Liberals’ Nick Minchin says GST must be raised Australia’s longest-serving finance minister, Liberal Nick Minchin, said the federal government had to look at increasing the GST rate or broadening its base in the next decade to deal with a long run of budget deficits that will make the central bank’s job tougher. Mr Minchin, who was one of the architects of the 10per cent GST, also said spending should be cut as part of a five to ten year medium-term fiscal strategy to deal with “huge” structural problems and a looming funding crisis. “The GST, in terms of its rate and its scope, will have to be revisited in the medium term,” Mr Minchin told the AFR Weekend on Friday. “It’s unavoidable in terms of a revenue side and a consumption tax is the best way to address the revenue problem.” Mr Minchin said the fiscal outlook was at a “critical” level, and the aid budget and health expenditure needed to be urgently reviewed. “The aid budget needs to be frozen immediately and health expenditure is the major problem for federal and state governments because it is demand driven. Most Commonwealth programs have a cap and when the money runs out it runs out – health is immune to that and it is just unsustainable.” Mr Minchin’s intervention – which flies in the face of Labor and Coalition refusals to look at the GST – came as Labor faced new doubts about its budget position. A report commissioned by the Minerals Council of Australia warns of a “large structural hole” that needed a $14billion cut in spending or an unprecedented period of fiscal restraint to be avoided. Treasurer Wayne Swan, in an essay published by the Chifley Institute on Saturday, concedes Labor hasn’t “always pulled the right rein every single time over the last few years. “But whatever people think about this Labor government they know it gets the big economic calls right even when that comes at a political cost. “No country in the world has made better decisions over the past five years than ours, and the dividends of that can be seen in low unemployment, contained inflation, and low interest rates.” Mr Swan also takes aim at calls by conservatives to rip billions from the economy, "risking recession and jobless queues kilometres long". “When expenditure in an economy is savagely slashed, aggregate demand is suppressed and unemployment rockets up, and ultimately savings in the economy (including the budget position) deteriorate, and in the long run we are all poorer.” As Prime Minister Julia Gillard visited Darwin on Friday to promote the controversial Gonski education reforms to the Northern Territories government, Opposition Leader Tony Abbott said Labor always overestimated its revenue and underestimated spending. “That’s why this is a government which just can’t be trusted to get the budget back into the black – not now, not ever,” he said. Mr Minchin sai d the Reserve Bank of Australia’s job would be made harder by a long run of deficits. Independent MP Rob Oakeshott said Australia was in urgent need of budget reform to support standards of living over the next 30 to 50years. “At the heart of that is comprehensive tax reform,” Mr Oakeshott told the AFR on Friday. The next government will have “no option but to put the GST on the table in a negotiation with the states over tax mix.” Su-Lin Ong, RBC Capital Markets head of economics, said the GST was the “most glaringly obvious” way to try to deal with the revenue drag facing the federal budget.“No-one wants to talk about that but from a political perspective – we just can’t sustain expenditure like this,” she said. Mr Minchin said there was little room to raise taxes through increasing company taxes, and that the budget needed a medium-term fiscal strategy taking in 20- to 30-year policy outcomes. He said the longer-term view would have shed fresh light on the Coalition’s decisions around the aged pension and diesel fuel rebate. “The idea of publishing in the budget papers a complete assessment of the structural position should go beyond the four years,” Mr Minchin said. “We need to be able to adequately address and focus on the long-term fiscal outlook and that would have been invaluable while the Coalition was in government and is even more important now.”
Posted on: Tue, 16 Jul 2013 13:46:28 +0000
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