- GST a wedge too far for the states
- Michael Gordon: Abbott in denial about broken promises
- The Pulse Live with Judith Ireland
Don’t think for a moment that Joe Hockey doesn’t get the case for a higher GST.
Asked at the National Press Club on Wednesday whether by starving the states of money for hospitals and schools he was trying to prod them into agitating for a bigger GST, he avoided the question.
"We went to the last election promising we would not change the GST and we are honouring that commitment," he said. "We said we would have a review of the entire tax system and we are honouring that commitment. Any changes we would make, we would obviously take to the next election."
But in a less-guarded moment before an audience assembled by the Spectator magazine in Sydney last month, he answered instinctively. British journalist Andrew Neil had just asked him whether he would rule out a change in the GST and had got the standard reply.
Then Neil asked him whether he at least recognised the argument that Australia relies far too heavily on income tax and needs to rebalance its tax take towards goods and services.
"I do," Hockey replied. "Clearly there is an imbalance in the Australian taxation system, but we will take that to the next election."
At least one state treasurer agrees with him, and that was before the budget. By now it might be a majority.
Hockey and Abbott are tearing up the generous Gonski school funding agreement signed with most of the states. It had six years to run. They are killing it after only four, just before the really big licks of money were due to be spent.
At the same time they will abandon the ever more expensive hospital funding agreement and replace it with something parsimonious, linked to inflation and population growth. Hospital costs are growing far faster than general inflation and population growth and have been doing so for decades.
It leaves the states with few options.
They are right to think they were led up the garden path. Before the election Abbott promised to "honour the agreements that Labor has entered into".
Now Hockey says "we said at the last election we would fund four years of Gonski and that was it", which certainly wasn’t how people heard it at the time.
Asked on Wednesday what options the state have, Hockey referred to an upcoming federation white paper and a taxation white paper. Both will deal with the GST.
When the goods and services tax was introduced in July 2000, the Commonwealth agreed that all of it would go to the states and it could only be changed with the agreement of all of the states. The act does indeed specify that, but it can be changed by a vote in the Parliament just like any other act.
Kate Carnell, who was the Australian Capital Territory’s chief minister when the GST was introduced, told PolitiFact in August she knew at the time the guarantee "wasn't legally enforceable".
Hockey doesn’t need the states to agree to a higher GST in order to impose one, but he would like them to, or at least most of them.
He is squeezing them. Hanging concentrates the mind.