GST reform: Bill Shorten has a tough decision to make

GST reform: Bill Shorten has a tough decision to make

To paraphrase a certain former prime minister, Australia seems poised to have a conversation it apparently needs to have. This conversation – at least in the Government’s view – will be about convincing voters to accept an increase to the GST.

The weekend tabloids carried a shock, horror story about the Government’s “secret” plans to hike or broaden the nation’s consumption tax.

Except this expose isn’t exactly a revelation, given the Coalition Government has made various attempts since being elected in 2013 to create momentum for tax reform – including changes to the GST – in a way similar to that initiated by former PM John Howard in 1997.

Howard created a national discussion about Australia’s “broken” tax system, and how it could be “fixed” by scrapping a bunch of inefficient taxes and replacing them with just one.

The campaign started with a comprehensive report from a taxation taskforce (similar to the Government’s current tax reform white paper process), followed a year later by a package of initiatives that included the GST as well as personal income tax cuts, increases in the tax-free threshold and pensions, and the scrapping of wholesale sales tax.

Just weeks later, Howard took the GST to an election that he won – but only by the skin of his teeth. Political pundits still disagree about whether the tax helped or hindered Howard’s re-election chances, but in Coalition ranks Howard’s GST campaign is considered to be the gold standard for “visionary” politics.

Also being rather fond of the vision thing, new Prime Minister Malcolm Turnbull is likely keen to try his hand at something similar. Considering an increased or broadened GST could help fix the Government’s current “revenue problem”, it shouldn’t come as a shock if Turnbull is found to be testing the waters of public opinion with his own tentative plan to take an increased GST to the next federal election.

Some of the groundwork has already been done, with former treasurer Joe Hockey having done some early spadework on the state and territory governments, who’ll be the major beneficiaries of any increased GST revenue.

Admittedly, Hockey was not particularly subtle, essentially trying to extort state and territory governments into acquiescence by flagging in the 2014 federal budget that there would be a $80 billion cut to future funding for schools and hospitals by 2024-25.

Yet this manoeuvre had the planned effect, with NSW Liberal Premier Mike Baird holding a “crisis” meeting to discuss the cuts straight after the budget, and then 12 months later leading the charge to increase the GST.

In a video posted on social media in July this year, Baird argued:

We need revenue. I know that’s not popular, I know that’s not something people want to talk about, but unfortunately, we must. And as I look at it, it’s quite clear. The best way of dealing with this is to increase the GST.

Baird’s move was vital, given he was the most popular politician in the country at the time. PM Abbott needed the support of a leader with the stellar levels of political capital and voter trust that Baird possesses (and Abbott lacked) to calm voters feeling anxious about such proposals.

It would be fair to say that now Baird has been joined by an even more popular politician advocating tax reform, there is an even greater chance that an increased GST will be taken to the next election.

Former Howard chief of staff and now Turnbull Minister, Arthur Sinodinos, admitted as much over the weekend when he responded to the Murdoch tabloids’ non-expose.

“If you’re someone like Malcolm” and “want to do something substantial,” Sinodinos said, “you’ve got to do it quickly and upfront and you’ve got to do it when you’re in a capacity to maximise the use of your political capital to sell a story to the Australian people.”

“But,” the Minister warned, “you need their consent, so you have to do it soon in the context of putting stuff to an election rather than seeking to foist something on people before an election.”

This was also important in regaining the trust of the Australian people as a government, Sinodinos said, “because you can’t get on with reform or anything else unless you have their trust.”

Trust will be a factor for Labor too as it reiterates the party’s broad but not unanimous anti-GST stance. It will be considerably tempting for Opposition Leader Bill Shorten to try to emulate former PM Paul Keating’s attack on John Hewson’s GST, former Labor leader Kim Beazley’s denunciation of Howard’s tax, or even Tony Abbott’s “big new tax” campaign against the Gillard Government’s carbon tax.

But Shorten should keep in mind that opinion polls suggest voters are starting to come around to the idea that a GST increase is needed to fix the budget, while only 23 per cent of voters trust Labor the most when it comes to economic management.

The other complicating factor for Shorten is that the Labor state and territory governments need the money.

South Australian ALP Premier Jay Weatherill has expressed frustration with the extended stalemate on the GST, giving conditional support for an increase and saying “somebody has to step up and be honest about the size of the problem and actually be prepared to advance some positive ideas for solving it”.

Weatherill also warned his Labor colleagues not to play politics with the issue, dismissing Bill Shorten’s strident rejection of any GST increase by noting federal Labor was in opposition, “and I don’t have the luxury of just opposing for the sake of it.”

And while the Queensland and Victorian Labor state governments are still sounding hairy-chested in their opposition to any GST increase, a media report today suggests the Queensland Government could be “open to a broader reform package that included a change to the base or rate, provided it did not leave Queenslander’s worse off” and that the Victorian Government would respect the Turnbull Government’s mandate if it won an election with the GST.

This leaves the federal Opposition Leader with an invidious choice.

If PM Turnbull has his way, Australia is about to embark on a grand adventure involving a national conversation and a mutually-agreed way to fix the budget.

However, if Shorten continues his blanket campaign against the GST, he risks further damaging Labor’s already poor economic record. And if he joins the conversation on tax reform and secures wins for lower-income voters who can’t afford the GST increase, he’ll face accusations of enabling the Government as the Democrats did in 1999.

Chief of staff job too big for one person

According to last week’s political commentary, the Prime Minister’s chief of staff Peta Credlin is to blame, at least in part, for the Abbott Government’s woes.

Credlin is not always named in these articles, with the less courageous mostly referring to her euphemistically as “the Prime Minister’s office”.

So we read in the weekend wrap-ups of what was arguably this Coalition Government’s worst week that much of it was apparently Credlin’s fault. The selectively leaked and then disavowed decision to drop the Medicare co-payment was due to “a unilateral decision taken by the Prime Minister’s office”, and the Dead Man Walking Defence Minister David Johnston would remain in Cabinet only because Abbott “and his office stubbornly insist that there is no need for a reshuffle”.

Another commentator went so far as to suggest that the biggest barnacles weighing down the Coalition ship of state were Abbott’s “deep unpopularity and predilection for listening to his office’s advice rather than that of his parliamentary team”.

And that’s the nub of Credlin’s problem, which is pretty much the same as that faced by most other contemporary prime ministerial chiefs of staff: MPs resent an unelected staffer playing gatekeeper and being the Prime Minister’s principal confidante. So when their access is limited or their pearls of advice are not acted upon, disgruntled MPs whinge to the media that the “prime minister and his office don’t listen”.

That’s not to say there mightn’t be some substance to the complaint. Aside from her capacity to ruthlessly hose down the ambitious manoeuvrings of ministers and wannabe ministers, Credlin is indeed said to be resistant to seeking or taking advice from experienced parliamentarians and strategists, as well as wise heads in the business community. She’s also known to excommunicate individual journalists or whole media organisations that she’s deemed to have crossed the Government in some egregious way.

But whether Credlin can or should be held responsible for the Government’s woes is another thing altogether. One former chief of staff, or CoS, in the recent book The Gatekeepers, says attacks on the person occupying that role are proxy attacks on the leader, and that it’s a fundamental part of the CoS’s job to be the lightning rod for those complaints.

On that measure, it’s Credlin’s job to take the blame.

However, one of The Gatekeepers’ authors, Anne Tiernan, said recently that prime ministers get the staff they deserve. Tiernan was referring to the tendency of successive modern prime ministers to draw organisational functions away from the Department of Prime Minister and Cabinet (PM&C), because they want these functions to be managed within their own office, but that the offices are ill-equipped for management.

Tiernan noted this mismatch has been exacerbated by the attendant tendency of prime ministers to personally appoint their CoS, instead of the role being filled from the public service, as often used to be the case.

The need for a CoS to fulfil both the traditional political support role and this additional organisational management role can lead to bottlenecks and logjams, such as that identified by a more courageous political commentator on the weekend, who named Credlin as “the chokepoint through which every decision must pass … according to the universal accounts from inside the Abbott Government”. Apparently this includes setting strategy, making appointments, and deciding policy, and extended to logistics for the recent G20 meetings.

Well, fair enough, that’s Credlin’s job, but it may be too much of a job for one person to handle.

It may be true, as one columnist noted on the weekend, that it was Credlin who drew up Abbott’s successful strategy in opposition, and that the perception in “the prime minister’s office” right now is that a panicking party has forgotten “who put it in power”. But a great strategist in opposition does not necessarily make a competent CoS or one that is able to adequately perform all of its functions.

During much of the Howard years, different aspects of the role currently being performed by Credlin were divided among a trusted few. During the time he was Howard’s CoS, Arthur Sinodinos was the political strategist and confidante who worked with the Cabinet Office on policy development, while Tony Nutt was the political enforcer. Sinodinos brought to the PMO a fundamental understanding of how government works – being a former Treasury official – while Nutt, the impeccably credentialed political fix-it man, did what he does best. Their good cop/bad cop routine maintained discipline while ensuring that everyone felt valued and consulted.

Howard’s best years were arguably when this arrangement was in place.

The arrival of Michael Thawley as the new head of the Department of Prime Minister and Cabinet may signify Abbott’s recognition of the need to do something similar. Thawley is an experienced bureaucrat and diplomat, with almost a decade’s experience in the US investment industry, and as PM Howard’s former international adviser is also an experienced senior staffer.

Thawley’s arrival may see for the first time in recent history a return of some of the functions that successive prime ministers have taken from PM&C, thereby theoretically lessening the load on Credlin.

Media reports today suggest Thawley’s first task will be to get the Government’s economic strategy back on track. So, in this sense, it appears Abbott has realised he IS ultimately to blame for the Government’s misfortunes and in appointing Thawley has done something about it.

Meanwhile, ministers are already making mischief in the media, saying there are high hopes for Thawley being able set effective strategy “unless he meets an immovable object”, which apparently is the new code for Credlin.

Whether the PM intentionally or not brought in Thawley to meet a deficit in Credlin’s skill set, she will at least be partly responsible for whether her working relationship with Abbott’s new man is a harmonious one.

And if it turns out to be obstructionist or acrimonious, then at least this will be something for which Credlin most definitely should take the blame.

Hockey steps in to clean up the mess

Those listening carefully last Friday may have almost caught Treasurer Joe Hockey humming a few bars from “Sadie the cleaning lady” as he announced his innovative infrastructure deal with state and territory treasurers.

For it was left to the Government’s chief budget spruiker to mop up the political detritus left by his colleagues over the preceding week and get the budget expectations campaign back on track.

The Treasurer, formerly known as Sloppy Joe, is painfully aware that his own credibility as well as that of the Abbott Government is vested in how well the public and the media receive his first budget.

That reception is reliant on a campaign of softening up the voters to expect decisions that are tough but fair, and to build acceptance even before the budget is handed down by creating a sense of momentum and inevitability.

Traditionally, the government uses the final week of Parliament before the six-week break leading up to the budget to create that sense of momentum. So a week playing Knights and Bigots was a distraction Hockey could ill afford.

Nevertheless, Hockey took to the clean-up task with relish. On Friday he threw the states and territories a juicy incentive to sell off their assets, under the guise of an almost too clever euphemism “asset recycling“, thereby effecting a workmanlike attempt to draw our eyes away from the car crash that was last week’s Parliament and refocus our gaze on matters economic.

Finance Minister Mathias Cormann rolled up his sleeves and joined in on Sunday, authoritatively re-establishing the narrative about “Operation Repair the Budget”. He attended to a few stray splashes by reaffirming the Coalition had committed only to the first four years of Gonski funding and that the NDIS would be implemented in a way that was “efficient and as well-targetted as possible”.

Cormann devoted considerable elbow grease to the troublesome Future of Financial Advice (FOFA) reforms, hoping to dispel concerns over what he claimed to be inaccurate depictions of the changes. He repeated, again, that he developed the reforms as the shadow minister for financial services and superannuation after extensive consultation and a series of parliamentary inquiries that looked at financial products and services.

This appeared to be as much an effort to distance the reforms from the standing-aside Assistant Treasurer, Arthur Sinodinos, as they were to calm citizens concerned about rampaging financial advisers. The former Australian Water Holdings chairman is due to give evidence to the ICAC on Wednesday, at which time Sinodinos’s many fans may be confronted with uncomfortable truths about the fallibility of their man’s widely-regarded political acumen.

Sinodinos has undoubtedly opened a chink on the Government’s flank, causing them to be at least temporarily circumspect when it comes to dodgy deals and corruption. This became clear when, amongst the many dramas unravelling in Parliament last week, barely a peep was heard about the sentencing of former Labor MP Craig Thomson and former ALP President Michael Williamson, for misusing union funds.

Had Sinodinos not been in the picture, Thomson and Williamson would have been brandished by the Government as further justification of the need for the royal commission into union corruption and used to wedge Opposition Leader Bill Shorten from his union support base.

Instead, the Parliament was subjected to the Prime Minister’s twin indulgences, a Racial Discrimination Act retrofitted to accommodate Andrew Bolt and the reintroduction of an archaic honours system.

Perhaps Liberal voters in Western Australia, who are required to attend a polling booth this weekend for the fourth time in 12 months, consider these relics attractive. It’s more likely they’re interested in jobs, health and education, all of which were barely mentioned by the Government last week.

Ironically, Shorten was more on-song with Hockey than the Prime Minister. In his first address to the National Press Club since becoming Leader of the Opposition, Shorten contributed Labor’s threads to the budget narrative by defending his party’s economic record while in government and helpfully nominating four criteria by which the opposition would (and the media “should”) judge the budget.

Shorten also sounded a curious dog whistle to conservative voters, who are traditionally wary of change, warning that a government’s priorities determine whether people are the victims or beneficiaries of change. Shorten cautioned that Abbott’s “bleak, hopeless brand of Darwinsim” means adapting to economic change will require “deep cuts to services, longer unemployment queues, lower wages and lower levels of government support.” We can expect to hear more of that refrain in the coming weeks.

Parliament may be over until the budget is brought down in May, but Hockey shouldn’t put his mop and bucket away just yet. This time next week, he’ll have to contend with another distraction from the budget as parties and commentators alike paw through the entrails of the WA Senate election re-run.

Depending on the election outcome, political strategies and budget narratives may have to be adjusted. Hockey may have to kickstart the budget expectations campaign yet again to create the momentum needed to consolidate public acceptance. And with less than five weeks to go to the budget, there will be little or no time left to mop up after any further prime ministerial acts of self-indulgence.

‘Weakling’ Labor pulls its punches

It’s six months into the Abbott Government’s first term and there is a growing sense the Labor Opposition just hasn’t been able to lay a blow on the other side.

Apart from struggling to adjust to the uncomfortable but necessarily edifying transition from government to opposition, Labor has seemed singularly unable to capitalise on the panoply of stumbles, gaffes, backflips and dubious decisions that Abbott and his team have manifested in such a short time.

Granted, the ALP is laying claim to the shiny scalp of the sidelined Assistant Treasurer. But in reality, The Australian newspaper’s call for Arthur Sinodinos to stand aside likely had more impact on the Senator’s decision to do so than any of the edicts hurled at him in Parliament.

Without the intervention of Uncle Rupert’s paper, there’s a good chance Abbott would have attempted to ride out the controversy, just as he did when the Assistant Minister for Health, Fiona Nash, was accused of breaching the ministerial code. Abbott held tight, secure in the knowledge that Labor had enough dirt on its hands to be cautious when pointing out the Coalition’s misdemeanours.

The Nash episode was a clear-cut case of whether she did or did not breach the code or mislead the Senate. The Sinodinos matter was, however, anything but straightforward for Labor, with the Opposition having to tread a very fine line when accusing the junior minister of being naïve, foolish or dodgy while chair of Australian Water Holdings.

By implication, Labor risked lapsing into the claim that Sinodinos should have known better than to be even indirectly associated with Eddie Obeid, a mover and shaker in the NSW Labor Party who was later found to be corrupt by the Independent Commission Against Corruption.

In short, saying that Sinodinos was dodgy for associating with a corrupt Labor politician is a bit like smacking oneself in the face.

Corruption in its own ranks is a significant limitation on the Labor Opposition’s capacity to credibly hold the Abbott Government to account on this issue, but it’s only one factor taking the edge off their attack.

Rorts in the union movement is another. The Government has a strategy to hobble the unions, cut off the flow of union funds to Labor, and reform wages and conditions, which spans across this parliamentary term and the next. Part of that strategy is to tarnish the reputation of unions and make Labor guilty by association.

Voters who pay attention to such issues would recall that PM Gillard vouched for the integrity of former Health Services Union head and Labor MP, Craig Thomson, who was subsequently found guilty of using his work credit card to pay for sexual services and make cash withdrawals.

One of the unstated aims of the Royal Commission into union corruption recently launched by the Abbott Government will be to ensure a broader range of voters associate Labor with unlawful activity within unions – regardless of whether that activity is sanctioned by the union in question.

This places Opposition Leader Bill Shorten, a former head of one the unions under investigation, in the invidious position of being seen to protect dodgy union activity whenever he defends the labour movement from what is patently a political witch-hunt. As a result, he keeps such protestations to a minimum and will be constrained in the assistance he can provide.

Similarly, Shorten limits his exhortations on the plight of asylum seekers, placed on Manus Island by way of an agreement struck by the re-ascended Labor prime minister Kevin Rudd to out-bid Abbott on “toughness” and win the anti-asylum seeker vote.

Even now the “toughness as a deterrent” tactic has devolved into terror, Labor’s role in bringing about the sorry situation has left them impotent and unable to fight for a more humane approach.

The ALP’s propensity to pull its punches may make sense within those politically sensitive contexts. But it makes Labor look like a weakling, particularly now that Australian voters have become accustomed to an opposition bristling with fight and negativity.

This is a particular problem for Shorten who has consciously rejected Abbott’s Mr No style and adopted an opposition leader model closer to that of Labor’s Kim Beazley (which itself was modeled on the Liberal, John Howard).

This model involves giving due recognition to sensible government decisions and eschews opposition for opposition’s sake. Inconveniently for Shorten, this moderate stance sits uncomfortably with his union leader past and could unintentionally suggest to voters that he’s not genuine. If that perception takes hold, it could create a whole new world of hurt for the opposition leader.

Labor can’t lay a punch on the Coalition because it is hopelessly implicated in some of the Government’s greatest sins and has shown no inclination to renounce that involvement.

This weakness is one of Abbott’s greatest strengths, and it may well be the key to his Government’s enduring political dominance in the foreseeable future.