Treasurer Scott Morrison has all-but confirmed the government is moving towards a potentially explosive GST rise, arguing tax reform is essential, that he is "no stranger" to unpopular causes, and that he is determined to do what is right for the country.
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Treasurer hints at GST plans
Scott Morrison says he does not shy away from the tough decisions and will do what is best for the country when it comes to tax reform. Courtesy ABC News 24.
But it remains unclear if it will be announced in his first May budget or before. Cabinet met on Monday to discuss a range of issues with a source observing the atmosphere within the leadership is now one of pre-election "sensitivity", although ministers remain confident that Prime Minister Malcolm Turnbull possesses the persuasive powers to conduct a GST poll.
The new signalling suggests the GST will become ground zero of a bitterly fought election contest with the Coalition betting its superior reserves of public goodwill will be enough to see off a Labor scare campaign whenever the election is held.
Labor is convinced a widespread public fear of a 50 per cent rise in the 10 per cent GST to 15 cents in the dollar offers it the best hope of pegging back the more popular Mr Turnbull.
With some state premiers on-side, including Labor's Jay Weatherill in South Australia, and the Liberals' NSW Premier Mike Baird, the government hopes to convince voters that the pain of higher retail prices can be offset by other economic advantages, including direct compensation for the least-well-off, and improved economic performance creating more jobs, and eventually, more revenue.
Departing from his previous stance, in which hosed down GST speculation, Mr Morrison has taken to talking up his commitment to selling necessary if unpopular policies to the electorate, citing his hardline record in immigration and border protection as evidence.
"We've got to do what's right," the Treasurer said in Canberra ahead of the Cabinet meeting.
He noted that the Newspoll published on Monday had shown "strong support" for the government at 53-47 after preferences, which he attributed to the Coalition's willingness to confront hard choices and remain "focused on jobs and growth".
"And if we were to make any changes in this (GST) area, it is because we believe it would support jobs and growth in the future," he said.
"I've got to say I'm no stranger to causes that don't enjoy popular support.
"I remember for five years I campaigned heavily on what were very unpopular measures, whether it was on turn-backs or other things, and the surveys were against it and all the rest of it.
"But I believed it was right for the country. And we went into that last election, we said what we were going to do on that, we did it in the way that we said we were going to do it and we got the result we said we were going to get."
As Fairfax Media reported on Monday, Mr Baird has proposed a modified version of his 15 per cent GST proposal, in which the bulk of the new revenue - expected to be $32.5 billion a year over the current forward estimates - would be retained by the Commonwealth and used for reducing company tax to 25 cents in the dollar, as well as for income tax cuts, GST compensation, and for extra health funding for the states. It would be renegotiated in 2020. Mr Weatherill welcomed that proposal but said SA still preferred the idea of a guaranteed share of income tax revenue for the states because it would grow with health costs.
While divisions exist on both sides of politics over the political wisdom and distributional fairness of a higher GST, Labor has taken heart from Newspoll as well, noting that support for a higher GST languishes at just over one third at 37 per cent.
With MPs gathering in Canberra for the commencement of what promises to be a tense political year culminating in an election most likely in spring, Liberal MPs were surprisingly relaxed about defending a GST rise.
"As long as it is part of a proper package, with adequate compensation for the poor, and demonstrable benefits for business and therefore job creation," it can be argued, said one marginal seat MP.
Another said the key was getting "some sort of consensus from premiers" before adding ruefully, "but that's like herding cats!".
Speculation in Canberra is that the government will eventually opt for both a higher GST rate and a broadened base likely to include fresh food. But Mr Morrison knows, spreading it to the currently quarantined areas of health and education would be politically toxic.
"The issues that were present back when the GST was introduced around health and education are still there today," he had said in late January.