Extract from ABC News
With Australia facing unprecedented economic challenges, we need a courageous reset in our federal budget discussion.
There's a process in politics known as giving people space, or sometimes just giving people permission.
When there is a difficult issue to be confronted, around which everyone has very entrenched views, players outside the system (or sometimes even in it) can help break a stalemate by resetting the boundaries of the discussion.
In the world of political deal making, it is the great value of having a more diverse parliament than one purely comprising two major political groupings.
It's not just that there are votes on the floor to be had, negotiations to be done. It's that the cross bench opens up new discussions in places where it is difficult for the major parties to go without straying from long held positions.
Would Labor have been prepared to move as far this week, for example, as they did on policies which severely constrain — in practice, if not explicitly — new coal and gas projects, if the Greens hadn't been calling for a total ban on such projects?
We aren't talking here about whether or not any of the policy options are good, bad or indifferent. Just about the mechanics of a political party that has become gun-shy about doing anything significant about emissions reduction, after repeated pastings by the Coalition, having "space" to move. But not as far as the Greens might want.
The task of giving governments space to move also often falls to those outside the system but with authority or credibility to change the conversation.
Federal parliament rose this week for the last time before Jim Chalmers' budget on May 9.
Never has there been more need to change the political conversation about policy than there has been about federal budgets just now.
Reflecting on Keating's 'banana republic' remark
The number of utterly inconsistent ideas and realities pressing in on the budget discussion, not just the budget itself, is at a level I certainly haven't seen in four decades of writing about them. Yet it's still not at the point where someone really calls it out and changes the discussion altogether.
The period leading up to Paul Keating's banana republic statement comes to mind. There had been maybe one or two years of increasing alarmist conversation about Australia's foreign debt.
But it was Keating's remark that if we didn't fix it, we would become a banana republic that really transformed the debate about economic policy in Australia.
Of course, by comparison with the sorts of numbers for budget deficits and debt that we have now absorbed, the alarms of the mid 1980s seem sort of laughable.
At that point, though, there seemed to be a range of hard but clear options for dealing with the "crisis": budgetary change — in the form of significant spending cuts and tax changes which would enhance investment decisions; labour and product market deregulation to make the economy more efficient and competitive.
These were perhaps the first layer of policy prescription orthodoxies that continue to prevail in theory, if not in practice, right through to today.
On top of that, we have been stuck with the ludicrous idea that tax as a percentage of GDP can go no higher than 23.9 per cent of GDP: ludicrous because it has no basis in economic policy. It has just been asserted as being really excellent because it was the level that prevailed when John Howard left office.
The spending side of the budget alone has carried the burden of the whole "debt and deficits" schtick.
Nudging the government towards courage
So here we are approaching the 2023 budget with literally unparalleled levels of debt and deficit generated through a pandemic; with an acknowledgement that the demands of our ageing population alone are going to significantly increase government spending; with an eye-watering commitment to a questionable nuclear submarine program dwarfing all previous levels of expenditure; that the current mix of tax bases in the economy are inefficient and eroding; but still little real sign that the status quo on tax might have to change.
There are few people trying to give the government space here — and even possibly a bit of a nudge towards courage.
One of them is crossbencher Allegra Spender who on Friday organised a tax roundtable with a range of experts to open up the discussion about what needs to happen.
Spender isn't necessarily saying we need more tax or less tax. Her point seems to be more about the efficacy of some tax arrangements.
One of the experts at the roundtable was Dr Ken Henry. Henry was a key player in the Keating tax reforms of the 1980s and in the Howard/Costello reforms of the 1990s.
And he headed the wildly ambitious tax review commissioned by Kevin Rudd and Wayne Swan which is mostly known for what became known as the mining tax. It also proposed profound changes to many of our tax bases — including land and transport — which have never really seen the light of day.
In a landmark speech a couple of weeks ago, Henry sought to revive the debate. And in a subsequent interview on 7.30, he observed that Australia had been "kidding ourselves" about the scope to rein in a huge deficit through spending cuts alone.
Over 20 years, he said, Australia had neither managed to keep spending under control or boost productivity in a way sufficient to allow us not to increase taxes.
That meant the task now, given a budget deficit of around $44 billion, was that "we're talking about a fairly immediate or close to immediate increase in revenue of the order of $50 billion a year".
'Incremental' changes here and there
But instead, we had been having a brawl about superannuation changes that would raise "something of the order of $2 billion a year".
"Clearly that is a drop in the bucket compared to the $50 billion, at least, that needs to be raised in additional revenue, in short order." Henry said.
"It's remarkable to me that there's been so much debate over what is really such a small measure. If this is how we're going to address the problem by incremental change here and incremental that change there, and so on, we're going to need 20 or 30 such measures, in order to address the fiscal challenge that we confront."
Henry argues Australia has to learn how to place less reliance on personal income tax and more reliance on other revenue bases "that do less economic damage".
Other tax bases are morphing, or disappearing, before our eyes, he notes. For example, fuel excise is disappearing thanks to electric cars.
But beyond that, he says: "As a nation that has such a peculiar reliance upon the export of natural resources, mineral resources in particular, I still find it quite extraordinary that we have not been able to figure out how to extract more revenue from that particular source. It just defies understanding."
On Friday, the Financial Review revealed the government is looking at raising billions of dollars more tax from the profits of gas producers through the existing petroleum resource rent tax.
One suspects that, like superannuation changes, that might be just a "drop in the bucket".
First, we need a clear direction — and a reset in our discussion about the aims and methods of the federal budget.
Laura Tingle is 7.30's chief political correspondent.
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