Federal Politics

Malcolm Turnbull pours cold water on GST rise during ABC interview

The prospect of a GST hike is looking more unlikely after Prime Minister Malcolm Turnbull said he was not convinced the measure would deliver enough economic gain, raising the chance that the scare campaign underpinning Labor's election platform will soon be disabled.

Should Mr Turnbull rule out a GST rise it would head off a backbench revolt by government MPs who either oppose the notion of tax hikes, or fear an electoral backlash in their marginal seats.

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'Not convinced': Malcolm Turnbull on GST hike

While not ruling it out, the Prime Minister tells the ABC's Insiders program he is yet to see strong evidence that favours a GST increase.

But the move would overrule Treasurer Scott Morrison who is said to be determined to deliver signature tax reforms by raising the GST, and would leave unresolved the question of how the government intends to solve Australia's fiscal challenges.

Speaking on ABC's Insiders program on Sunday, Mr Turnbull said he must be satisfied that raising the consumption tax would be equitable, as well as drive jobs and growth.

Prime Minister Malcolm Turnbull during the GST debate in Parliament last week.
Prime Minister Malcolm Turnbull during the GST debate in Parliament last week.  Photo: Andrew Meares

"At this stage, I remain to be convinced or be persuaded that a tax mix switch of that kind would actually give us the economic benefit that you'd want in order to do such a big thing," he said.

Asked why he didn't just drop the proposal now, Mr Turnbull said he was running a consultative government and Cabinet would make a collective decision after "careful and considered analysis".

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He said the government's final ruling would be evidence-based and "it's not going to be a political decision".

ReachTEL polling shows voters strongly back the Turnbull government, however they are clearly opposed to a GST hike. Labor's primary vote has fallen below 30 per cent.

Prime Minister talks GST changes

Compensation would need to be considered for some Australians before any decisions are made about tax changes, including a GST hike according to Malcolm Turnbull.

Labor's Treasury spokesman Chris Bowen on Sunday claimed Mr Turnbull was "in a muddle" over the GST rise and lacked the political backbone to pursue the policy, which he said was "in the [Liberal] Party's DNA".

"What's very clear is Malcolm Turnbull had a plan to knock off Tony Abbott, but doesn't know what to do with [the leadership] afterwards," Mr Bowen said, declaring the Liberal Party was "at war with itself".

"If he doesn't proceed with increasing the GST, which we all know he wants to do, it will be humiliating for Malcolm Turnbull. What would be the point of a Turnbull government if it doesn't have a tax reform agenda?"

Mr Bowen pointed to Labor's proposals to fund important spending and repair the budget, including tobacco tax increases and a crackdown on multinational tax avoidance.

Should the government abandon the prospect of a GST rise to 15 per cent, it must find a way to address the budget deficit and the problem of bracket creep, which occurs when inflation pushes people's income into higher tax brackets.

A raft of government savings measures have been blocked by the Senate, including university deregulation and scrapping the Australian Renewable Energy Agency.

Mr Turnbull flagged possible changes to other tax areas such as corporate concessions and superannuation, and said changes to negative gearing had not been ruled out. But conceded the final policy must be politically saleable.

"You know, you can have the best idea, best policy in the world but if you can't persuade people to accept it, then it's not going to fly," he said

Earlier on Sunday, Cabinet Secretary Arthur Sinodinos said the politically sensitive GST had become a "mythical beast" and if the current proposal was killed off, it would entrench the myth that "you can't touch this thing".

"[The GST would become] the tar baby of Australian politics and therefore it will make it very difficult for it to come back," he said.

"The reality is all governments have to look at the pros and cons of doing things and unless it stacks up it won't happen."

He signalled his personal support for a GST rise, saying "if you want to have bigger tax cuts you have to have a bigger pool".

"You potentially get that pool through a GST but on top of that you need to address concessions and other things, so you can make sure the tax cuts are appropriately structured so lower middle income earners [feel] they are considerably better off as a result," he said.

Mr Turnbull has previously said if the government was to raise the GST to provide income tax relief, it would also need to increase pensions and devise a complex compensation scheme.