exposed as a little man with no ideas of substance — beyond pandering to class prejudices, and to lunatics like the Greens — but for as long as he remains in his present post, he will do everything in his power to ensure the reforms so desperately needed to free up the Australian economy are torpedoed.

If readers wonder why I unilaterally declare Shorten unfit to be Prime Minister, this is a very big hint.

As The Australian editorialised on Friday, Shorten’s self-proclaimed “year of ideas” is all but over; having spent the two years since his ascension as “leader” doing everything he can to ensure Labor, in effect, maintains the vandalism it wrought on the federal budget in the belief an election win lies therein — declarations of increases in national debt on the Liberals’ watch, whilst voting against every proposed savings measure in the Senate, are proof of this — the only “ideas” Shorten has advanced are a reintroduction of not one carbon tax, but two; a ridiculous 50% renewable energy target that would, if implemented, price essentials like fuel and electricity beyond the reach of most households; the abolition of the private health insurance rebate, a measure whose end destination would be the overrun and collapse of public healthcare; and vaguely articulated, mean-spirited initiatives such as a crackdown on superannuation for “the rich” and “ensuring multinationals pay their fair share in tax,” which is a notion that has neither been substantiated in any way whatsoever, nor solved by any government in any comparable country across the world.

In other words, Shorten — a self-confessed liar — is asking people to trust him.

Pigs might fly, too.

But when it comes to others attempting to discuss serious reform (even if Shorten and Labor refuse to) anything involving the GST, like so many of the articles of faith of the political Left, isn’t even a permissible subject to talk about; this, like labour market reform, or nuclear power, or a whole litany of ideas, is something the ALP flatly refuses to permit mention of — and when such an edict is defied, its own contribution is based on half-truths, fatuous and empty populism, and outright lies.

Raising the GST, we are told, is not tax reform. It is lazy. It isn’t innovative. Oh, and it goes without saying, of course, that it isn’t “fair.”

What a lot of garbage.

And perhaps this would be true, were a hike in the GST — in isolation — what was on the table, but it isn’t.

I think it’s exciting that a root-and-branch shake-up of taxation arrangements is in prospect; it appears, to those who bother to acknowledge it, that everything is under consideration — literally, everything — and whilst reducing or abolishing state taxes like payroll tax and stamp duty might seem unlikely outcomes, the fact Turnbull and his acolytes are prepared to discuss them at all should explode the myth that a straight GST increase is simply a revenue grab by stealth.

Any broadening or lifting of the GST will be accompanied by steep cuts in PAYE income tax — a shrinking revenue source that is relied on far too heavily in this country, and which has seen average taxpayers pushed into the second-highest tax bracket: hardly a system embedded with incentives for hard work that encourage success.

Any broadening or lifting of the GST will also be accompanied by compensatory increases in pensions and other adjustments to ensure the less well-off are not disadvantaged: just like the introduction of the original tax in 2000 was, and something nobody on the Left is prepared to concede, let alone admit publicly, lest it destroy the dumb scare campaign being hastily reassembled from more than 20 years ago.

Did the sky fall in when the GST was introduced? Of course it didn’t. And it won’t now, if changes — including a heavier reliance on the consumption tax — are made.

I was reading on the weekend that even measures like cutting or abolishing fuel excise and car registrations were on the table as part of any taxation overhaul; hardly the handiwork of a senseless, one-way tax grab.

But mindless, blanket carping of the Shorten Labor variety ignores the fact that taxes on consumption, provided poorer people are fairly compensated, collect disproportionately more money from richer people than they do from those at the bottom of the ladder.

The more you spend, the more you pay: hardly a regressive concept.

And even if “nightmare” scenarios of a GST on Education were to materialise, who would pay the most? Labor’s hated “rich” people, who send their kids to elite private schools: $125,000 to put a kid through five years of secondary schooling at the kind of establishment so detested by Labor, if subjected to a 15% GST, would reap the government close to $20,000 in tax receipts where none currently exist. A student in a state high school, by contrast, would pay nothing.

But having ordinary wage earners paying 37 cents in every dollar in income tax — which is the end result of so-called “reforms” undertaken by the Gillard government, which were nothing more than a fiddle of the tax scales — scarcely encourages people to work hard and save; on the latter score, faced with real living costs that now see some Australian cities rank among the most expensive places in the world to live, saving money is a concept that is simply beyond some taxpayers and families to even dream about.

That 37% rate, by the way, includes the 2% Medicare levy: as I have argued before, it is a pointless semantic exercise to itemise this impost separately when all it is is income tax. People on the lowest incomes don’t pay it anyway. Part of Turnbull’s reform dialogue should be to get rid of the nonsense of a Medicare levy, and simply incorporate it into the tax scales directly. But I digress.

There are those that argue that putting more money in people’s pockets, only to claw it back in the form of GST receipts, is a smoke and mirrors exercise, and it misses the point: allowing people to keep more of what they earn gives them greater choices and control over how they spend it. The more they spend, the more tax they pay. This is not a difficult concept to grasp. Even someone of limited economic literacy like Bill Shorten could grasp it: were he not so hellbent on torpedoing it, that is.

The point is that by unilaterally ruling out a conversation that includes the GST — just like he has tried to do with labour market reform and penalty rates — all Shorten is doing is to prove those dissenters who regard him as a one-trick pony obsessed with power and power alone to be correct.

Governing Australia is not a simple process of buying a few union hacks and Greens off, and clicking your fingers — something the Rudd/Gillard/Rudd government learned to its political cost, and to the country’s enduring detriment.

Hard questions need hard answers, and they are not going to materialise when dogma-driven cretins like Bill Shorten attempt to firewall whole swathes of the total economic picture from consideration.

While we are at it, they are not going to materialise when puerile, immature and factually misleading rubbish like this is indicative of the contribution of left-wing and socialist hacks out in the independent commentariat either: no mention of compensation for the less well-off, quoting figures that by their nature cannot represent the government’s reform proposals (bluntly, they haven’t been finalised, let alone announced) and laced with abuse of anything to the Right of Stalin, the drivel contained in that article is all too representative of the intellectually misleading, fundamentally dishonest diatribe Labor is trying to foist on ordinary voters.

There are some in the ALP — Labor state Premier Jay Weatherill foremost among them — who recognise and accept that without sweeping structural reform of the country’s taxation arrangements, Australia faces a permanent budget deficit whose end destination is the economic ruin typified by the likes of Greece.

These people, like Turnbull and a solid majority of those on the Right, recognise that for any reform to be meaningful, it must assess every aspect of the tax edifice — even if individual items are, in the end, discarded from consideration.

But if Shorten were a leader’s bootlace — which he isn’t — he would be joining the debate, seeking to influence it, and providing better critiques than simply calling things “unfair,” or “lazy,” or summarily dismissing things like GST changes without a valid or credible explanation which to date, he has singularly failed to provide.

Once again, by his utterances on tax reform, Shorten has shown himself to be nothing more than an economic Neanderthal, a vandal, and a wrecker of meaningful change in this country.

If this is the best he can do, then quite frankly, he should simply be ignored: especially in a climate where his own party is readying to do exactly that.

GST Reform? Absolutely. But Abolish The Medicare Levy, Too

THE APPARENT PUSH by the Turnbull government to consider and hopefully attempt serious structural taxation reform is long overdue, and to be welcomed; the ostensible inclination to tackle what former Prime Minister Tony Abbott and his Treasurer, Joe Hockey, refused to tackle deserves praise. But in making the case for tax reform, the Medicare levy should be abolished: call it what it is — an income tax measure — and make it so.

I am on the run today — on the run, in fact, to Melbourne Airport to catch a plane for hopefully the last time this year — but I wanted to briefly touch upon the emerging push within the federal government to consider, design and seek electoral endorsement for wide-ranging tax reform, including broadening the GST base and lifting the rate at which it is charged.

First things first: for some additional coverage from the mainstream press, readers may peruse these articles from The Australian here and here; I think these adequately set out the options under consideration and the reasoning behind them, and I caution those philosophically disinclined to support GST change that none of these proposals is set in stone: the process is at its earliest stage, although with an election rumoured within the next few months that process is unlikely to drag on very far.

And in my own case, my views on GST reform and its absolute necessity as a tool to place national finances on a sounder footing as the PAYE income tax base shrinks are well known to readers; anyone wanting to reacquaint themselves with those, or newcomers to the discussion wanting to see where I stand and why, can access a selection of articles through the GST tag in the cloud to the right of this article.

Today, with time scant, I am not going to revisit those arguments: we will come to those in due course as, inevitable as it appears, the government’s push to reform taxation arrangements takes clearer shape.

But there is one long-overdue reform I think needs to be made and included in any tax reform package, and it is the abolition of the Medicare levy and its incorporation instead in marginal income tax rate.

One of the objectives of any program of tax reform is to make things simpler, and having add-ons that sit outside the structure of direct tax arrangements hardly satisfies that criteria.

We all know how the Medicare levy came into existence: originally set at 1% of taxable income in return for the Commonwealth meeting the cost (supposedly) of 85% of people’s medical expenses, this little tax supplement has grown, been used and abused, and in any case doesn’t even raise enough money to cover the cost of the state’s component of healthcare funding.

It has been used over the years as a mechanism to cover everything but medical costs: from natural disaster relief programs to recouping staff entitlements at failed airline Ansett, the Medicare levy has been raised, lowered, plundered, and abused by governments of both political shades as a way to lift taxes without the direct admission that that is what they have done with it.

It currently stands at 2%, supposedly to cover costs associated with the national Disability insurance Scheme: and designed by the former Labor government and projected by Labor’s own people to cost $22 billion annually when fully operational, the small lift in the Medicare levy falls a country mile short of such a ridiculous objective.

I don’t plan to get into a discussion of the NDIS today, or the damage it will do to the already-creaking federal budget — irrespective of the worthiness of the cause — when up and running.

But it seems to me that having a separate Medicare levy (which isn’t even charged for low-income earners) is ridiculous.

If the 45% top tax rate is to be cut to 40%, as some proposals suggest, then cut it to 42% instead and do away with the Medicare levy altogether.

The same adjustment to changes to tax scales should be made down the line on all tax brackets required to pay the levy.

It may sound like a small matter, but the levy doesn’t cover the outgoings it was intended to — and never did — and since the Commonwealth funds healthcare out of taxation revenue anyway, this little earner should be incorporated into the direct tax take rather than being held out as a separate item: which, in reality, it really isn’t.

In some ways, the notion of a Medicare levy itself is the ultimate piece of political spin: when is a tax not a tax? When it pays for GP visits and hospitals, of course!

But whichever way you cut it, the federal government is going to spend the money on health irrespective of what it is called, and as those monies will be drawn from the overall revenue pool it makes no sense (other than some puerile exercise in making people feel good about paying more tax in the name of “universal” healthcare) to separate it out.

It’s just a thought. It remains to be seen whether such simple common sense occurs to the present powers-that-be in Canberra. It would be interesting to know what readers think.

 

I will be back later in the week, and will post again after my return to Melbourne.

Medicare Levy Proposal Exposes ALP Policy Cluelessness

CALLS BY two Labor Premiers to raise the Medicare levy to 4% as an “alternative” to GST reform — including lifting the GST rate and broadening its base — are short-sighted, inadequate, stink of a piecemeal Band-Aid fix, and betray a distinct lack of understanding where tax and health policy are concerned. This vacuous idea smacks of political trickery, and shames any credibility the ALP may once have had where economic reform is concerned.

This is the reform proposal (for want of a more fitting term) I held over in the hope of getting to it during the weekend just gone — thank you, Bronwyn Bishop — and even today I am on the run, so doing it justice is a bit of an ask.

Even so, it seems this idea isn’t going to go away, with Sydney’s Daily Telegraph carrying a story today showing modelling on the effects of doubling the GST to 4%, in response to a characteristically vacuous, ill-considered, half-baked idea by Labor Premiers Annastacia Palaszczuk and Daniel Andrews to double the Medicare levy and dedicate the entire proceeds to health funding for the states.

This dreadful idea — if ever implemented — will solve few if any problems, and leave a raft of other, arguably far more important issues, unaddressed.

Quite aside from anything else, all this is is a tax hike, and whilst the idea of more money for hospitals is an electoral hot button that makes certain groups of people feel good about themselves, more is not necessarily better, and not least when no attempt to realise efficiencies and optimise service delivery from existing Health funding pools is proposed to accompany it.

Labor governments (and the Labor Party generally) are obsessed with Health and Education, in that order, and along with throwing increased sums of welfare money around and smoothing the path for as much union power as possible, ostensibly care for little else.

Competing with them on Health is a dangerous pastime for conservative governments, yet that seems to be exactly what the Liberal Party’s wunderkind of the moment, NSW Premier Mike Baird, seems bent on doing with his equally silly proposal to simply lift the GST to 15% — with no offsetting income tax or other accompanying structural tax reforms — and earmark that money, too, exclusively for Health spending.

Certainly, Baird deserves credit for putting GST reform on the table, just as the likes of Palaszczuk, Andrews, and the contemptible specimen “leading” the federal ALP deserve censure for their refusal to even countenance it.

And the fact that Abbott government sources for the Tele‘s article are said to refuse to rule it out is, frankly, bloody scary — if unsurprising given the government’s record in office thus far.

But slugging people more under the guise of hiking the Medicare levy is a silly idea.

As the Tele shows, average families would be hit by between $2,000 and $4,000 per year; for many of the 50% of Australian households already paying a similar amount out in private health insurance premiums annually, this would be one slug too many — and the resulting mass exodus from health funds, and the huge additional strain imposed on the public system, would see it struggle to cope: even with all the new money the tax hike might reap.

Coming from Labor Party figures (and having regard to their party’s obsession with Health to the exclusion of many other critical areas of governance), the proposed doubling of the Medicare levy stinks of an ideological dogma and smacks of the kind of illiberal imposition of the will of the political Left that is sweeping left-of-centre politics across the world, and carrying many on the centre-right — unwilling or unable to compete in a battle of ideas — with it, as appeasement and lack of will are substituted for rigorous policy debate and the presentation of better ideas.

It’s a criticism consistent with much of what I have had to say about the Abbott government over the past two years, with its big-spending, high taxing, moribund “solutions” to the budgetary and economic management problems bequeathed by Labor that too often see it target its own constituency of support in its own marginal seats.

But having said that — even looking to Labor’s own pet policy fancies — a Medicare slug won’t fix much — if anything.

Already lifted from 1.6% to 2% in a deal between former Prime Minister Julia Gillard and the Coalition to “fund” the National Disability Insurance Scheme — which the Liberals were crazy mad to enter into, with the cost of the scheme when fully operational of well over $20bn annually remaining almost completely unfunded — a further hike will do little to balance out hospital funding requirements: partly as any new money would quickly be soaked up by the demands of an ageing population, partly through the waste and mismanagement that always accompanies Labor governments, and partly through the vicious swathe it will cut through the private health insurance industry.

It will do nothing to boost Education funding.

It will add nothing to the pot of welfare money so lovingly doled out by Labor to buy votes with new “initiatives” designed to enslave greater numbers of people on new or expanded “benefits.”

As for the unions, I couldn’t care less, although it’s a fair bet that were this “reform” ever introduced, the unions covering the health sector would find some way to get their paws into the till as well.

But Australia faces other problems that simply jacking up the Medicare levy won’t solve, although jackasses like Andrews and Palaszczuk — in office mostly due to smarm, union muscle, and vapid policies designed to cause little electoral angst rather than to actually fix anything — aren’t concerned with that.

It will do nothing to begin to pay down the $350bn debt pile that is the only tangible legacy of federal Labor in office.

It will do nothing to redress the gaping $40bn hole in the federal budget, engineered by a Labor Treasurer in Wayne Swan, which is now being used to try to destroy the present conservative government by using Senate muscle to refuse to allow it to fix it: and if Labor returns to office, not only will this problem not be solved, but it will simply be accelerated as the nation slips deeper and deeper into debt to the rest of the world.

It will do nothing to fix the tax base, making it more sustainable as people age and PAYE tax shrinks.

It will do nothing to incentivise business to hire people.

It will do nothing to incentivise people to work harder to get ahead or, indeed, to work hard at all.

There are plenty of other problems aside from just these as well.

But perhaps the most galling aspect of this cretinous tax “reform” plan is that if the Medicare levy is simply hiked to 4%, then at some point more and more tax rises are going to be needed to fix the things that the Andrews/Palaszczuk “plan” will not fix, and apparently disregards completely: and with tax collections in this country (once Medicare and superannuation costs are included) already running at 33.7% of GDP — bang on the OECD average — Australia is not a “low tax country.”

This proposal would simply heavy the burden on already stressed middle Australia, with very little indeed to show for it.

We will come back to this issue in greater detail in the weeks and months ahead, for as I said at the outset, it appears it won’t go away in a hurry.

But as I outlined in that article dealing with Baird’s half-a-GST reform proposal, the only way to reform taxes in Australia is a wholistic approach to tax reform — and that means making the GST, expanded and with an increased rate, the centrepiece of an overall solution that also cuts GST, introduces more compensation for low-income earners and the welfare poor, and abolishes some of the inefficient taxes still remaining on state statute books that are disincentives to business and employment.

In conclusion, this is just another mad, bad and dangerous idea from Labor types that hasn’t been properly thought through, and will cause untold economic damage if it’s introduced.

But then again, Labor — with the exception of Hawke and Keating — has never been averse to causing economic damage. It’s a point voters who might be impressed by this stupid thought bubble will ignore to their detriment — and ultimately, to their (and Australia’s) long-term cost.

 

 

GST: Labor Should Grow Up And Join Reform Debate

THE SURPRISE of the GST on the reform agenda, partly due to an idea of NSW Premier Mike Baird that admittedly falls short, is encouraging: with rising public spending and an income tax base set to shrink for decades as the population ages, a rebuilt GST is key in fixing structural revenue issues. Labor must abandon its obstruction and empty rhetoric about “cruelty” and “fairness,” grow up, and help find the best outcome in the national interest.

First things first: until or unless his willingness to engage in meaningful discussion turns out to be a stunt or worse still, a subterranean strategy to scuttle meaningful change, South Australian Labor Premier Jay Weatherill deserves acknowledgement for apparently breaking ranks with the other Labor Premiers in being prepared to countenance changes to the GST; the push from some state Premiers to overhaul and bolster the GST may come to naught in the end, but it is refreshing — and surprising — to see a prominent identity from the “modern” ALP perhaps being prepared to actually set partisan politics aside in the interests of constructive policy rather than merely spruik an objective to do so as a way to harvest votes without ever delivering on it.

In fact, the fact a seemingly serious push for GST reform has emerged at all is surprising, for the combination of flat denials of willingness from almost every section of the ALP to even consider overhauling the tax and the reluctance of some Liberals to be the ones to raise the prospect of reform has to date killed any chance to even have a serious discussion around doing so.

The unprincipled charlatan that is ALP of the 21st century has seen to it that an increasing number of policy areas in urgent need of reform — taxation, welfare, labour market regulation and structural electoral reform, to name a few — are politically untouchable, and the GST fits within that subset; so concerned with winning elections at any cost is the Labor Party that it would rather see serious damage inflicted on this country than to permit its growing list of “sacred cows” to even be discussed, let alone reformed in any way.

But as ever, the ALP cares about power, not people.

The unlikely inclusion of the GST on the agenda for state Premiers to consider has come, in part, from an idea proposed by NSW’s Mike Baird that — to be blunt — fails to cut much ice when examined in even cursory detail, but Baird nonetheless deserves credit for getting the matter onto the table at all.

His idea for a straight lift in the GST rate from 10% to 15% without broadening the base (currently just 48% of all goods and services), with half the proceeds going to tax relief for low-income earners and welfare recipients to offset the impact and the remainder being carved up between the states, is at least a start.

But it fails to address the fact that the unhealthy reliance on PAYE tax is unsustainable, with an ageing population that sees that revenue base shrinking, which it will continue to do for decades; and as well intentioned as the Baird proposal undoubtedly is, it apparently places no emphasis on the need to match taxation reform with a program for winding back profligate, wasteful, recurrent government expenditure by past Labor governments — state and federal — that might have been well enough intentioned, but mostly is and was unaffordable.

It’s an unpleasant reality few in the ALP care to publicly admit, but every dollar of electoral bribery spent by a government is paid by a taxpayer — whether in business or a wage or salary earner — and for all the aversion to”cruelty” and infatuation with “fairness” Labor professes, there is little evidence it gives a stuff about the people who actually generate the tax dollars it so lovingly, and carelessly, doles out.

To say this largesse is out of control is an understatement; the line propounded by Liberal politicians (as well as a number of Treasury bureaucrats and economists) that the country has a spending problem rather than a revenue problem is true, and I saw at the weekend an article (a link to which I forgot to save — sorry!) that whilst headline revenues account for 27.3% of GDP, once the Medicare levy, superannuation contribution costs and other ancillary imposts are taken into account, the actual tax take is 33.2% of GDP — and bang on the OECD average, neatly exposing the myth that taxation in Australia is low by international standards.

Yet unless a switch in the focus of taxation is made from taxes on income to taxes on expenditure, that spending problem — if unaddressed, as Labor has gone to inordinate lengths to ensure it is — will soon enough be matched by a revenue problem as well, and it is only an irresponsible politician who can suggest there is no need to cut recurrent outlays or to take steps now to urgently fix the tax base.

I don’t propose to talk about cutting spending today, and in fact, this morning’s article is really only a curtain raiser to an enterprise in GST reform that I’m sure we will be talking about a lot more over coming weeks and months.

Aside from Baird putting the issue on the table — and Weatherill saying he is open to raising the GST and prepared to engage in rational and constructive conversation — Tasmanian Premier Peter Gutwein has said that whilst his state is disinclined to support changing the GST rate, he is prepared to listen to the arguments for change and reserve his government’s position on any reform proposals, whilst Western Australian Premier Colin Barnett (also nominally opposed to raising the GST rate) wants to examine the prospect of broadening the tax’s scope to apply to a far wider range of goods and services, including fresh food, the impact such changes would have, and the need for compensation for low-income earners and those on welfare and pensions.

I emphasise that any change to raise and/or broaden the GST comes with an obligation to do just that: it is the better-off who will contribute the bulk of the extra consumption tax dollars through higher spending, and those at the lower end of the social ecosystem would need to be compensated — just as they were when the tax was first introduced 15 years ago.

But broadly, there is considerable willingness among heads of government to contemplate tax reform. It is to be hoped some kind of consensus emerges.

Personally, I would like to see the GST doubled to 20% — in line with similar taxes in most comparable countries — with the income tax threshold lifted to, say, $25,000 per annum, marginal tax rates above that level flattened and reduced, and the GST base expanded to cover everything except healthcare, residential rents, education expenses and some financial transactions, with other government imposts like stamp duty and fuel excise abolished.

After increasing pensions and benefits to ensure welfare recipients are unaffected, some of the extra revenue could be ploughed into the states, with the remainder used to help fill the black hole left in the commonwealth budget by the Rudd-Gillard government that has been further exacerbated by the slowdown in Australia’s mining sector.

As a GST is a growth tax, these changes would set the country on a far more sustainable financial footing.

But as ever, the recalcitrant economic flat-earth types at the ALP refuse to have a bar of it.

So-called federal “leader” Bill Shorten refuses to discuss the GST at all, whilst he and others in the party claim their “policies” of cracking down on tax “evasion” by multinationals (read: punishing tax imposts on non-union businesses) and superannuation “reform” (read: punishing those who fund their own retirement without recourse to government benefits) would do the job instead.

But hitting big, offshore-based businesses is more of a pie chart concept than a practical, quantifiable, workable measure that could well do more harm than good if the usual hamfisted Labor way were to drive these companies — and Australian jobs — offshore.

And whilst Labor is obsessed with and racked by class envy and greed where self-funded retirees are concerned, I make the point that whilst Labor complains they don’t pay enough tax (not that there is an amount it would ever be satisfied with) but that these people save the government many billions of dollars annually by not claiming pensions.

You can’t have it both ways.

And as for Victorian Premier Daniel Andrews’ characteristically dumb-arsed call to lift the Medicare levy, all I will say is that this is an income tax rise that would have to be so large to make a meaningful difference to government budgets as to destroy the incentive to work. But Andrews — like so many of his Labor counterparts — is more interested in catchy sound bites than he is in serious, workable policy ideas.

It’s about time the GST occupied centre stage in any serious discussion about revenue and spending in this country, for it is the one measure that can be adapted to provide a fix to what, if left unaddressed, will become a permanent sea of red ink on state and federal budgets — and not all that far into the future.

Australia is not economically unassailable. Its prosperity cannot be taken for granted. Those leaders on both sides who have shown the courage and the stomach to start this debate deserve to be praised.

But as for the rest of the ALP which — as usual — would prefer to sit on the sidelines throwing populist stones in the hope it can be elected with as small a mandate for tough decisions as possible, it should grow up and take its responsibilities as a party to governance in Australia seriously, and stop trying to maintain a policy firewall contrived in its own petty electoral interests rather than focusing on the long-term good of the country.