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Abbott must share the blame for tax stuff-up

<i>Illustration: michaelmucci.com</i>

Illustration: michaelmucci.com

WHEN governments stuff up in a democracy we think the solution is obvious: toss 'em out and give the other lot a go. But if you want a democracy that also delivers good government, it ain't that simple.

For too long, the private partisanship of those who want to see good economic policy lead to good economic outcomes has blinded us to an obvious truth: if you look back at the reform we've implemented, you find almost all of it happened because it had the support of both sides.

It's been too easily forgotten that all the potentially hugely controversial reforms of the Hawke-Keating government - deregulating the financial system, floating the dollar, phasing out protection and moving to enterprise bargaining - were supported by the Coalition.

Amazingly, the last big move to slash protection came during the depths of the recession of the early 1990s, when unemployment was on its way to 11 per cent. Dr John Hewson's big criticism was that Labor should have been bolder.

How did Labor have the courage to do such things? It's simple: it knew any adversely affected vested interests would get no sympathy from its political opponents.

Most Australians - even those who follow politics closely - don't realise how obsessed politicians are by the likely reaction of their opponents to anything they do; how much the policies of the opposition affect the policies of the government.

After Paul Keating failed to win his party's support for a broad-based consumption tax in 1985, he set his face against a goods and services tax. His scaremongering over Hewson's proposed GST was the main reason he won the unwinnable election of 1993.

After Keating's demise at the following election, the Labor opposition abandoned all bipartisanship on economic reform, running another scare campaign against John Howard's GST plan at the 1998 election and going close to defeating him.

This makes the GST the honourable exception to the rule: the only major economic reform we've seen survive without bipartisan support.

And it brings us to the mining tax. Let me be crystal clear about this: Labor has made an almighty hash of the minerals resource rent tax, revealing an abysmal level of political nous, moral courage and administrative competence.

It failed to release the Henry tax reform report for discussion well before announcing its decisions (thereby catching the miners unawares), failed to explain an utterly mystifying tax measure (and, before that, press Treasury to come up with something more intuitive).

It failed to stop the entire business community joining the miners' crusade against the tax, failed to counter the economic nonsense the miners peddled in their TV ad campaign, and failed to hold its own in the negotiations with the big three miners, allowing them to turn the tax into a policy dog's breakfast that, at least in its early years, would raise next to nothing.

In all this Kevin Rudd has to take much of the blame (for lacking the courage to release the Henry report early), Wayne Swan has to take much of the blame (for not putting Treasury through its paces and being so weak at explaining the tax) and Julia Gillard has to take much of the blame (for decapitating Rudd and then being so desperate to rush to an election she was prepared to agree to anything the miners demanded, without proper Treasury scrutiny).

After all that, Labor deserves no mercy. But the truth is Tony Abbott also played a part in lumbering the nation with a bad tax.

The case for requiring the miners to pay a higher price for their use of the public's mineral reserves at a time of exceptionally high world prices (even now) is strong.

Remembering the miners are largely foreign-owned, a well-designed tax on above-normal profits is a good way to ensure Australians are left with something to show for all the holes in the ground.

Similarly, the argument that a tax on ''economic rent'' (above-normal profit) is more efficient than royalty payments based on volume or price is strong, as is the argument that taxing economic rent should have no adverse effect on the level of mining activity. Relative to royalties, quite the reverse.

But Abbott cared about none of that. His response was utterly opportunistic. He would have opposed the tax whether it was good, bad or indifferent.

He saw an opportunity for a scare campaign and he took it, particularly when it became clear the big three miners were out to defeat the tax by bringing down the government and so would have bankrolled his election campaign.

It was fear of what Abbott would say that prompted Labor to delay the release of the Henry report until it could rule out most of its controversial recommendations.

It was the success of Abbott and the miners' joint campaign against the tax that, added to his loss of nerve on the emissions trading scheme, made Rudd vulnerable to his enemies within Labor.

And it was Abbott's strength in the polls that made Gillard so anxious to square away the miners at any cost and rush to an election while her (as it turned out, non-existent) honeymoon lasted.

But noting Abbott's share of the blame isn't the point. The lesson for people hoping for economic reform is that unless they're willing to use what influence they have to urge bipartisanship on their own side, they should expect precious few further advances.

Twitter: @1RossGittins

172 comments so far

  • I usually respect most of what Ross Gittins has to say but to try blame Abbott to the the mining tax fiasco exposes him as being a little clouded by his political bias.
    Very poor analysis..

    Commenter
    Nick
    Date and time
    February 18, 2013, 8:35AM
    • To be fair Nick (and other comments saying pretty much the same thing) Ross prefaced his bit on Abbott by slamming the collective efforts of the ALP (which i agree have been rubbish on this issue)

      The mining tax is the example, bipartisan support for well thought out economic reform that looks beyond a federal term is the point.

      Commenter
      Adam
      Location
      Freshwater
      Date and time
      February 18, 2013, 10:01AM
    • Wierdly I think he has just copied Michael Pascoe's homework. That aside, there is a (non bias political point) there, which will be shot down by a stream of troll's, grumpy old men and young liberal members, that the standard of opposition behaviour is at an all time low. Where the LNP in the 80's and 90's played a role in good government and policy development, current thinking (not just LNP and not just in oz) is to derail and demolish, with no thought to either short or long term outcomes. Worst of all expect worse with a labor government in opposition post september. Until it changes the only people that will care about politics are sort of the parochial bleaters who are warming up their finger to give poor old ross a spray.

      Commenter
      tele12
      Date and time
      February 18, 2013, 10:09AM
    • You should read the article, not just the headline.

      You might find out that the headline doesn't actually reflect the gist of the article - which is that economic reform generally requires partisan support; and that Abbott was irresponsible in helping to sink what Gittens believes was a good reform.

      Of course the blame lies with Labour.

      I agree with Gittens. If companies are making obscene profits out of selling publicly owned assets, then it is fair enough to tax them a little higher. Let's face it, what's in the ground is never going to depreciate in value, so there's no chance the miners will leave.

      Commenter
      Ross
      Location
      Preston
      Date and time
      February 18, 2013, 10:10AM
    • So let me get this straight, commenters so far - your message is:

      "Ross is biased. I'm not. Labor are rubbish. Go LNP!"

      I see. Thanks for the lesson in objectivity.

      The funny thing is that Ross went to soo much effort to clarify that this was about bipartisanship in general and not about one party or the other. There was more criticism of Labor in there than the LNP. Did you cheerleaders even read past the headline?

      Commenter
      janice
      Location
      melton
      Date and time
      February 18, 2013, 10:12AM
    • By god the mining astroturfers are out in force today! Ross Gittins is one of the only voices of sanity left in the MSM in this debate and readily attacks both left and right when the occasion calls for it. To accuse him of bias does nothing but draw attention to your own roles and that of your paymasters.

      Commenter
      Jimmy
      Location
      Canberra
      Date and time
      February 18, 2013, 10:20AM
    • Wayne and Julia Gillard
      "has to take much of the blame (for decapitating Rudd and then being so desperate to rush to an election she was prepared to agree to anything the miners demanded, without proper Treasury scrutiny)."
      The only part of this article that counts.........

      Commenter
      BANK CASINO
      Location
      sydney
      Date and time
      February 18, 2013, 10:32AM
    • Rubbish. Gittins rightly lists criticisms of various government ministers and the PM, then mentions Abbott's belligerence (and obsession with his belief he was robbed of the last election) to say no to a rational economic intitiative.
      The only thing wrong with this piece is is doesn't underline Abbott's recent rank hypocrisy in complaining how much the tax hasn't raised.

      Commenter
      drovers cat
      Location
      an alleyway
      Date and time
      February 18, 2013, 10:33AM
    • So according to the left, its a rational economic decision that should have been supported.

      Nope, whether it is rational depends on your point of view. Conservatve voters opposed it from day one for a number of issues and fully supported Abbott in opposing it. The left need to learn that conservatives do not have to agree with your views.

      As we are clearly seeing the left cannot govern and more and more people are thankfully turning away. Roll on Sept 14 (or earlier).

      Commenter
      mike
      Location
      Vic
      Date and time
      February 18, 2013, 10:52AM
    • Unbelievable. Both incarnations of the mining tax were deeply flawed. Numerous economists pointed out the methodological problems (starting base for depreciation, state royalty changes to name two) with both of the attempts but were ignored.

      For a start this "Abbott Abbott" nonsense is a joke. It's not about Abbott. It is about an entire political party with almost half the seats in parliament which has perfectly valid reasons for opposing a disastrous mining tax, a carbon tax headed for the same financial disaster with falling carbon prices, a flawed NBN, overspending on school halls...Not to mention the $1,450,000,000 scheme to...does this make sense...pay companies to put pink batts in peoples' roofs? Oh and a few billion for a really useful change in immigration law...you know there are millions of people out here like me, who are desperate to see the end of this awful government and who don't even care who our leader is, Turnbull, Hockey, or Abbott as long as they are the PM with a party in Government.

      Secondly the logic here appears to be...don't oppose our tax Abbott, because if you do we will introduce a different tax that is even worse??? How does that work?

      Commenter
      mike
      Location
      melbourne
      Date and time
      February 18, 2013, 11:16AM

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