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.

A salutary tale for the Australian Greens


There once was a political party that claimed it was not like the others.

The party was led by a wizened political warrior who spoke compellingly about the major parties being out of touch. His party advocated environmental protection, recognition for indigenous Australians, law reform for gays and equality for all Australians.

The party offered Australian voters a third force in politics and vowed to impose accountability upon the major parties.

Over time, the party grew in popularity and its candidates won enough votes to secure the balance of power in the Senate.

Do you know which party this story is about?

Well think again, because this party, the Australian Democrats, held or shared the balance of power with other minor parties or independents in the Australian Senate for nearly 25 years (1981 to 2004). At their peak, the Democrats also held the balance of power in the upper houses of several state parliaments: NSW from 1988 to 1991, SA from 1979 for the following two decades and WA for one term following the 1996 election.

Today they hold no seats – in any Australian parliament.

How did this happen? And more importantly – could it happen again?

This is the question that should be occupying the minds of the Australian Greens right now, as they prepare to take up the Senate balance of power on 1 July 2011.

There are both similarities and differences between the Democrats and the Greens. Both parties positioned themselves where there was a perceived absence of political representation. The Democrats were considered a centrist party, attracting the first preference votes of the disillusioned major-party faithful, who then returned to the fold with second preferences on a roughly 50-50 basis.

Despite campaigning on many of the same issues, the Greens have positioned themselves to the left of Labor, with around 80 percent of their second preferences heading back to the Labor Party.

Perhaps the most significant similarity between the two minor parties is the amount of voter goodwill and accompanying high expectation that each party generated.

It was the Democrats’ inability to fulfil this voter expectation that ultimately proved to be their undoing and this should be a salutary lesson for the Greens.

Many observers point to the Democrats’ decision in 1999 to support passage of the GST in the Senate as the beginning of the end. This is instructive in itself, for the Democrats took a pro-GST policy to the preceding election. Nevertheless, the decision was portrayed as a sell-out of Democrat principles, reinforced by a number of Democrat Senators crossing the floor to vote against the tax. This undoubtedly contributed to the leadership tensions and internecine manoeuvrings that wracked the Democrats from that time onwards, until they lost their last Senate positions in the 2007 Federal Election.

When the Greens attain the balance of power in July this year, they will discover, as did the Democrats, that it is much more difficult to be a political or policy purist when your vote actually counts. Negotiations will inevitably lead to concessions, sometimes on the part of the Government but also of the Greens. The Greens will need to manage member expectations better than the Democrats did to avoid the pitfalls that decision-making can bring.

This article first appeared at The King’s Tribune.

Tastings from the 2010 political buffet

At the end of this week, just before the official start of summer, the Australian Parliament will rise, politicians will head home to their electorates and voters will focus on how many meats to serve on Christmas Day or the quickest route to the beach. For many, the summer break is for relaxation; yet for others it evokes reflection about the year just passed. Given the political year we’ve just had, the reflective folk will have much food for thought.

From my perspective, the two leadership challenges, two state elections and the federal poll have challenged conventional wisdom and rewritten election playbooks, but also confirmed some political trusims. I don’t pretend to be a psephologist or political pundit, but I’m hopelessly attracted to the world of politics. I can’t help but look for patterns and cause-effect relationships and wonder how these might alter the path of political endeavour in the future.

With that caveat, I offer up for your degustation these observations from the political buffet of 2010.

Appetiser: Australian voters want their politicians to be genuine

At times during the federal election, it was hard to distinguish a 7.30 Report interview from the latest instalment of Kath and Kim, such was the broadness of Aussie accent on display. Both Gillard and Abbott went to great lengths to prove they were genuine and in touch with real Australians – particularly compared to their predecessors, the densely verbose Rudd and the tree-hugging patrician Turnbull.

However, Gillard’s authenticity was somewhat inconsistent during the early days of the campaign. At one point she morphed into a Stepford Prime Minister, nodding sagely to the cameras while using the calming tones of a pre-school teacher. This persona grated on voters’ sensibilities and she was quickly cast off in favour of the New! Real! Authentic! Julia. While undoubtedly relieved, voters were nevertheless left to wonder about the previous incarnations of Ms Gillard and their authenticity.

Tony Abbott’s misstep was equally unsettling, telling Kerry O’Brien that he couldn’t necessarily be held to account for words spoken in the heat of the moment, but that his written word was trustworthy. While operatives tried to spin this blunder as candour, it undoubtedly left a crack in Abbott’s everyman persona.

While there were many factors that contributed to the federal election outcome, I believe the genuineness of the party leaders was one of them. Faced with two relatively unknown politicians, both of whose authenticity was in question, many voters chose neither. The perception that neither Gillard nor Abbott was genuine contributed to the shift of votes to the Greens.

Gillard and Abbott are now on probation – the media and voters are alert for any more cracks in their authenticity. So too will the country independents be scrutinised to see if they are as genuine as they currently seem.

Entrée: Unfulfilled expectations will come back to bite you

Kevin Rudd’s downfall was that he didn’t deliver on the expectations he created in the 2007 federal election. As I wrote back in June, Rudd deftly positioned himself prior to that election as Howard-lite, framing himself as the “other” safe pair of hands, but with bonus features such as the ratification of Kyoto and the scrapping of WorkChoices. While Rudd did apologise to the Stolen Generation he did not deliver on any other major promise. The Labor MPs and operatives who eventually deposed Rudd did so because they knew voters were waiting to take out their anger on him, just as they had done to Keating in 1996.

PM Gillard almost paid the ultimate price by making the same mistake soon after she replaced Rudd. Gillard became Prime Minister promising to resolve three issues: Australia’s response to climate change; the battle with the mining industry over the Resource Super Profit Tax; and a more humane approach to sea-borne illegal immigrants. Instead she announced a clumsy citizens’ assembly on climate change; gave ground to the mining industry and replicated some of the most reviled elements of the Howard Government’s detention scheme. Voters would have been forgiven for wondering why the PM who couldn’t fulfil commitments was brutally torn down for another with the same failings.

Gillard was damaged by that early mismanagement of expectations. It will be interesting to see whether the Labor Government, the Greens and the independents are wary of creating (or maintaining) expectations in 2011 that cannot be met.

Main: Re-enfranchised rural Australians are watching carefully

Rural Australians are a canny bunch: they may have grown up in the arms of the Country or National parties, but they are open to any other party or individual who can protect their chosen way of life. This is clear from the diminishing number of National Party members in both the Senate and the House of Representatives. Both the ALP and Liberals have developed “country” arms of their parties to capitalise on this opportunity.

Country independents are not new to our parliament. Up until now, most have languished on the cross-benches because their votes were not important. Now with deciding votes in the lower House, the current country independents are being watched very carefully by rural Australia. No doubt, National MPs are closely watching them too. Rogue WA National, Tony Crook, managed to do what the rest of his fraternity could only dream of by swiftly dissociating from the Nationals soon after the election and putting his vote up for auction.

If the independents and Crook can materially improve the lot of rural Australians with their pivotal votes, then National MPs could be faced with the unenviable choice at the next federal election of either becoming an independent themselves or being beaten by one.

Dessert: The Greens run the risk of dis-enfranchising their constituency

More than a decade ago the Australian Democrats held the balance of power in the Senate, just as the Greens will do on 1 July next year as a result of this year’s election. In order to extract certain concessions from the Howard Government, the Democrats agreed in 1999 to support the GST legislation in Senate. This decision was portrayed as a sell-out of Democrat principles. It undoubtedly contributed to the leadership tensions and internecine manoeuvrings that wracked the Democrats from that time on, until they lost their last Senate positions in the 2007 federal election.

When the Greens attain the balance of power in July next year, they will discover as did the Democrats that it’s much more difficult to be a political or policy purist when your vote actually counts. Negotiations will inevitably lead to concessions, sometimes on the part of the Government but also of the Greens. The Greens will need to manage member expectations better than the Democrats did to avoid the pitfalls that decision-making can bring.

Cheese: The current model for election reporting is broken

Much has already been said and written about this final point. Political parties have so tightly orchestrated the involvement of mainstream media in election campaigns that the resulting coverage is so contrived that it’s meaningless. Senior journalists rarely travel with the Leaders’ teams any more, preferring to observe and opine from the comfort of their office. Journalists who do travel with the Leaders are told little, shepherded from venue to venue, and given little time to absorb policy announcements before being given access to the Leader who merely parrots the line of the day.

The current model is broken and probably cannot be repaired. I look forward instead to mainstream media outlets refusing to put anyone at all on campaign buses next election, the parties having to instead produce campaign footage for placement on YouTube, Leaders choosing to hold numerous town hall meetings around the country instead of pic-facs, and MP and candidates dealing directly with their constituents through Twitter, Facebook and Skype.

Now that will be an election to reflect upon!