GST reform: Bill Shorten has a tough decision to make

A popular Prime Minister leading a party praised for its economic management wants to have a national conversation about expanding the GST. This leaves the Opposition Leader in an invidious position.

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.

Where is social media savvy Malcolm?

Why has new Prime Minister Malcolm Turnbull – an early adopter of social media and a prolific app user – nearly vanished from Twitter?

Why has new Prime Minister Malcolm Turnbull – an early adopter of social media and a prolific app user – nearly vanished from Twitter?

For SBS News.

Baird victory not necessarily good news for Abbott

Much has been made in the past 48 hours of Mike Baird’s likeability. Federal Social Services Minister Scott Morrison said yesterday the NSW Premier was “popular but not a populist”, noting also that he had a “winning smile and that incredible natural charm, which only a few people are blessed with”.

Many others have made a similar distinction. Considerable attention has also been given to Baird’s risky decision to be up front with the voters of New South Wales about his plans to privatise the state’s electricity infrastructure.

According to much of the commentary, Baird has shown his Liberal colleagues how to successfully sell reform. In the words of Scott Morrison, this involves not just the selling of change, but also the benefits of change.

It’s no coincidence that the need to “sell the benefits of change” has become a mantra chanted by leadership agitators at the federal level. The incantation was evoked not only by Morrison in recent days but also by Foreign Minister Julie Bishop in response to Baird’s re-election.

But to infer that Baird essentially charmed his way back into government despite an unpopular privatisation agenda would be to misunderstand the NSW election result. It wasn’t Baird’s popularity or charm to which voters responded; it was his integrity.

Integrity is defined as the quality of being honest and having strong moral principles. Like authenticity, it’s hard to fake. According to three captioned pictures that reportedly hang on his office wall, Baird’s driving principles are integrity, passion and results.

So it was in accordance with those principles that the neophyte premier promised to restore integrity to the government when Baird replaced the former NSW Premier Barry O’Farrell last year.

Baird delivered on that promise, overseeing the resignations of 10 Liberal MPs from the party after they were exposed by ICAC to have accepted illegal donations, declining to run Liberal candidates in the by-elections brought about by the resignations of sacked Liberals as an act of “atonement”, and driving reforms to clean up political donations in the state. As a result, Baird is now a politician that people trust.

Even Baird’s opponent, Labor leader Luke Foley, recognised in his concession speech on election nightthat Baird embodies that elusive quality, calling the re-elected premier an “honourable man”.

It may well be that NSW voters re-elected Baird because he successfully communicated the benefits of his privatisation agenda. That’s certainly what his reform-minded colleagues at the federal level are counting on. But it is more likely the state’s electors decided to go with Baird because they trust him to do the right thing for the state, even when it comes to an unpopular policy like selling-off or leasing state-owned assets.

This is what is really meant when it is said that Baird’s election strategy was based on that of John Howard when the former PM took the GST to an election in 1998. In contrast to Baird, Howard was never popular in the traditional sense, although he achieved the second highest approval rating ever as prime minister (67 per cent in May 1996). But in those days, before the Tampa and Work Choices, there were enough voters who nevertheless trusted the relatively unpopular Howard to do right by the nation to see him re-elected at the GST election, albeit with less than 50 per cent of the vote but enough seats to retain government.

Based on last weekend’s election, Baird’s trust factor is far superior to Howard’s, having won 55 per cent of the two-party vote with 48 per cent of people supporting the privatisation proposal, up from only 23 per cent in February. A Newspoll in late February found 75 per cent of NSW voters would describe Baird as trustworthy.

Consequently, the Foreign Minister Julie Bishop was only partly right when she claimed the take-out message from the NSW election was “people are ready for reform as long as it’s explained to them”. As she separately recognised, trust was also a key factor.

Considered from this perspective, the NSW election result is not particularly good news for the PM. It would be fair to say Abbott has minimal integrity in the eyes of Australian voters, given his track record in breaking promises and telling little white lies, such as “we have fixed the budget”.

Unsurprisingly, the most recent Newspoll to measure perceptions of the federal leaders’ attributes, conducted in February, found only 43 per cent consider the PM to be trustworthy. While no similar measure is available for another of the government’s key salespeople, Joe Hockey, a recent poll found only 27 per cent approve of the job he is doing as Treasurer.

Now the NSW poll is out of the way, federal Liberal MPs will again turn their minds to their own election prospects, as well as the government’s fractured reputation for sound economic management. This reputation must be repaired if the Coalition is to retain incumbency.

As the PM said in his congratulatory statement to Baird, the NSW premier is a man of integrity who “stayed the course in the face of a concerted scare campaign by Labor”. In contrast, Abbott is the man who has wilted in the face of opposition, dropping or abandoning $27 billion of budget measures, and who has shown little integrity in ditching $3 billion worth of unpopular reforms in the past six weeks simply to shore up his embattled leadership.

In considering what to do next, Liberal MPs will give further scrutiny not only to the PM but also the Treasurer.

In doing so, three things will quickly become apparent. Neither man retains an appetite for the required economic reforms, the skill to communicate the worth of reform, nor the perceived integrity to secure voters’ trust to implement the reforms.

The real question is whether there is anyone at all in the Liberal Party, man or woman, who can fit this bill.