They can't do anything right

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This was published 12 years ago

They can't do anything right

The public doesn't reward federal governments, even when they've improved overall wellbeing.

By Peter Hartcher

If you are the most unpopular federal government in 40 years partly because of a new tax that you plan to introduce, do you:

A: Declare that you will not make any further tax changes?

<em>Illustration: Rocco Fazzari</em>

Illustration: Rocco Fazzari

B: Quietly edge away from any further use of the three-letter word starting with "t" and change the subject?

C: Call a big public meeting where 156 special interests get to come and demand tax cuts, setting off a frenzy of media speculation, unrealistic public expectations, Opposition scaremongering and talk-back terrorising of low-income households?

Of course, you go straight to Option C. That's what the Gillard government did this week when it released its discussion paper for the tax forum it plans for October.

Why would the government do this? Is it crazy? It's doing it because it has to. It's a condition of it agreement with the independents and the Greens on forming a minority government.

The glaring irony here is that this is the government that just wanted a quiet life. Julia Gillard seized the prime ministership not only to get rid of Kevin Rudd but also to downplay or dismiss some of his most ambitious ideas, including carbon pricing and the mining tax.

But while Labor might have lost some of its ambitiousness, its junior partners in government have not.

The Gillard government is now the vehicle for the ambitions of others. The carbon tax, pokies reform and now the tax forum were all thrust upon Gillard by the Greens or independents.

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What are the ambitions of the tax forum? The government started by telling us what its ambitions are not. You can see why - it's trying to head off as much scaremongering as possible. Wayne Swan said that any tax changes would be "revenue neutral"; that is, there would be no net increase in overall taxation.

He said that he's not prepared to discuss any changes to the GST. And he's not prepared to negotiate any changes to the tax plans already under way, such as the carbon tax or the mining tax.

A discussion paper, which Swan stressed was not government policy but for discussion only, listed, as one possibility, a congestion tax on cars to discourage car use in peak hours.

But when this aroused some media attention, Swan ruled this out too. His press secretary sent an email to media outlets about 4pm which said on the subject of congestion taxes.

"This was raised by the Henry review and is an issue for state governments. The federal government has no intention of implementing congestion charges."

Other media reported this.

Sydney's Daily Telegraph decided that it would run the story anyway. And not just run it but make it the main front-page news story in yesterday's paper.

"Second Wave of a Tax," blared the headline. Its story read: "Still reeling from the announcement of a carbon tax, drivers could be hit by another wave of green-induced financial pain. A string of new taxes are on the agenda, with the federal government exploring more options to hit taxpayers where it hurts.

''A road congestion tax, designed to limit the use of cars on city streets, and a heavy vehicle tax to slug truckies by weight or distance travelled, are two of the 'environmental and social' major tax reforms contained in a discussion paper."

And it's true that they were contained in a discussion paper. It's just that Barry O'Farrell had earlier ruled it out for NSW. So had his Treasurer, Mike Baird.

And the leader of the junior coalition partner in NSW, the Nationals' Andrew Stoner, had too. "Absolutely no plans from the Liberals or the Nationals for a congestion tax," he said last year.

And now the federal Treasurer had ruled it out too. The Telegraph's story ran immediately under the giant puff-box advertising its Harry Potter poster. So its front page was based on fiction and fantasy.

But that didn't stop the federal Liberals' shadow treasurer, Joe Hockey, taking it up yesterday in a radio interview with John Laws. Hockey said that he was very worried about the government.

Hockey: ''I fear what they are going to wheel out in the future. Already today we have seen speculation about a congestion tax. People have had enough. In the city if you are paying tolls you are paying a congestion tax. For my brother, who drives to the city everyday, he pays $17 in tolls. $17, and that is from north-west Sydney.''

Laws: ''Is that one way?''

Hockey: ''One way.''

Laws: ''Holy ghost.''

Hockey: ''He has a young family and he is saying to himself, 'What are they doing to me?' They are about to increase electricity by at least 10 per cent and gas by at least 9 per cent. They have a flood levy on him and interest rates are looking as if they are going to go up.''

Laws: ''I believe they will go up.''

Hockey: ''What would posses this government to go and have a congestion tax? What would posses them at this point in time? It is just absurd!''

Laws: ''Well, are they stupid?''

Hockey: ''Yes, they are. They are stupid.''

The circus rolled on. In Macquarie Street, the NSW Liberal government then put out an angry denunciation.

"The fact the federal government is suggesting a congestion tax for a place like Sydney, that doesn't have adequate public transport links to growth areas like south-west and north-west Sydney after 16 years of Labor failure, shows how completely out of touch Julia Gillard and Wayne Swan are," thundered the NSW Roads Minister, Duncan Gay.

This was on a tax that his own government had ruled out and that the federal government had also ruled out. Gillard suggested yesterday that the Telegraph enter the story in a fiction competition.

And so the Daily Telegraph-Liberal Party-talkback-Liberal Party misinformation machine invented and propagated a new line of anti-Labor vitriol.

The weirdest part of all this is that there is no shortage of actual Gillard government failings. There's no need to invent one.

In Australia's serious media, the universal tone of commentary was the opposite - business groups, professional groups and economists expressed disappointment that the agenda for tax reform was so limited.

The government could be forgiven for giving up on any attempt to reform tax. Look at the tax changes the Rudd-Gillard governments have already implemented:

First, Labor cut income taxes for three years in a row. A worker earning $50,000 is this year paying $1750 less tax than he would have three years ago. Someone earning $80,000 is paying $1400 less.

Does the federal government get any credit for this? Looking at its primary vote in the Herald-Nielsen poll of 26 per cent, the lowest of either major party in the 39-year history of the poll, it would seem not much.

It's also raised not only the payment but also the formula for calculating pensions for 3 million age pensioners. Instead of getting a pension equal to 25 per cent of the average wage, Rudd Labor raised the ratio to 27.7 per cent in the 2009 budget. That meant an extra $1100 a year extra for single pensioners and $1900 extra for couple pensioners. The cost to the budget was $14.2 billion over four years.

And then there's the increase in the childcare rebate, the introduction of paid parental leave and a string of other benefits.

The government's future plans include a mining tax. It will use the revenue to, among other things, cut the corporate tax rate from 30 to 29 per cent.

And it has announced a trebling of the tax-free threshold from $6000 to $18,000, as part of its carbon tax changes. If implemented, that would take about 1 million people out of the tax system entirely.

They would be lower-income earners, and most would be women.

And despite the thundering rhetoric about the vast tax burden on the Australian people, the OECD's data shows that Australia imposed total taxes of 27.1 per cent of GDP in 2008, its latest full set of comparable data. That made Australia the seventh lightest-taxing country among the 34 developed countries of the OECD.

The average for the group was 34.8 per cent. The only countries with a lighter tax burden than Australia were Chile, Japan, South Korea, Mexico, Turkey and the US.

Despite all of this, the government's poll numbers keep falling. This helps confirm the suspicion that the Australian public doesn't really reward governments for improving their economic wellbeing.

In fact, it's more than a suspicion. Professor Ian McAllister, of the Australian National University, writes in his new book, The Australian Voter: Fifty Years of Change, that careful surveys of voter behaviour show that the electorate gives greater weight to the outlook than to the past or present.

In other words, we will pocket a tax cut or a payout without pausing to credit the government that delivered it. The Howard government made the same discovery.

But if Gillard and Swan thought that it was all hopelessly hard and felt tempted to give up, if they thought they might turn the 156-person tax forum into something akin to Gillard's earlier plan for a 150-person "citizens assembly" as a way to kill off carbon pricing, they had their spines stiffened yesterday.

One of the people who keeps them in power, the independent MP Rob Oakeshott, reminded them of why they must persist with the October tax forum.

"The forum is an important part of my agreement with the government. I expect the government to treat this opportunity as the most serious work it will do during its time in office in this 43rd Parliament," he said. "No option is off the table."

If they wanted a quiet life, Gillard and Swan should have taken up gardening.

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