Forget about tax cuts — and GST will be 15pc TERRY MCCRANN SUNDAY HERALD SUN MARCH 29, 2014 TREASURER Joe Hockey announced on Friday that Australians would never again get a general tax cut. He told us that future budgets, right into the 2020s and beyond, would be increasing taxes and cutting government spending. In short, that both state and federal governments, whether Labor or Liberal, would be taking money out of your pockets, both coming and going. And after that, they’d come back and take some more. What? You didn’t catch that on the news? Well, that’s because he didn’t actually, literally, say that. It’s that he might just as well have done, on the basis of what he did tell the state treasurers. The meeting was to discuss how the GST cake would be carved up among the states and also to hear about Hockey’s “sell and build” deal. Boy, did he have a deal for the states: sell state-owned assets like power stations (not that we have any left to sell thanks, and I sincerely mean thanks, to Jeff Kennett), roads, rail and all the bits and pieces built up over the past century, and he’ll add 15 per cent on top. The money he’ll send to the states will come from the states themselves, or at least their citizens. Or the Federal Government will borrow it, adding to its debt. Actually, your debt. There’s one big condition on the Hockey offer. To get the 15 per cent extra, a state has to spend the money it raises from the asset sale on new infrastructure or buying a new asset. It can’t use the funds to pay off state debt. It can’t do what Hockey’s predecessor Peter Costello did as treasurer — use the money raised from selling Telstra to pay the federal debt down to zero. We saw the last surplus and the last tax cut, both back in 2008. And we aren’t going to see either again in most of our lifetimes. What Hockey did tell the premiers was that the first analysis of the federal Budget in the 2017-18 year showed a deficit of $32 billion. What about the years in between? Well, we already know they will tot up deficits adding to $123 billion. Former temporary Labor treasurer Chris Bowen finally ‘fessed up to those deficits in the temporary Rudd government’s last days, after his predecessor Wayne Swan finally abandoned the ludicrous promise of getting a surplus in the 2012-13 year. But he only ‘fessed up to a further $63 billion in deficits, to come over the four years to 2016-17 (on top of the $191 billion in deficits from Labor’s first — and last — six years). And like every one of those Swan budgets, Bowen’s first and last fiscal effort still kept promising that the deficits would be shrinking almost to nothing by the ‘out years’. Now Hockey has previously told us that Labor’s shrinkage was bunkum. Labor was going to have $63 billion of deficits out to 2016-17, ending with a tiddler of just $4 billion. Hockey said, no. The deficits will add to $123 billion, and we’ll still be $17 billion in the red in that last year. True, he had no incentive to make things look better and he did specifically make the deficit worse by giving the Reserve Bank money. But that was only $9 billion. But the big point is that the way Labor structured its much-ballyhooed NDIS — National Disability Insurance (sic) Scheme — is that the actual spending on it, really only starts to wind up in 2017-18. And so, people actually getting help — outside the pilot programs — really only starts then. So what Hockey disclosed was that when this kicks in, the 2017-18 deficit won’t go down from 2016-17 but rocket out to $32 billion. I’m here to say — good luck that the deficit should be that small. Two things make me very, very sceptical. The way treasurers calculate future budget numbers is to assume that the economy returns to normal growth; that people get jobs and pay taxes. It does not try to predict, say another GFC, an implosion — or explosion — of growth in China. Second, the numbers assume governments don’t get any new ideas to spend money, like another NDIS. Third, that tax revenues rise at a faster pace than growth in the economy because of the never ending, insidious impact of bracket creep; the very real increase in your tax — and it all paints too optimistic a picture of the budget bottom line. In fact, as we can see only too clearly from the past six years, you can take to the bank the certainty that the budget deficits that we actually get over the next four years, subject to government action, will be bigger than forecast. When you throw in the blunt reality that whenever a government offers a “free lunch” like the NDIS, more people than calculated always turn up, we can be all but certain that Hockey’s $32 billion 2017-18 deficit number will turn out to be optimistic. And that means further deficits in the years after that. Goodbye any prospect of a generalised tax cut this side of the 12th of never. Hello permanent bracket creep, and all but certainly a 15 per cent GST. Treasurer Joe Hockey after his meeting with state and territory treasurers.
Posted on: Mon, 31 Mar 2014 11:25:44 +0000
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