It is as well that hope springs eternal in the Council of Australian Governments because Wednesday's leaders' retreat to discuss federation and taxation reform is already fracturing along ideological and partisan fault-lines. NSW Premier Mike Baird set a hopeful tone on Monday with a call for GST to be increased from 10 per cent to 15 per cent, with no broadening of the base and compensation for lower-income households. Any prospects of obtaining the necessary unanimous support for GST changes appear far-fetched, however. Victorian Premier Daniel Andrews (who promised Victorian voters at the last state election that a Labor government would not support a GST increase) is opposed outright to change. And there's nothing to indicate WA Premier Colin Barnett will move on from his attitude to the GST, which is to oppose any reform that does not include change to the way the revenues are distributed.
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It's no small irony that when COAG leaders scheduled this retreat last April it was with a view to maximising long-term reform opportunities in an atmosphere "relatively free of partisan political pressures". The fact that there was no need for another election for 16 months ought to have been grounds for optimism that short-term political considerations could be set aside for bipartisanship and urgent national problem-solving. Yet, despite this, the Abbott government's warnings in 2014 that fundamental reforms were necessary to shore up Commonwealth finances, and the fact that Commonwealth tax revenues have been eroded substantially by falling commodity prices, the appetite for reform appears lukewarm. The faintheartedness is particularly noticeable in the Abbott government, which has retreated completely from its reformist guise of 2014 and ruled out any changes to superannuation, negative gearing and capital gains tax exemptions during its first term. That has not prevented it from continuing to espouse the need for lower taxes, of course. As to what revenue measures the government would be prepared to embrace to pave the way for tax cuts, however, it is not saying.
That aversion to new or increased taxes of any kind explains why the federal Coalition is content to let the states and territories make the running on a GST increase – even though a hike would replenish state and territory coffers, allow the Commonwealth to reduce tied funding, and potentially enable income tax cuts. The Abbott government could, theoretically, mount a strong and compelling case for a GST increase, one capable of overcoming Messrs Andrews' and Barnett's objections. Likewise it could support Mr Andrews' sensible suggestion for a Medicare levy increase to finance increased health spending – a measure supported by ACT Chief Minister Andrew Barr. But the federal Coalition's strong resistance to new taxes suggests this is only a faint possibility.
If, as seems likely, Wednesday's leaders' retreat delivers up homilies and platitudes rather than outcomes, the public's cynical summation will be that politicians and governments are incapable of putting the national interest above their own interests. This is not entirely true – as the Hawke/Keating government reforms indicated – but the Abbott government seems cynically averse to pressing reforms.
