Yes, Scott Morrison, Cut Taxes – But Slash Spending, Too

THE call by Scott Morrison for Australia to cut company taxes — or risk being uncompetitive globally — has merit, but does not go far enough: proper tax reform would include lifting and broadening the GST, raising the income tax threshold, and cutting income tax rates; an agile government would rein in spending, too. Still, Morrison’s position is at least a start. Perhaps there is an ounce of intestinal fortitude within the government after all.

During 2017, readers are going to hear an awful lot from me about a strategy the Abbott and Turnbull governments should have used before last year’s election, but didn’t — racking up double dissolution triggers one after the other, on every area in which they attempt to legislate reforms but are stymied by the Senate — for the near-death experience of the Coalition at the polls, whilst attributable to a range of factors extending well beyond the nature of any legislation passed on its watch, owed as much to political timidity and a totally erroneous approach to parliamentary management as it did to anything else.

But the case made by Treasurer Scott Morrison in The Australian yesterday — that Australia risks being crippled as an internationally uncompetitive outpost of high taxation — has great merit, and perhaps (I emphasise, perhaps) signals that despite the woeful flaws spanning many aspects of the Turnbull government, some elements within it retain at least a scrap of intestinal fortitude, even if what Morrison is actually arguing fails to reach anywhere near far enough.

Morrison’s argument rests on the recent precedent of the United Kingdom, where the government of former PM David Cameron cut the British corporate tax rate to 20% whilst in a worse budgetary position than that currently facing Australia; Cameron’s government also implemented reductions to personal income taxes and increased VAT — Britain’s equivalent of the GST — from 17.5% to 20%, whilst winding back spending across the board, but with a particular emphasis on the UK’s ballooning welfare budget.

The effects of these changes are undeniable; Britain today is the fastest growing economy in Europe and, for a time, was the fastest growing economy in the Western world, outstripping growth in Australia; the fundamental premise that cutting taxes stimulates economic activity, creating jobs and bringing investment that in turn contributes higher revenues to government coffers than the “foregone” tax revenues cost, is a proven model that has worked many times over the past 40 years — and worked in Britain once before, too, during the early years of the Thatcher government, underpinning rapid economic growth in the late 1980s and sparking an unprecedented boom in the early 1990s that continued until the global financial crisis snuffed it out in 2008.

And Britain isn’t the only place this approach has worked, either; during the period of the ascendancy of the mainstream Right across much of the Western world during the 1980s and early 1990s, this emphasis on creating conditions conducive to economic activity and growth underpinned one of the largest expansions in history; it is the rise of the Left in the early 1990s — in the USA, in Canada, in Britain, with the arrival of the Blair government, and across continental Europe — that saw the rise in taxation by stealth and rampant social spending cut the foundations from beneath prudent fiscal management in the West, and for which the developed world arguably is paying the price today.

The Eurotrash economies of Spain, Italy, Greece et al — strangled by socialism and crippled by debts exceeding, in many cases, 100% of GDP — are the end destination of a ruinous dalliance with “modern” left wing dogma. The United States has just ended an eight year experiment with the same failed policies. Here in Australia, the Rudd and Gillard governments set what for years had been regarded internationally as the “miracle economy” on the same destructive path.

Without a drastic change in direction, the basket cases of Europe embody the fate Australia will, in time, suffer itself.

As The Australian notes, Australia boasted the ninth-lowest corporate tax rate among OECD nations 15 years ago, a position that has deteriorated to 22nd today; it also now ranks among the top five highest taxing nations within the same cohort — an unforgivable indictment on both the Rudd-Gillard regime, which saw business and high income earners as its personal piggy bank, and (I hate to say) the Abbott-Turnbull government, which hiked taxes on middle income earners and which has exhibited neither the inclination nor the mettle to engage in root-and-branch tax reform in any serious or meaningful way.

In this vein, the Morrison agenda of a two-tiered corporate taxation regime, with cuts at the lower end and little else, leaves everything to be desired.

The graphic carried in the article from The Oz is telling.

 

GREED ISN’T GOOD…Australia’s high-tax status will rebound on it in coming years, placing living standards, economic growth — and, ironically, tax revenues — in jeopardy. (Source: The Australian)

In other words, Morrison’s pompously labelled “Enterprise Tax Plan” is a fiddle, no more; yet like all of the fiddles undertaken by this government, it runs the real risk of achieving very little of value whilst cruelling the case for wider reform through its impotence.

Back in 2008 — shortly after Morrison’s arrival in Canberra as the member for Cook — a contemporary asked me for my take on the energetic new Coalition MP’s likely trajectory. “I think he’ll be Prime Minister one day,” I replied. My associate was incredulous. “You rate him that highly?” he asked, disbelievingly.

Readers of this column know that between his role in elevating Malcolm Turnbull to the Prime Ministership and his role as a patsy in the so-called tax reform “debate” presided over by Turnbull a year ago, my opinion of Morrison’s value to the Liberal Party has…slipped, to put it most kindly.

He flourished as Immigration minister in the Abbott government — in a portfolio that would have been a slam-dunk for any modestly competent Liberal MP at that time — but floundered in Social Services, in a stiffer test based on winding back the ridiculous Commonwealth outlay on welfare.

As Treasurer, his record has been unimpressive; his “Enterprise Tax Plan” will achieve little (if ever delivered) at a huge cost of political capital: just like Morrison’s fiddle to superannuation, which has outraged huge slabs of the Coalition’s base (this time the self-funded retirees who took little or nothing by way of government assistance). Morrison and his sidekick, the decidedly unimpressive Kelly O’Dwyer, have also fallen into the trap of implementing Bill Shorten’s “multinational tax” which O’Dwyer herself admits will recoup just $100 million per annum — but at the very real risk, as I have opined previously, of provoking multinational companies to take their operations (and the jobs they create) somewhere else.

This government operates in an environment in which a bare majority in the lower house, a very hostile Senate and the risk some of its number are set to leave to set up a rival “conservative party” are compounded by policy torpor and an utter lack of tactical and strategic smarts.

The tax reform “debate” last year proved, beyond any doubt, that the Turnbull government either has no clue whatsoever about meaningful top-to-bottom tax reform, or a complete lack of any political acumen with which to sell it, or both.

Morrison, as Treasurer, is the standard bearer of the government’s efforts in this arena. His career in the longer term hangs in the balance. He can either take a leadership role on proper taxation reform — breaking as many eggs as is required to make the omelette, and making a few enemies along the way by confronting self-interested vested interests — or he can sink like a stone with his piecemeal patchwork fiddles and the rest of the bullshit Turnbull passes off as a “jobs and growth” agenda.

A program that doubles and broadens the GST, cuts the company tax — for all businesses — to 20%, cuts the top rate of income tax to 35% and reduces the tax scales overall, lifts the tax-free threshold to $25,000 for wage and salary earners and provides a modest boost to pensions, should be accompanied by the abolition of as many other taxes and charges as the increased GST revenues enable (with the states enlisted in that endeavour), whilst identifying as widespread a program for spending cuts as possible: including as much Gillard-era social spending as can practicably be slated for abolition.

Labor will push back — as it always does these days, for populist political reasons — but its predictable rhetoric about tax cuts for millionaires, and fatuous statements that cutting taxes on business will fatten corporate profits but produce no additional employment growth, betray a fundamental lack of comprehension of basic economics, and this fact should be rammed home to the Australian public (provided, of course, the government can fix another of its complete failures during its tenure in office: its communications unit).

The enabling legislation should be presented to the Senate a second time in its original form if rejected, and the government should stand firm in the face of amendments contrived by the ALP, Greens and left-leaning Senate crossbenchers that aim to neuter the package (or even render it counter-productive, as Clive Palmer did with the abolition of the mining tax, turning it into a $3.2bn cost to an Abbott government more desperate for a deal than with delivering rigorous policy outcomes).

In other words, Morrison can use tax reform as the Coalition’s first base for building a proper reform agenda: and if the Senate knocks it back, the enabling bills should be converted into double dissolution triggers. More would follow if the same approach is replicated across government. This is the way Turnbull’s government can simultaneously answer the charge it has no agenda with which to govern, whilst stockpiling a solid base of worthwhile policy with which to fight another election if its efforts are thwarted.

An agile, streamlined, efficient system of low and broad taxes, that rewards and encourages enterprise and personal effort and discourages and penalises indolence, is a reform any conservative government could be proud of: and if Morrison is fair dinkum about tax reform, he should forget his half-baked “Enterprise Tax Plan” and have a serious crack at the whole thing.

The Australian notes Morrison is in London to talk to business leaders; he should take the opportunity to sound out Cameron, his Chancellor George Osborne, Minister for Work and Pensions Iain Duncan-Smith, and others who were central to the Cameron-era program that picked Britain up off her knees and set her back on her feet.

In the final analysis, however, Morrison’s remarks offer the flicker of hope that someone in the Coalition’s senior ranks has belatedly got the message that unless the government does what it was elected to do in 2013 — and embarks on sweeping reform in Australia — it is doomed to lose whenever it next faces the public at the ballot box.

Perhaps there is an ounce of intestinal fortitude within the Turnbull government after all; but if Morrison wants to ever be Prime Minister — or even be regarded as a successful Treasurer, and not just another hack occupying that office — this piece in The Australian must merely represent the start of a renewed effort and change of focus, and not just another of the directionless thought bubbles that have already cruelled the Coalition’s political stocks for far too long.

 

Memo Pinko Socialists: Australia Does Not Need More Tax

A LETTER — from 50 socialist activists — calls on Canberra to collect “more tax, more equitably” to pour more money into Health, Education and Transport whilst maintaining welfare spending. Ostensibly aimed at Coalition plans for a stimulatory company tax cut, the letter does not mention efficiency, is mute on waste inherent in current expenditures, and shows ignorance of cost of living pressures already hurting ordinary Australians.

The problem with socialism, as Margaret Thatcher famously observed, is that sooner or later you run out of other people’s money to spend; here in Australia, this truism — combined with the ingrained notion that the state knows best, and that alleged elites of the Left know best how to direct it — has seen a situation where simply flinging billions of dollars of taxpayer money at a time has become the entrenched norm whenever a problem or spending deficit is identified: whether real, imagined, or invented through political expediency.

I have been a consistent critic of blatantly political government expenditures in this column, with some of that criticism applying to the middle class welfare measures introduced by the Howard government as much as to the electoral enslavement of poorer people through recurrent largesse financed on international money markets by the odious Rudd-Gillard government; the merit, at face value, of some of these measures is not questioned, but the practice of simply borrowing infinitely to fund socialist pedagogy is a blight this country neither needs nor can afford.

And taxing people more, when Australia is not a low tax country as many assert — when the Medicare levy and GST are included in such pronouncements, from which they are usually omitted — but one of the higher-taxing OECD countries, is no solution either.

First things first: The Australian has coverage of this issue that readers may access here, with the actual open letter able to be viewed here.

And just in case anyone was deluded enough to think this stunt was independently motivated…the same newspaper covers opposition “leader” Bill Shorten “warning” about mooted Coalition plans for a company tax cut here.

Heaven forbid the Left should neglect to co-ordinate and synchronise its crap.

I saw a report earlier in the week that noted the program instituted by the Coalition to weed out disability support pension recipients who didn’t qualify was on track to save $680 million per annum; this is one spending program, one bloated, wasteful budget, and one sacred cow of the Left among thousands of others on the statute books.

These are people who — rather than take the government assistance they are entitled to, and do the right thing by not pushing the favour — have simply been found to be overclaiming on welfare or, even worse, claiming payments to which they were not entitled at all.

And the Left — including many of the names on that letter — opposed the crackdown to the hilt.

If you have a look at the names on the letter, none of them are what a reasonable person would describe as being in any way right of centre; most are openly or latently hostile toward the Liberal Party, and none is so insufficiently remunerated as to be in any way adversely impacted by their own calls for big tax hikes.

These are the people who, in the main, are already loaded; that list is heavily comprised of people who have made millions off the back of one form of constituent contribution or another. It’s not that I necessarily begrudge them their wealth — with a few exceptions, I don’t — but to have these people shaking their fingers at the rest of us whilst agitating to get their filthy paws further into our pockets is inappropriate.

These are the kind of people who are utterly resistant to any attempt at getting value for money; the $680 million saved by not paying disability pension recipients who could only be described as rorters is, to them, proof of what nasty arseholes the Liberals are: a rorter and a bludger addicted to welfare rather than trying to help themselves is a rorter and a bludger who will vote for the Left, which is the only group prepared to further the scam when in office.

Any suggestion for these people that perhaps Julia Gillard and Wayne Swan didn’t get it right first time around with the NDIS — and that at least a few billion could be chiselled out of its obscene $24 billion eventual cost without making an iota of difference to service delivery — is jumped all over as evidence of how heartless “non-believers” are, replete with vicious declarations about attacks on the sick and suggestions those who merely wish to ensure good value without jeopardising the scheme in any way are willing disabled people to die.

It’s the same over at Health, where billions of dollars are wasted through duplicate state-federal bureaucracies, and armies of well-remunerated pencil pushers soak up disproportionate amounts of health budgets that could and should be diverted to frontline service delivery if the back office wasn’t filled with unionised personnel hiding from the real world at taxpayers’ expense.

Over at Education — where, like Health, more money is being spent in real terms than ever before — there is a huge problem: despite the largesse, record teacher numbers, record real teacher salaries and record low teacher to student ratios, educational outcomes at Australian schools are falling fast, with ballooning numbers of school leavers unable to read, write or add up properly.

You only have to read the first few articles in any Australian news portal to spot the problem. If, that is, you are literate enough to know the difference between proper English and what some of these sites publish in the first place.

But suggest paying the best teachers more than the also-rans — or even getting rid of the worst of them — is to invite a barrage of militant bullshit from powerful education unions, which arguably have been the greatest beneficiaries of the various Labor governments that have ruled most states for a majority of the past 30-odd years.

You hear how hard teachers work, despite the fact teaching contact hours are now just 20 hours per week to free up time to stop them having to spend much of their own time on the job at all.

You hear how nasty Liberals have “secret agendas” to smash education, destroy public schools, and “divide and conquer” teachers by paying some more: not that the no-hopers in their ranks deserve to be paid at all.

Meanwhile, the best teachers (and there are many) are unable to earn more to reward their competence, and are forced to watch on as the clods in their staff rooms turning out kids who are not adequately equipped for life get paid exactly the same money as they do.

It’s a bit rich for the 50 socialists behind that letter — and I am not going to dignify any of them with  the publicity they clearly seek by naming them, except to say some, like Ged Kearney, are no more than jumped-up noisemakers who should simply be ignored — to assert the current federal government is somehow defective because the budget deficit has increased during its tenure.

After all, it was their friends and henchmen who created the problem in the first place, and their friends and henchmen — in the form of the insidious Shorten and his colleagues — who have led the charge to ensure the present Senate denies the present government virtually all of the savings it has sought to achieve in order to fix the deficit.

And it is perhaps no surprise that the “policies” announced to date by Shorten boil down to just two words.

New taxes.

If these people want more spent on Health, Education, and those who would rip the taxpayer off by claiming more than they are entitled to, they should first be prepared to accept a rigorous, line-by-line review of the record monies already being spent, for nobody (except those with their snouts in the trough) could credibly suggest adequate value is being realised from that expenditure.

There is no such thing as “government money:” there is revenue collected from the payments of wage and salary earners, consumer spending, and businesses. Every dollar spent by a government has been paid for by someone, and the cavalier assumption the pot is endless is obscene.

The idea people can simply be fleeced more to pay for this week’s Utopian fantasies is even worse.

This “open letter” (a tactic that is becoming as overused and clichéd as sealed sections in teenage magazines) purports to be aimed at rumoured Coalition plans — yet to be confirmed — that the company tax rate is set to be cut from 29% to 25% in Treasurer Scott Morrison’s looming pre-election budget.

Of course, anything that might grow non-unionised businesses must be belted out of existence using any and all means available.

Anything that might help create non-unionised jobs must similarly be smashed into pieces using any and all means possible.

And, naturally, anything that allowed non-unionised businesses to give their non-union staff pay rises, without Trades Hall being able to claim bragging rights for them, is an absolute no-no under any and all circumstances.

Whether they care to admit it or not — given everything that is wrong with government funding, the waste and inefficiencies involved, and the fact such expenditure is already running at record levels in real terms — what these people are really advocating is the ability to stack even more cronies and fellow travellers into unaccountable jobs at public expense, away from prying eyes, but whence unions can take aim at any government with the temerity to come looking to upset the apple cart.

Don’t believe it? Then let’s have these people jointly declare for an efficiency drive to free up some of the funds to cover the new measures they want and/or to enact budget redress. After all, it doesn’t take a genius to surmise that the scope to realise efficiencies — without jeopardising services, if not, perhaps the jobs of socialist stooges — runs to the tens of billions of dollars.

Don’t hold your breath.

Until or unless that happens, Australians are taxed quite highly enough as it is: and if 50 pinkos with more money of their own than most normal people will ever have don’t like it, there are plenty of Eurosocialist countries they can move to: where, of course, more of other people’s money has been spent than was ever on hand to begin with, and the ruinous state of those countries is a monument to the end destination people like the 50 pinkos are seeking to push Australia towards.

 

“Federation” Fiasco: Turnbull Now Courting Election Defeat

CHASTENED, humiliated, and looking more spooked than fit to govern, Prime Minister Malcolm Turnbull has led the Coalition to the precipice of electoral defeat; the hurried, half-baked “reform” plan scuttled by state Premiers shows little has been learned from the ills of the Abbott era, and that Turnbull has learned nothing from his disastrous first stint as Liberal leader. This year’s election is his to lose. On current form, it may well be lost.

It comes as no surprise that the latest half-baked, half-arsed “reform” proposal cooked up by Prime Minister Malcolm Turnbull — this time, a plot to cede income taxing powers to the states to enable the Commonwealth to wipe its hands of school and hospital funding, let’s be candid about it — was turned into a smoking ruin yesterday by state Premiers who refused to be hoodwinked by such a blatant exercise in buck-passing.

Yes, Health and Education are state responsibilities and yes, the Commonwealth had been progressively sucked into larger and larger obligations for funding them over a period of decades, as successive federal governments of both political hues have used benevolent largesse to curry favour with voters on a secondary front and to parade their credentials as champions of these critical areas of state expenditure.

Yet whilst the notion of forcing the states to take back and shoulder more of the burden for paying for them is, on the surface, sound, the rock-hard political reality is that doing so — however viable, workable and legitimate the mechanism, if convoluted — invites at best the rank cynical opportunism of a scare campaign that will resonate, and at worst the end consequence of such a noisome enterprise in the form of electoral defeat, as journalist Laurie Oakes observes in Sydney’s Daily Telegraph this morning.

And it is facing this blunt reality that Turnbull’s government now finds itself.

It also finds itself marooned in the worst of all worlds: for not only has an unworkable and politically toxic proposal been aired and scuttled — in less than 48 hours, incredibly — but the Coalition will now find itself carrying the consequences of the least popular elements of the policy, ratched up by an obligatory and predictable ALP scare campaign, but without the policy being enacted at all or its purported benefits being realised.

In this sense, what the government has been up to this week is eerily reminiscent of the handiwork of Tony Abbott and Joe Hockey over the notorious 2014 budget.

I don’t especially wish to be seen to be talking the Coalition’s election prospects down — the fact I never supported Turnbull as Prime Minister notwithstanding — but by the same token, I’m not prepared to buy into the consensus position of the wider commentariat that the government is cruising toward re-election (however narrowly) when I don’t think it is.

I was pilloried for writing Queensland Premier Campbell Newman off two-and-a-bit years out from the 2015 state election and was ultimately vindicated, and whilst I don’t think the federal government’s fate is a foregone conclusion just yet, there is an urgent need for the Liberal Party in particular to get real about the fact that it has done little to warrant a second term in office, and its ongoing antics are sufficient to permit an ALP victory by default unless the government collectively gets a grip on itself, and quickly.

The dysfunctional micromanagement regime operated by Peta Credlin, with Abbott’s explicit imprimatur, may be gone, but it has simply been replaced by a different variety of the same degree of ineptitude.

Aside from the abolition of knighthoods — the repeal of which I don’t entirely agree with — just about the only outcome of any substance that has been delivered on Turnbull’s watch has been the overhaul of the way the Senate is to be elected. Whilst laudable, even that could lose the Coalition votes unless the demented, self-obsessed bleating of the crossbench and the opportunistic negativity of the ALP are summarily slapped down.

But since Turnbull became Prime Minister, voters have witnessed not one, but two, comprehensive ministerial reshuffles; the first was to offload Abbott loyalists after the leadership change (in some cases, quite appropriately) but the second was the almost direct result of Turnbull’s appointment of foreseeable liabilities to key positions around whom avoidable scandals subsequently erupted with almost Karmic predictability.

That process — which is ongoing, with new allegations swirling around Cabinet Secretary Arthur Sinodinis — was an early indication that Turnbull had learned nothing from his disastrous first stint as Liberal leader; more have followed, of course, but the bald indulgence of promoting henchmen and acolytes when he could and should have known better was an indictment on his judgement that validated the concerns of many conservatives who believed Turnbull should never have been restored to the post.

The practice of kite-flying that contributed to the dysfunction of Abbott’s government — running policy ideas up the flagpole, only to yank them back down when the early public reaction (or the confected, hyperventilating rage of the ALP) was unfavourable — is one that has been continued with mindless enthusiasm on Turnbull’s watch; this year we have seen a tax “debate” that has raised and torpedoed all manner of potential reforms, and all but precluded the Coalition from reforming the tax system at all. Other areas, like ballooning welfare costs and labour market flexibility, have either been ignored by a gun-shy government or quietly allowed to be dropped.

And of course, the complete inability to sell anything that so cruelled Abbott also remains alive and well; the markers of this affliction are everywhere, but a prime example is laid bare by Des Houghton in today’s Courier Mail, taking aim at the government’s (thoroughly appropriate) push to reintroduce the Australian Building and Construction Commission, but with the case for doing so either not properly set out before the voting public or, latterly, not bothered with at all.

One month ago, I speculated whether Turnbull could lose this year’s election, and finished with an open conclusion to the question; that article sets out the background to why an election defeat loomed as a possibility even then in much greater detail, and I strongly urge those who missed it at the time to read it now.

As a backdrop to the embarrassment Turnbull has presided over this week, it is both telling and prescient, and with every week that has since passed, it seems, the government itself appears increasingly determined to flirt with its political mortality.

One issue we haven’t touched upon lately is the horrendous state of the federal budget, and the almost criminal amount of government debt — now approaching half a trillion dollars — that has been allowed to accrue on the Commonwealth balance sheet as a direct result of the ineptitude and economic vandalism of the ALP during its last period on the Treasury benches.

Nobody is suggesting the Rudd government was in error by responding to the onset of the Global Financial Crisis with some kind of stimulus package, even if the quantum and targeting of such a package, in the end, left virtually everything to be desired.

But not only was the “temporary” stimulus spending never stopped, but Julia Gillard and her execrable Treasurer — the insidious, self-important Wayne Swan — went to enormous lengths to ensure recurrent spending was ramped up far beyond the capacity of the budget to pay for it without heavy ongoing borrowings, and as we’ve discussed before, the “booby trapping” of the budget to render it unmanageable to an incoming Liberal government was an explicit Labor objective.

The damage, of course, is reflected in that half-trillion dollar debt, and is accompanied by collateral consequences: the capacity of the Commonwealth to respond to any new global economic emergency and/or a domestic recession is now severely compromised as a direct result of Swan’s and Gillard’s handiwork.

All of this has been vastly exacerbated by the behaviour of Labor under Bill Shorten, with help from the Communist Party Greens and the odious Palmer United Party, which have either refused to pass any legislation that cuts outlays, whilst clamouring to pass anything that increases them (Labor, Greens) or passed Abbott-era measures like the abolition of the mining tax, but with conditions attached that left billions of dollars in spending measures in place (Palmer).

And all of this is relevant because the two strongest electoral cards in the Coalition’s hand — rampant misconduct and illegal activity by a lawless union movement, and the precarious federal budget now balanced on the edge of a cliff — just happen to be two of the issues this government, under both Abbott and Turnbull, has proven least capable of gleaning any advantage whatsoever from.

It comes back to one of my most consistent criticisms of this Coalition government: it couldn’t organise the purchase of sex in a brothel.

Its management — if you could even call it that — of the Senate has been woeful; its political tactics and strategy have been of the worst possible kind, and fashioned it often seems only to aid the opposition; its ability to communicate its intentions and programs clearly, simply and forcefully to voters is not easily recognisable; and its ability to actually sell anything is non-existent.

Regular readers know that despite being flatly opposed to Turnbull’s return as Liberal Party leader and thus Prime Minister, I was nevertheless prepared to give him a go; far from the “wait and see” approach this has taken that for too long was more “wait” than see,” this week Turnbull belatedly showed his hand. As a spectacle, it was a train wreck: unedifying, humiliating, and amateurish, Turnbull’s so-called “big idea” made the government look more like a bunch of panicked novices than an outfit seriously suited to the governance of this country.

That should in no way be interpreted as any kind of endorsement of “Billy Bullshit” or of the ALP he thinks he will “lead” into office later this year: and I will come back to him shortly.

But my calls for Turnbull to go to an election late last year, urgently, weren’t some pie-in-the-sky delusion; I fully expected that after the stellar opinion poll spike — and fully expecting Turnbull’s defective political judgement to reappear in spades at some point, probably sooner rather than later — that the government’s fortunes would quickly nose-dive. In this sense, what we are seeing now is no more than anyone should have expected back in September, when Turnbull and 53 other idiot Liberal MPs knifed Abbott.

That is not to say Abbott would have won an election — I think he was doomed, and said so at the time — but the Coalition is now looking down the barrel of being doomed anyway unless someone or something can break the government out of the indulgent funk into which it has slumped.

Australia cannot afford a Labor government; the ALP, if elected, will do nothing to fix the budget mess it, itself created — irrespective of anything it says to the contrary — but it will ramp up more spending, with increased taxes, and do enormous damage to both the national economy and the federal budget.

Unions, freed from the threat of being held to account for their behaviour, will become impossible to control: it is no exaggeration to suggest that a Labor government would allow the vast expansion of the influence unions wield over every aspect of Australian society, perhaps even to the point of giving them the right of veto over government appointments and sanctioning the blackballing of non-unionised industries and businesses. These are not ambit concerns, for they represent no more than the present thuggish union domination of the building industry replicated on a wider basis.

And the would-be Prime Minister — Labor’s so-called “leader,” the ethically deficient Bill Shorten — is the most inappropriate candidate put forward for high office by either major party since the 1960s, if not ever: at least Bill McMahon wasn’t shrouded in a smelly trail of accusations of misconduct, even if he was a national joke, and at least Doc Evatt actually stood for something, even if he was insane.

Shorten doesn’t stand for anything except the indulgence of his own ambitions, and in tandem with the fact he is just another union cat’s paw, is one individual who has no moral right to ever aspire to the Prime Ministership.

But Turnbull and his mates — after months of false starts, confusion, mixed messages and general pissing about — showed their hands this week. It wasn’t a pretty sight.

There is some suggestion that the “outcome” was what they wanted; there will now be a “slow process” of investigating with the states untying Commonwealth grants for Health and Education in return for a reserved share of income tax monies being handed to them, rather than giving the states the power to levy income tax themselves.

It has been a hell of a lot of grief just for that: and if that is what the government wanted from the outset, it should have said so. It didn’t.

So here we are: the government — slowly running out of time to do something, anything ahead of an election bearing down on it — has weathered one of its worst weeks since it took office in 2013, and is spending the weekend looking chastened, humiliated, and very, very silly.

The problem is that there is no sign any of this is going to stop; that anyone at the Coalition has a clue about putting well designed and properly calibrated policy packages before the public; or that when push really comes to shove, in the context of an election campaign, that it can get its shit together at all.

It has been suggested to me that come election time, Shorten will simply crumble under the pressure, and go to water: this is a dangerous miscalculation indeed, for Shorten has spent more than two years weathering (and surviving) literally everything that has been thrown at him, or which has leapt out at him from left field, or into which he has blundered.

After the whole union Royal Commission, allegations of wrongdoing as a union official, excruciating public discourse, allegations of sexual misconduct, totalling several cars in Melbourne whilst illegally drinking coffee, and later showing a continued cavalier disregard for road safety by sending text messages whilst driving — and anything else you can add — Shorten is still Labor “leader,” will lead it to an election, and might just win.

Late last year, Shorten was about to be dumped from his post: what I published in this column was grounded in fact, not delusion. Then the Federal Police raided the home of former Special Minister of State (and Turnbull henchman) Mal Brough. Labor caught its breath and Shorten believed he was in with a chance again. And that was that.

If he does win, it will be 100% the fault of the Coalition parties, and of Malcolm Turnbull more than most.

This week has been an instructive insight into the functionality, or otherwise, of Turnbull’s government, and a demonstration of the unfortunate fact that it seems determined to flirt with political mortality despite having nothing solid, or even workable, to justify winning the looming election other than “we’re not Labor.”

Foolhardy behaviour often becomes a self-fulfilling prophesy, and unbelievably, Turnbull and his cohorts appear determined to put their government’s life on the line.

The defeat of the Coalition became a little more likely this week. The outcome of this year’s election is in no way a foregone conclusion. And if the Prime Minister and his chums continue to tempt fate, it might just explode in their faces at the ballot box.

 

AND ANOTHER THING: to those of my followers on Twitter hassling me about voting for the Australian Liberty Alliance, please don’t: it isn’t going to happen. Conservative politics in this country has its problems, almost all of them self-inflicted, but the ALA is no answer. I’ve had a look, I don’t approve, and you won’t convince me. So don’t try.

 

State Of Health: Turnbull Tax Plan A Stinking, Festering Turd

WE WILL say it plainly: Malcolm Turnbull’s “big idea” — to cede a slice of income tax revenue to the states, plus income-taxing powers, in return for ending Commonwealth health grants — is a rancid, festering, stinking turd metaphorically belonging only in a sewer. The package is a nonsense, and reeks of a hastily-concocted mishmash by a government desperate for something, anything to sell after months of political and policy ineptitude.

I write this morning not, oddly enough, to criticise Malcolm Turnbull, but from the sheer horror that my sense he could in fact lose the Coalition government this year is looking less and less like alarmist over-reaction with every passing day; this time — not content to have spent months examining better reform ideas in a thoroughly half-arsed fashion before unequivocally ruling them out, boxing the government in and moving the reform debate onto Labor’s vapid, vacuous turf — Turnbull has apparently presided over the creation of an actual policy initiative that is almost tailor-made for a vicious and hard-hitting ALP scare campaign.

More on that a bit later.

But Turnbull’s grand plan to “withdraw from a certain amount of income tax that would be available to the states” — and to give them the power to raise their own income tax component on Australians living within their respective jurisdictions — is one of the silliest, most politically dangerous and almost certainly unworkable “reform” policies produced by either side of politics for a very, very long time, and makes the “Medicare Gold” embarrassment cooked up by Mark Latham and Julia Gillard in 2004 look like a masterstroke by comparison.

The plan, which is unbelievably bereft of detail (and which readers can peruse more about here and here, with some comment from The Australian here) is, to be most kind, as oxymoronic as the pledge delivered by Tony Abbott in 2013 to bring the haemorrhaging federal budget back into surplus without major spending cuts if he won that year’s election; Abbott, at least, had a catch-all as a get-out-of-jail card: a disclaimer that if the books were in a worse state than the Coalition feared once it attained office, then all bets were off, even if that statement was subsequently ignored and the Abbott government proved incapable of using it to sell the 2014 budget. But Turnbull doesn’t even have anything like that to fall back on.

It’s hard to know where to start, so numerous are the holes in this policy, but the obvious place to start is with the states and territories, in whose hands income-taxing powers would be an anachronism, an assault on the truly national system of economic management that has emerged over decades, and a cynical abrogation of any meaningful attempt at genuine reform.

The states — all six of them — have not held responsibility for collecting income taxes for more than 70 years; the idea they could now do so, with no current expertise in this field, is laughable, and the notion the Commonwealth could collect it on their behalf and remit it to state coffers would seem to defeat the purpose completely.

As for the territories, which would presumably also receive this new power to vary and increase income taxes, it’s a case of something they never had that should not be given now.

It takes a heroic assumption of the behaviour of state governments — irrespective of political stripe — to believe that the power Turnbull is contemplating conferring on them would not be abused, and readers need look no further than their antics after the introduction of the GST in 2000 to know that it would only take a few years after this change for all of the states to be broke again, their people taxed to the hilt, and their governments once again crying poormouth on the Commonwealth’s doorstep.

As intended, the GST provided a short, sharp surge in receipts for state governments; Liberal administrations in Victoria, South Australia, Western Australia, Tasmania and the Coalition in Queensland were quickly bundled out of office at the first available opportunity in each case following the Howard government’s declaration that it would seek to legislate the measure if it won the 1998 election.

The resulting wall-to-wall Labor state governments went on a spending binge that left no lasting benefit or improvement in service standards in key areas such as health, education and roads; thousands of extra bureaucrats bloated and swelled stacked pro-Labor public services, of course, but these people do not directly tend or nurse sick patients, or teach kids, or build freeways.

Of course, those teachers and nurses and emergency services workers lucky enough to have jobs got hefty pay rises, as the rivers of GST gold flowed into their paymasters’ pockets, but their overall numbers did not rise to the extent proportionate with the huge amount of extra money the states had been gifted.

In short, and for the most part, the GST fillip was wasted.

To give the states income-taxing powers now — tied specifically to health — is to open a veritable Pandora’s box.

We already know, from their past behaviour, that the states would hire thousands of additional consultants, analysts, senior fat cats and other pen pushers, but very little in the way of extra teachers and nurses, or the beds and classroom infrastructure their professions require respectively.

Once the agreed share of income tax (whatever it is) has been exhausted — and the states’ income tax levers fully extended to extort more cash out of their people — what will they do? Go directly back to Canberra with their collective hand outstretched.

Of course, Turnbull has given no indication of how the plan will work, which raises the prospect of eight different income tax regimes across the country: this isn’t “competitive federalism,” as some in the Liberal Party like to imagine; it’s anarchy.

And what it also is — exactly as some commentators have already realised — is the thin edge of the wedge of an exercise in double taxation, where both the Commonwealth and the states get to pick over every dollar earned by hard-working mums and dads. The cost of living in this country is already a disgrace, and too many people earning seemingly comfortable incomes are involuntarily doing it tough as it is.

Contrary to Turnbull’s solemn assurance that there would be no overall increase in the tax burden faced by ordinary Australians, this dumb scheme will lead to precisely such an outcome, and as we all know too well, once governments are addicted to increased levels of recurrent spending it is very, very difficult to bring them back down.

Turnbull’s plan contains no details of any accountability measures — if there are any — to put constraints on the states to ensure they do not recklessly abuse the powers he proposes to give them, and if there are no such details to provide, then Turnbull shouldn’t have announced the policy. It’s that simple.

This terrible idea is not, as Turnbull pompously proclaimed, the “most fundamental reform to Federation in generations,” nor “the only way” to address the vertical fiscal imbalance that he claimed constitutes the “failure at the heart of the Federation:” any number of better options for securing government revenues — most notably, GST reform — offer other possibilities for dealing with the problem, even if they have been summarily discarded by the Coalition at the first sign of ALP mischief-making.

But simply shuffling responsibility for who levies which portion of the overall tax take around the place fundamentally solves nothing at all, even if (as expected) the states were to use that right to hike the taxes they took.

Curiously, the state Premiers have been barely lukewarm in their responses to the idea, and there is probably a warning message there: the sense that Turnbull might in fact be wiping his hands of federal responsibility for Health funding probably outweighs, in the mind of a pragmatic Premier, the attraction of what Paul Keating once characterised as “a pot of free money.” Certainly, something smells, and the states appear surprisingly astute in their hesitation.

But once Turnbull gave them partial income taxing powers for Health, what would follow? More state income tax for schools? More state income tax for roads? Before you know it, the Commonwealth would need to drastically increase other taxes (such as job-destroying company taxes) to be able to continue to deliver on Defence, Foreign Affairs, its own share of responsibilities for Roads and Higher Education, and — not least — the $175bn annual welfare bill, which in itself is a national disgrace.

By its nature, the Turnbull plan on Health does not and cannot enforce efficiencies on the states: they would be utterly free to squander every cent of the increased revenues on Labor-allied bureaucrats and other hangers-on if they chose to do so and again, protestations that “that would never happen” are shot down with a glance back in the direction of the post-2000 introduction of the GST.

And having seemingly surrendered funding of Health to the states altogether, the Commonwealth would be in no position at all to oversee any kind of effort to eliminate waste, or to exert any control over health service delivery at all, and with the odd exception of the odd state government for short periods not always determined by which political party holds power, the last thing anyone would argue is that Australian state governments have been star performers when it comes to running hospitals.

After months of picking up tax “reform” ideas, one by one, only to find arcane and at times ridiculous pretexts on which to unilaterally rule them out, the policy announced yesterday by the Prime Minister smacks of desperation, and reeks of the near-panic of a government that is in dire need of something — literally, anything — to cling to and to sell with an election bearing down on it like a road train.

But it won’t fix the funding problem the states have created in their hospitals, by pissing money away on non-frontline personnel when they had it; it won’t guarantee a permanent source of growth revenues to fund health services, and it won’t — irrespective of any melodramatic twaddle from Turnbull — reform the Federation in any way, shape or form: all it will do is create an anarchic mess, to say nothing of the very real scope for the Coalition’s opponents to run the mother of all scare campaigns to ensure it never even materialises.

With luck, this policy will go the same way GST changes, and capital gains changes, and negative gearing changes have gone: dumped. It is an execrable and unbelievably stupid “initiative” from a government that can and should know better. Then again, the quality of policy objectives from governments of both persuasions over the past decade has left a great deal to be desired.

A better discussion would be to finally confront the debate over whether Australia truly embraces universal socialised healthcare, and moves Medicare to a NHS-style system as applies in the UK, or whether it really does look to move to a model of two discrete systems of a public service funded by a Medicare levy with a parallel private system that people can opt out of the public system to join and fund through insurance.

As it stands, families with two middle income earners and a private health policy are paying up to $10,000 per year on health per household, often with poor outcomes in terms of waiting times, cost gaps* over and above those direct payments, and in some cases no availability of services at all.

But whether that happens or not, an even better discussion to have centres on why there should be eight state and territory health bureaucracies — plus a federal department of Health — when the Commonwealth can and should be the sole provider and funder of a single public system that can be streamlined, real savings realised through rationalisation, and the proceeds ploughed back into frontline services in the form of more nurses, beds, and more facilities and equipment.

In short, healthcare in this country is broken, and Labor is every bit as much to blame for that as the Coalition, irrespective of whatever it says to the contrary.

And this brings me back to the scare campaign Labor is already cranking up on the back of Malcolm Turnbull’s stupid, half-baked plans for the states to tax income to pay for hospitals.

Opposition “leader” Bill Shorten’s column today in Sydney’s Daily Telegraph is typical of the vacuous, dishonest, shrill rubbish that forms the ALP’s contribution to public debate these days, and whilst I’m not going to dignify it with the line-by-line demolition it probably merits, it is sufficient to simply describe it as absolute bullshit.

The problem is that whilst Shorten has undeniable form for talking bullshit, there are plenty of people around who like the sound of it, and who don’t give it a second thought: and by releasing such a politically naive policy that can’t and couldn’t achieve what it ostensibly aims to achieve anyway, Turnbull has exposed the government to yet another onslaught of Shorten’s verbal diarrhoea.

This year’s election is no slam dunk for Turnbull. Already, some who are well-placed in Coalition ranks who disagreed privately just a month ago with my assessment that defeat was starting to loom as a possibility are this week telling me they’re reconsidering their opinions on that assessment. And if a festering, stinking turd is the best Turnbull can offer after months of backdowns and policy dithering, then heaven help the country when he really gets cracking with the rest of his election agenda.

 

*As a personal aside and to illustrate the point, readers will recall I shared my experience of having “a stroke” on an aeroplane last August that wasn’t a stroke at all, but a completely harmless (albeit extremely rare) ear abnormality: despite the Medicare system and despite having top private health cover, it cost me $2,300 in out-of-pocket costs to ultimately ascertain that I needed a grommet. Others will have similar stories. If healthcare in this country is to be fixed, Labor’s model of bureaucrats and big pay rises for existing frontline staff (and little else) — and Turnbull’s game of smoke and mirrors with tax collection arrangements — are nothing more than empty bluster.

Tax And Oblivion: Costello Highlights Hockey Dilemma

CONTRIBUTIONS TODAY in the Murdoch press by former Treasurer Peter Costello highlight the bind the Abbott government finds itself in with a tricky federal budget looming, and the degree to which it has surrendered the debate to economic vandals in the ALP and the Communist Party Greens, who block most constructive measures in the Senate. Treasurer Joe Hockey has a tough but clear path to walk. Whether he does remains to be seen.

Today’s article is aimed at sharing two items from Sydney’s Daily Telegraph — an op-ed piece by Howard government Treasurer Peter Costello, and the paper’s editorialisation of his argument — to highlight what ought to be a no-brainer for a responsibly calibrated government (and especially one moulded by liberal and conservative thought) in contrast to the high tax mentality that underpinned current Treasurer Joe Hockey’s loathsome 2014 federal budget.

The old adage that “no nation ever taxed its way to prosperity” seems to have been honoured in the breach to date under Hockey’s approach to budget repair, relying heavily on a mixture of bracket creep, additional income tax slugs aimed at the core Coalition voter base, and a sympathetic view of various band-aid measures such as new bank taxes, multinational taxes, a populist increase in GST from online purchases by lowering the threshold at which it applies that is uneconomical to collect, and so forth.

Add in the clamour for other taxes from those who are the enemies of both the Liberal Party and Australia’s best interests — Labor and the Greens — on superannuation, individual companies (read: their detested News Corp) and, incredibly, the besieged mining sector, and what we have is a recipe for taxing Australia into economic oblivion in the name of taxing it into economic security.

It is true that this column has, once or twice, advocated a windfall tax on banking profits (built, it must be said, on reaping obscene fees, penalties and charges from the banks’ customers) as a way of effecting redress upon the budget deficit.

But that advocacy, made with no enthusiasm whatsoever, was born of sheer frustration with the inability of governments — first led by Julia Gillard and now, it seems, stewarded by a Liberal Treasurer apparently bent on perpetuating the “tax as salvation” myth — to find the appetite for serious structural reform of Australia’s tax base, and to build on and expand the foundations of an efficient and simple tax regime as laid down by Costello over 12 successful federal budgets between 1996 and 2007.

The idea that taxes that are as broad as possible and levied at relatively low rates is counter-intuitive only if it is accepted that businesses will pocket profits rather than hire people if their taxes are cut, and the proof that such a conclusion (even now, 40 years after it first gained prominence) is wrong can be seen in the “Thatcher miracle,” the “Reagan miracle,” and everywhere else so-called supply-side economics were implemented in the 1980s, leading to employment growth, steady rises in prosperity, and budget surpluses achieved from — surprise, surprise — rising revenues off a base of taxation measures levied at lower rates as broadly as possible.

It is refreshing of late to see that Hockey is showing signs of at least putting the GST (and possible increases to it) onto the table, for consumption taxes are an efficient and straightforward way of raising significant revenues to enable the business of government to be carried out.

Based on his track record, however — and the woefully inept record of the Abbott government to date in selling anything — it is doubtful this conversation will progress very far.

Instead, great attention is being paid by the government to the favourite hobby horses of the Left — slugs to superannuation, making it harder for the self-funded to continue to pay for themselves in retirement without government handouts, and chasing multinationals to reap a windfall no Western country has, in fact, reaped to date — and this merely shows how far control of the economic debate has been surrendered by this government, and the degree of real influence the economic vandals and wreckers in the ALP and the Greens still retain over a conservative administration elected, in part, to explicitly end such madness, not perpetuate it.

Remember, too, that both Labor and the Greens are pledged to the reintroduction of carbon and mining taxes as soon s they are restored to office.

Even extending the current GST at its present rate to cover everything except healthcare spending (remembering that at present it applies to just 48% of all goods and services in Australia) would be enough to fund offsetting increases to pensions (thus insulating the less well off from its effects) and to enact modest cuts in income and company taxes, and without the complicated fancies being bandied about for new and inefficient taxes.

Doubling the GST, to 20%, would enable benefits for the needy to by increases further, alongside a program of slashing other taxes rather than raising them.

But I think Hockey — were he truly ambitious — ought to contemplate going further again, with an even greater program of cuts to personal income and company taxes sitting alongside a broadening and lifting of the GST.

The experience of such a program of tax realignment internationally has been that businesses — far from simply banking fatter profits — will hire a lot more people, simultaneously cutting welfare expenditure and increasing PAYE tax collections; those employees would obviously spend more on goods and services, increasing GST revenues, and the collective impact of these measures would be an overall increase in government revenues from a regime that imposes lower rates of taxation generally.

Yet the flat Earth proposition put by the Left — that only higher taxes can fix the criminal negligence inflicted on Australia’s finances by its own hand when last in office — is doggerel.

If Hockey took the road less travelled (in Australia) of far broader but overall lower taxes, he would provide the Abbott government with a powerful point of difference, and a compelling proposition to sell electorally.

He would also be able to equip the Liberal Party with a series of double dissolution triggers based around tax cuts (the compulsory Labor scare of a GST rise notwithstanding) as the package is inevitably blocked by an opportunistic Senate, controlled by Labor with the Greens, and bent on obstructing their way back into office so they can get on with the job of taxing Australia into economic irrelevance.

And the end destinations of this process?

On the one hand, a double dissolution election based on slashing taxes, raising pensions, and a program for low tax torpedoed by Labor and the Greens. The idea of an election to confront the Left over its petulant torpedo of wholesale tax cuts is a delicious one.

On the other, capitulation: continuing down the route of higher taxes, bracket creep, the Left’s populist new taxes, and a likely electoral hiding from angry voters who rightfully feel betrayed.

I know which is the better option, and it isn’t throwing new taxes around like confetti.

Hockey should listen to Costello, confront the government’s opponents head on, and press ahead with the broader, lower, more efficient tax plan that would boost economic activity and — crucially — fill the government’s coffers by increasing the size of the economic pie, not taxing it into disincentive and disrepair.

 

Cost Of Labor: Huge Income Tax Hikes Shorten’s Only Option

AS IRRESPONSIBLY POPULIST as Labor’s approach to the federal budget has been under Bill Shorten, one thing stands out above all others: confronted by a deeply structurally flawed budget and shrinking revenues relative to spending, Labor has gone to desperate lengths to ensure meaningful expenditure reductions are squashed by the Senate whilst ruling out any increases. The price of a Labor government would be a colossal hike in income taxes.

A debate over a debate, in the current context of Australian politics, is a ridiculous and tangential indulgence.

Yet there are early signs that a “debate over a debate” may be precisely what is set to be unleashed in political circles, with the so-called “fairness debate” ignited by opposition “leader” Bill Shorten perhaps set to become the focus of the national press, sections of the commentariat and, most disturbingly, the Liberal Party, as it seeks to somehow wrest control of the political agenda away from an irresponsibly dishonest Labor Party that talks about little else.

Last night I read an article in the Fairfax press — centred on the economic view of Australia by a former senior Treasury official now based in Edinburgh — that was premised on the possibility that a deep recession may be required in this country to force government into the painful corrective action needed to fix the structural flaws now embedded in Australia’s budget and its economy, and noting that reductions in interest rates (which are already at record lows) have all but reached their use-by date as a tool for stimulating economic growth, meaning the “easy option” is about to become redundant.

And it makes the telling point that one big effect of plunging interest rates is their impact on the domestic housing market which, in short, is to cause the price of housing stock to rocket.

It warrants mention of the so-called stimulus package implemented by the ALP and its contemptible then-Treasurer during the Global Financial Crisis, by virtue of which close to $100 billion of (mostly borrowed) government money was sluiced into the economy.

And its objective: to avoid a recession at literally any cost, for the Labor government of the day feared above all else that were it to preside over the first recession in Australia for almost 20 years, electoral annihilation would soon follow.

One obvious impact of that stimulus package is that whilst home values did fall by somewhere between 10 and 15 percent, the bottom did not fall out of the residential housing market; it had the effect of protecting people from their own stupidity, as those who either bought at the top of an overheating property market were insulated from a market correction that the stimulus money probably only deferred (until some point soon, I would wager) or who failed to divest their assets in time to realise the gains from their risk that were effectively underwritten.

But the stimulus package delivered by the Rudd government is also a very big reason for the “entitlement mentality” that is now entrenched on this country, and the dishonest and brazenly populist antics of Shorten and his ranting about “fairness” serve merely to reinforce it.

I raise that article because — in the absence of intelligent and meaningful reform — it is probably right: a deep recession that imposes the very corrections politicians are (understandably) loath to see occur on their watch in office might very well be the only way some common sense and sanity is able to be restored in Canberra.

I hope it doesn’t come to that, of course. But with the “fairness debate” itself now apparently becoming the subject for a national conversation in its own right, Shorten probably can’t believe his luck; anything that inoculates Labor from the obligation to account for its rhetoric, or excuses it from laying out the hard details of what it would itself do if restored to government, can only encourage more of the same dumb-arsed and idiot-simple bleating about “fairness” and the unreasoning parliamentary obstruction that accompanies it.

(This doesn’t mean I have gone soft on Treasurer Joe Hockey and the abominable federal budget he delivered last year, mind; the imperative is on the government to make a far better fist of this critical task in 2015, and preferably under a new Treasurer equipped with better resources in communications and marketing than is currently the case, but I digress).

The “fairness debate” can be distilled to two points.

One, anything that can be used by Shorten and his cronies for political gain, through a refusal to allow the recipients of bloated government spending to be adversely affected by so much as a cent in expenditure reductions, is “fair.”

And, two, anything that seeks to realise expenditure savings that can be used to whip voters into a vicious anti-Liberal frenzy is “unfair.”

So much for the “debate” over the “fairness debate.”

The fact remains that whether people like Shorten want to accept it or not, Australia is living beyond its means; simply stating, ad infinitum, that we have sustainable and targeted welfare and other spending programmes that are reasonable and “fair” ignores the hard truth that they cannot continue forever, or perhaps continue at all without some hard changes being made.

Claiming that Australian government debt is “low by international standards” and that therefore no budget “crisis” exists is disingenuous: yes, debt levels in Australia are currently low by world standards, at some 25% of GDP. But left to their own devices and on their current trajectory, these will hit 50% within a decade and 100% by 2050.

So much for Shorten’s, and Labor’s, low debt view of Australia: a reality their own handiwork in office, with booby-traps built into the federal budget through colossal new recurrent spending commitments in welfare and education legislated ahead of an election loss, set to accelerate the country’s descent into unsustainable red ink.

And far from being a target in a “hit the rich” onslaught against a non-existent class Labor claims is ripe to tax into oblivion, the top 16% of taxpayers already pays 66% of all income tax, as has been noted elsewhere in the press today.

Australia should be having sensible discussions — and devising policy responses — on many fronts: about doubling GST; using the proceeds to fund offsetting increases in age pensions and other essential payments; cutting income taxes for middle wage and salary earners; dropping the 30% company tax rate to at least the 20% level that applies in the UK as an incentive for businesses to relocate here or to expand, and to hire more people, providing jobs growth; sensible welfare reforms that encourage a transition to work by those who have no excuse not to so, such as ending single parent pensions when a youngest child goes to school; abolishing the first home buyers grant; and finding ways to circumvent Labor (and the unions) in lowering cost barriers to businesses hiring staff by getting rid of Labor’s noxious “Fair” Work regime and instituting greater labour market flexibilities around conditions, entitlements and wages (yes, wages).

These are just the first handful of changes that spring to mind as I write; there are plenty of others. But none will ever see the light of day if Shorten and his acolytes have their way.

Properly considered, the list of items that ought to comprise the next wave of economic reform is substantial.

Labor’s blanket refusal to allow the Abbott government to do anything about them is telling, and Hockey — with his politically lethal budget and a total inability to sell it — hasn’t helped.

But what is most telling, especially where “fairness” is concerned, is what Labor under Shorten has ruled out — and what is left, as a result, for it to work with if ever returned to office.

The GST is off-limits.

So, too, is any concerted attempt to overhaul welfare payments: premised squarely on a ridiculous unspoken assertion that all handout recipients are legitimate just because they are, not a penny can be saved in this area.

Foreign aid cuts are an absolute no-no.

Saving money by removing the electoral bribe that was Gonski is akin to a policy of wilful advocacy of national illiteracy and poverty, if you listen to the ALP.

The National Disability Insurance Scheme — totally unaffordable if well-intentioned, bloated before it starts at an eventual $22 billion annual cost, and a political trap the Liberals in opposition fell blindly into — can’t even be mentioned.

The GST is just a no-no: lifting it by a fraction of a percentage point (even if the monies raised are redirected to put spending on a more sustainable footing) is tantamount to a slug-the-poor policy that Labor, with the flatulent wind of empty rhetoric filling its bellows, will resist to the very fibre of its rotten core.

Shorten’s only specific policy to date (which he hasn’t allowed to be ventilated in public, understandably, for months now) is the wholesale abolition of the Private Health Insurance Rebate — an “initiative” that would see the private healthcare sector collapse and the public system flooded with increased demand at a cost of some $12 billion per year: money currently injected into the system out of the pockets of private insurance policy holders.

Shorten’s health policy might play well with his beloved poor and the “unfairly” targeted, but if it is ever implemented it will cause their “free” health system to collapse altogether under the weight of its own unaffordability.

Where all of this leads is to the question of how Shorten would, as Prime Minister, fund an increasingly unsustainable programme of profligate government spending in light of everything he has decreed to be untouchable, and in view of all the things he refuses to allow to be explored as possible reforms to put the national budget onto a more solid long-term footing.

The only thing Shorten has not ruled out is a colossal tax grab, aimed at middle income earners, that will force millions of ordinary families into the real poverty against which Shorten claims to be the national guardian, and which would completely destroy quaint notions such as incentive, reward for effort, social mobility or empowering ordinary people to take personal responsibility for their own lives as opposed to the slavish and entrenched culture of dependence on government it would simply encourage and reinforce.

If there is to be a real debate about “fairness,” this is where it should start.

As unpalatable as some may find the present government, the alternative would be far, far worse: both in the immediate sense and with an eye to the long-term health of the country’s finances and the preservation of the national lifestyle that is so uniquely our own.

Then again, perhaps the alternative storyline of a thumping and involuntary recession — taking the arbitrary response away from today’s politicians and forcing the structural corrections Labor at least is hellbent on preventing — might be exactly what is called for after all.

And if that uncontrollable correction causes property investors to shed paper gains government should never have taken action that underpinned an assumption that they were entitled to them — rather than capitalising them through divesting assets at a time determined by shrewd judgement rather than limiting losses in a panic-induced fire sale — then so be it.

They wouldn’t be the only ones to feel the pain. And Shorten — when the fallout spread to reducing opportunities for the very people he spuriously claims to be the champion of — would become the national pariah his deception and irresponsible populism so richly demand he should be.

 

GST, Banks Must Feature In Tax Reform Debate

ANY DISCUSSION OF TAX REFORM in Australia must — almost by definition — include revisitation of the scope and rate of GST, and the attendant prospect of steep cuts to direct taxes; rank populism by the ALP (which modelled a GST hike in government and now claims such a change to be a “breach of faith”) should be disregarded, as long-term structural considerations are placed above ridiculously destructive partisan politics.

I have been reading a very good opinion piece in The Australian this morning, which neatly sums up both the challenges facing Prime Minister Tony Abbott in any contemplation of the GST as part of any wider attempt at tax reform, and the rank opportunism of the ALP (and some of the states) that such a discussion has already provoked.

I have to keep this circumspect today, as I am — as readers already know — quite busy at present, but there are nonetheless some key points I should simply get onto the table.

The most obvious of these is the fact that of all the taxation options available to the government (and with an eye to the escalating and recurrently growing demand for revenue by the federal government sector), the GST stands almost alone as a mechanism capable of delivering an expanding growth stream of taxation revenue.

Hot on the heels of this is the revelation, widely reported in yesterday’s press, that the ALP itself commissioned Treasury modelling in office to observe the effects of a modest GST increase of its own, raising the rate from 10% to 12.5%.

Such an increase, in my view, does not go far enough: the switch in the “tax mix” from taxes on income to taxes on expenditure is both urgent and critical, as the share of government revenue contributed by income taxes continues to fall over coming decades as the workforce ages, shrinks, and casualises.

And contrary to the deepest desires and ideological dogma of the ALP and (especially) its bed buddies at the Communist Party Greens, simply hitting “the rich” ever more heavily to try to claw back the difference is counter-productive and will also prove self-destructive in the longer run.

In his article, Paul Kelly hits the nail on the head, and his summation of Labor’s mentality on this question — that merely seeking public consent and/or seeking to engage in a comprehensive and rational debate about GST reform is a “breach of trust” — could as easily apply to the ALP approach to virtually any area of government that requires overhaul, and which Labor in power, despite the robust position it inherited, mostly squibbed.

For mine, a GST rate of 20% applying to everything aside from medical treatment — with accompanying steep cuts to income tax scales, along with boosts to pensions, and perhaps a further lifting of the tax-free threshold and/or the absorption of fuel excise collections into the GST net — makes perfect sense. This, and any options for GST reforms up to and including this position, merit consideration at the very minimum, irrespective of whether they are subsequently adopted or not.

But in the current, toxic political environment — in which even the consideration of raising one tax is used as a crude populist battering ram, irrespective of any potential offsetting measures — such a debate seems unlikely to eventuate, and it will be Australia that will be the worse off for it.

A simple measure of this contention will lie in the fact that comments to this column, if they follow past trends, will simply ignore my own advocacy of cuts to marginal tax rates and increases to social security payments, and simply pillory me for arguing that a doubling and broadening of the GST should be contemplated at all.

Some who come here looking to sink the boot into “Tories” may resist the urge to engage in such blinkered abuse. I will believe their restraint, quite literally, if I don’t see the evidence otherwise.

 

AND ANOTHER THING: readers have been surprised in the past to find this column — usually devoutly liberal in its economic views — advocating for a windfall tax to be applied to profits generated by the banking sector.

There is a difference between a free market returning healthy profits and plain, old-fashioned price gouging, and any group of four companies that cumulatively reap after-tax profits equivalent to roughly 5% of the country’s entire GDP demonstrates the shortfalls of prudential regulation that singularly ignores the difference between the two.

With Australia’s so-called “big four” banks hauling in clear profits of about $75 billion last year, the problem has gone beyond a joke; the retail banking sector uniquely defied the Global Financial Crisis to record consistent profit growth — in part, due to government intervention and monies expended by the Rudd government — and largely off the back of a fees, penalties and charges regime that is not grounded in any reflection of the true costs of providing these items.

This column repeats its assertion that a windfall tax should be applied to all profits recorded over a nominated threshold — say, $5 billion per annum per “banking group,” to remove the incentive to spread black ink through a plethora of subsidiaries — and levied at 50% of all revenues above that level.

Such a tax would raise about $40 billion based on last year’s figures, and whilst its yield would fall if met with cuts in banking charges in response, the measure would nonetheless deliver a win for consumers as it restored money pried from their pockets one way or the other.

$40 billion buys a lot of health and education funding, repays a fair whack of government debt each year, or funds quite a slather of other worthy government expenditure that currently eludes reality.