The Business Council of Australia (BCA), according to Crikey’s Bernard Keane last week, is “Australia’s most vile business lobby”, a pack of “profiteers and gougers” engaged in “a policy pantomime driven by greed and amnesia”. Whack!
His broadsides were largely fair — the BCA has been reheating the same corporate rent-seeking disguised as policy for decades, and its latest report continues this tradition. Among some unobjectionable lines about integration with Asia, lifelong learning and achieving net zero, we see predictable calls for lower corporate tax rates and a more “flexible” industrial relations regime.
But one of its suggestions is gaining broader traction: raising the GST. Independent MP Allegra Spender, who is conducting an independent review of the tax system, publicly jumped on the BCA bandwagon this weekend, echoing former Treasury secretary Ken Henry by calling our tax system an “intergenerational tragedy”.
But Treasurer Jim Chalmers quickly hosed down such suggestions. And Labor Party president Wayne Swan backed Chalmers, his former adviser, saying, “a move to a more regressive tax system” would create “a more unequal Australia”.
One might naturally think Swan’s position is the progressive one — why tax a millionaire the same amount on their groceries as someone on JobSeeker? And using the proceeds to cut corporate taxes, as the BCA and Henry propose, is certainly a galling suggestion amid record corporate profits and a cost-of-living crisis.
But in isolation, or as part of a package of tax increases, our unpopular consumption tax deserves a second look from the nation’s left.
The rich spend… eventually
The GST isn’t quite as regressive as it looks. It certainly eats up a greater proportion of income for lower earners, because higher earners save more on average each year. But higher earners eventually spend a lot of their savings; they just do so in larger, lumpier sums.
Australian National University and OECD reports have found that the GST, when measured as a portion of consumption (which can be financed by money earned that year or saved from previous years), is roughly proportional across the income spectrum.
More importantly, by focusing on the tax side of the ledger, progressives often ignore the spending a GST raise would enable. If social services or welfare payments were subsequently increased, the benefits to most low-income earners would outweigh the money lost at the checkout.
Instead of demanding the GST’s revenue be spent equitably, Australia’s mainstream progressives spent the early 2000s backing away from the welfare state, leaving dole recipients to languish on frozen rates, while fussing about GST carve-outs for fruit, vegetables and other items. The BCA quite reasonably laments the absurd complexities this created for businesses, such as “taxing pizza rolls based on the thickness of topping” and “taxing unfilled meringue cases but not unfilled cannoli”.
Bigger is better
Looking historically and around the world, one usually finds the most Robin Hood-esque governments are those with more money to spend, regardless of how they raise it. The Nordic countries have huge GSTs and other “regressive” taxes, and they don’t “target” their welfare payments to the poorest nearly as stringently as Australia does. Yet their societies are much more equal than ours.
The Scandinavians don’t worry excessively about whether each individual tax or spending program is the most pro-poor it can possibly be; they just get on with building big welfare states with world-class social services. Their citizens accept higher overall taxes because they see the benefits. And the total effect is much more redistributive than puritan fiddling.
Since the Occupy Wall Street movement, the left has rallied around “taxing the rich”, as if tax were a punishment. But it shouldn’t be seen that way. Tax isn’t just about redistribution — though that’s important. It’s also the membership fee we all pay for having a decent society, where we’re insured against the shocks of unemployment, disability, old age and more.
The pioneering Labor governments of Curtin and Chifley discovered this early. Having initially promised not to raise taxes on low-income earners, they had to artfully backtrack in order to finance their WWII effort and burgeoning welfare state. Thank God they did, or else we might not have the dole or aged pension today.
Fiddling while the poor burn
Contrast this maximalist approach with the shy minimalism of the Albanese government last week. On Thursday it released the latest intergenerational report, which projects we’ll need more revenue for social spending to service an aging population. Yet Chalmers immediately dismissed calls for a tax overhaul, instead looking for “bite-sized” measures.
Some of his hors d’oeuvres have indeed been anti-rich, such as tax changes on multinationals and high-value super accounts. Other measures have been pro-poor, such as the $40 increase to JobSeeker. But the magnitude of these measures is pretty puny.
It’s not only external critics frustrated by such small fries. The Australian recently reported that activists from Labor’s left faction have called the federal government’s policy approach “overly cautious” and “increasingly out of step with the public mood”.
Don’t get me wrong — raising the GST isn’t the meaty tax reform I prefer most. Removing concessions on superannuation and housing assets and introducing an inheritance tax would be better, while the stage three tax cuts remain a ticking time bomb.
But, absent the courage to lead from the front, the government may need cover. If it can’t find any elsewhere, and some unlikely bedfellows can stand athwart the naysayers, I’d rather Chalmers imperfectly hack his way through the fiscal thickets than bury his head in his tortoise shell.
Is raising the GST a fair way to pay for the increasing cost of Australia’s social services? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
On the comparison with Nordic countries: Norway used its resources boom to build a sovereign wealth fund that can pay for generous social programmes for the next century, while we almost paid multinationals to cart the stuff away, and are still giving tax breaks to them.
That’s what Howard was advised to do. But look where we are with his vote buying Budget busting financial forays – $50bn a year and rising.
He was also advised not to sell the Telstra hardware (cables and conduits). He did and that stuffed the NBN nearly a decade later.
The difference is where you start from…………….
………..the Liberals work out how much tax to raise first, THEN work out what to spend it on (usually whatever their donors require, and the bare minimum to keep the joint ticking over )
The more sensible way is to work out what services people actually want, work out the associated cost and present that to the population as what is required.
As demonstrated by the Nordic countries, people are quite happy to pay for services they actually get…………………
neo lib failures under these lazy myopic dullards – libs and National and the neo lib independant economic social vandals
Alas, here in Australia big business and governments (state and federal) prefer to build their wealth (politically and individually …allegedly) off the backs of every day citizens. Resource boom…how to get richer why fleecing Australians. Social programmes, bin that.
one scuzzy accountant and his 2 porcine mates ex accountants making 58 million a year- through the jobs and in NDIS contracts and jobs providing and training services business – get our money and our resources to run a scam operation but do the base math 7000 unemployed divided by the 58 million – why do these 3 with failed service and outcomes under the govt contracting – Unemployed citizens are made clinically depressed due to their dignity and agency being stolen and they are profit fodder – yet they are the innocent , unemployed victims of this scam made to look like needy losers wasting our valuable abused talent
Vertical business growth!
beautifully expressed
Privatisation thanks mainly to Keating and Howard. Can anyone name a previously people owned enterprise which when privatised didn’t end up gauging us all.
Think they had us all gauged years ago. Now we are being comprehensively gouged.
That’s a new subliterate horror from Crikey, which obviously enjoys tormenting its readers with unprovoked assaults on our language. How did ‘small fry’ (tiny immature fish usually ignored as not worth the bother for consumption or sport) become whatever this author is alluding to — could ‘fries’ here be American for chips? What the hell?
Not only this author; someone is responsible for
The Murdoch’s have always been….
Perhaps it means a very small stir-fry? Enough to keep the body alive, but not to nourish.
who cares when the are bigger phish
to fry
yes but er hards in the rite plaice
The problem is that the standards of literacy in Milennial generations and beyond is so generically bad, that even top quality publications don’t seem to have any choice any longer but to hire people who are structurally grammatically challenged. You see it far and wide beyond Crikey. Yet “his work has appeared in Crikey, The Age, Junkee and Kill Your Darlings.”
The offending phrase is of course one you’d get away with in general conversation or stabbed out without much thought on social media.
But it’s like that’s become the common discursive denominator. Journos don’t seem to think “this is going into actual print, I’d better re-read the whole thing first because a higher standard is demanded, or even when they do – because their grammatical ear is so addled by growing up with social media, they can’t even hear the mangled language.
And frankly, The Age or ABC.net.au are both far far worse than Crikey. So when the biggest journalistic brands are out there hitting “publish” without even a vague sense that for a large % of there audience, the standards of grammar they’re employing are actually TRASHING their brands and undermining what vestigal authority these publicatiion … it’s a problem for the entire sector, but all the people who are liable to notice will be dead in 30 years.
At which point we can safely let the YIMBY generation blissfully erase all humanity’s cultural achievements (as seems to be their wont) and permanently impoverish every subsequent generation from a position of blissful, cold dead ignorance.
*their audience LOLOLOLOL!
I’ve worked as an editor and can tell you that many of our most cherished authors and journalists routinely turn in copy that is full of ‘unprovoked assaults on our language’. Sometimes it’s because they were on a deadline, other times they just expect subeditors to clean up their first draft. It is rare that a piece arrives ready to publish. You can blame Crikey for a lack of good editing.
If only I could believe that an Australian government would spend an increased revenue on helping those in need of help…
Alas – nothing I have observed during my 29+ years of living here indicates that would happen. Both, politicians and a majority of Australians consider poverty a character flaw and/or a self-inflicted malady and view those in need of assistance as a drain on supposedly scarce resources (note how we always have tonnes of money to gift to the ‘lifters’). I don’t see them falling over each other to provide to Australians the kind of services that Scandinavian and some other European countries provide for their people.
As for Spender – I wouldn’t take anything she says on fiscal or social policies as a sign that something is the right approach. She’s as Liberal as they come.
You don’t need to tax more to spend more, the government can simply do it. This is not a household
However, just printing more eventually ends up fuelling inflation, as each extra dollar created devalues all existing dollars.
That is actually what the neocons like you to believe.
Just as the Bank of England states in this paper https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy,
the majority of money in circulation is created by commercial banks when loans are approved. Those actions have no effect on inflation.
During the Covid pandemic, when QE (The Bond Purchase Program) was in progress the RBA created $281 billion with no impact on inflation.
The federal government is the sole issuer of the Australian Dollar, through its bank, the Reserve Bank of Australia, and its licencees, the commercial banks. The currency issuing Australian Federal government never needs to borrow Australian Dollars and will never default on a debt.
Unemployment is a choice of the federal government, as is the decision to not provide housing for all Australians, or properly fund our health and education systems.
Every dollar spent by the federal government is a brand new dollar. Government spending may cause inflation if it competes in a market for scarce resources that are fully employed. The government could employ taxation, or regulation to free up the resources it intends to use, and avoid any inflationary consequences of its spending.
No effect on inflation, but don’t look at house prices.
House prices are the direct result of successive federal governments implementing policies that converted a market for shelter into a market for investment and wealth creation.
Albanese claims he is a social democrat who believes in markets, while at home,in the real world, we are confronted by market failures.
The housing market, as deliberately constructed, is incapable of supplying sufficient housing for Australians in need. The energy market is owned by multi national corporations that use their power, money, and influence to co-opt government and continue environmental destruction, while shafting the populace. The duopoly in the grocery sector reap extraordinary profits in a time of high inflation, and the banking and finance sector, the sole growth sector in the economy continues to take us all for a ride.
That is all the direct result of neo liberal economic policies and governments and economists enforcing a belief in the myth of market infallability and efficiency. It’s all CRAP, and the evidence surrounds us.
House prices are a result of strangled supply, goosed demand and loose credit.
Without all that money being created for loans, they would not be as high (though the shortage problem would still exist).
Agree, see Turkey etc.
one yests of their natrs super profits would get em 27 billion
Courtesy the MMT magic pudding..
This is not an article about the source of public funds and I didn’t comment on that. My comment was about the likelihood of this (or any other) government spending more on certain issues if it had more money to spend. No matter where the money comes from.
yes but shes better than the blobs in the neo lib main parties –
Agree, for two reasons, many nations over use GST or consumption taxes by lifting to higher rates because it’s politically easier, while there is avoidance of any taxes, especially income, impinging on above median age, income and wealth, too much.
Yet, ironically it’s the latter baby boomer cohorts who are becoming more dependent on budgets for health care, services, pensions, super rebates etc., while the Norwegian fossil fuel sovereign fund is a deflection in my opinion as a ‘solution’ locally due to unpredictable markets, transition to renewables and the risk inherent of the state, govt. or a small coterie of individuals making big calls for the nation’s future with too many eggs in one basket.
‘Libertarian trap’.
There’s maybe half a point here (more like a quarter), but part of the argument is that welfare payments will be raised as a compensatory factor for our most desperate. Yeah. What about the next couple of rungs of the earning ladder? The working poor, already being run as lean as possible by our corporations and large businesses? How are they going to endure an increase in the GST? What, large tax returns? Good luck for the other eleven months of the year.
unemployed are being indentured mostly older women post chikd rearing teens and used as skaves as they will not get employed by parasites who then call em karen
Forced savings are not an entirely bad idea. That’s the entire premise of the superannuation system.
Interesting, if one believes taxation pays for spending, instead of reallocating available resources.