Newman's cunning early election trick causes chaos

Wednesday January 14 2015, 5:00pm

QUEENSLAND Premier Campbell Newman engaged in some hypocritical humbug in announcing an early election for the state.

“Queenslanders don’t want and don’t need months of endless politicking and uncertainty as people jostle up to an election date,” he said. “We can’t afford to lose one day because that’s bad for the economy and bad for jobs. We simply can’t have the sort of political chaos that we have seen in other states.”

So, he equates an election campaign where issues are debated and tested with “political chaos”. It almost harks back to the days of Joh Bjelke-Petersen when pesky things like elections or proper processes were seen as getting in the way of business – the only thing that matters for them.

If Australian politicians were serious about removing uncertainties in the election cycle and providing an environment in which business and the public service can plan, they would provide fixed-term elections for all jurisdictions.


Elections could be held in late November or early December and any new government would be able to settle in more easily over the summer.

Far from avoiding “political chaos” Newman in fact created it by forcing people to scramble unexpectedly back from holidays.

The truth is that the economy had nothing to do with it. It was a cunning trick to surprise the other side and the minor parties.


THE Australia Institute did a splendid job last week at calling the bluff of business groups, conservative politicians, economists and think tanks that pretend to be independent while taking swags of money from the big end of town.

These groups have been calling for an increase in the rate of the GST and a widening of its application. Various leftist commentators and community groups are opposed.

For example, the Liberal MP for Wannon in Victoria, Dan Tehan, argued this week that the GST should be widened to include all food. The Business Council of Australia and the Australian Chamber of Commerce and Industry agree and say the rate should go up from 10 per cent.

On the other hand, Cassandra Goldie, chief executive of the Australian Council of Social Service says her organisation is “very opposed” to the tax on fresh food.

That sort of left-right split has dogged sensible debate on the GST for 14 years. Labor opposed the Coalition’s GST proposal at the 1993 election and won. Labor again opposed the Coalition’s GST plan in 1998 and won the popular vote, but not enough seats to form Government.

So even if in his heart of hearts Prime Minister Tony Abbott would like to broaden the GST and increase the rate, as his former employer John Howard would like, he is very wary of it. It is seen as a regressive tax because poor people spend almost 100 per cent of their income on goods and services whereas the wealthy save a lot of their income.

Now the Australia Institute has come up with research that shows the GST base could be widened in a way that would not hurt the poor. The institute’s Matt Grudnoff says the GST should be applied to private school fees and health insurance.

Natsem figures show that the GST on school fees would raise $790 million – 63 per cent of it from the top 40 per cent of earners. The GST on health insurance would raise $1.53 billion – about a third of it from the top 20 per cent of earners.

My guess is, though, that the burden would be even more equitably spread. This is because income distribution figures are based on tax records and surveys, and many people understate their income. So many people who are notionally in the bottom 20 per cent of earners and send their children to private schools are not really in the bottom 20 per cent of earners at all.

I cannot imagine people withdrawing their children from private schools because of a 10 per cent GST. Many private schools have raised their fees by that amount in one go in the past and kept their students.

Nor would people withdraw from private health insurance because of a 10 per cent GST.

Further, I doubt whether imposing a GST on these things – which are disproportionately consumed by wealthier people – would see people switching their vote to Labor.

Economists like broad-based consumption taxes because they are efficient and do not have the distorting effects of other taxes, like property taxes. But they recognise that without better welfare payments they can be unfair. This is because when you look at the total tax picture (income and consumption) people on very low incomes should not be paying any tax at all, but with a broad-based consumption tax they pay tax and at the rate of the GST because they spend all their income.

The trouble for the Government is that any promise to increase welfare payments to compensate for a higher GST would be met with justified suspicion because governments can and have whittled away welfare benefits by changing indexation arrangements.

At least the Australia Institute’s proposal would pass a basic fairness test.

Maybe its next project should be to determine if imposing the GST on fresh food would be as regressive as we imagine. My guess is that the shopping baskets of wealthier people would have a higher proportion of fresh food than those of poorer people.

Another project would be to determine whether GST on rent might hit landlords greater than tenants because the GST would not be easily passed on.