Some brutal things have been said about Malcolm Turnbull during his long career in public life – that he's narcissistic, bullying, volatile, duplicitous, disingenuous – but no one has yet proposed that he is certifiably insane.
He may be certifiably insane. We will soon see. If he commits his government to increasing the GST from 10 per cent to 15 per cent, he will be certifiably, clinically, incurably insane.
Such madness would immediately revitalise Australian federal politics. It would guarantee a more competitive federal election this year. It would mobilise the Labor Party to sack its leader, Bill Shorten, and replace him with Anthony Albanese. It would confirm in the popular mind that Liberals prefer to push regressive taxes than tax the banking class.
Whatever the economic arguments for an increase in the GST, the politics are diabolical. It could only be bad for the Coalition. Having to offset any rise in the GST with rebates to the disadvantaged would be an exercise in more tax churn and bureaucratic complexity.
The government has allowed this 15 per cent GST kite to drift aloft for too long. Turnbull has clearly distanced himself from this kite, as he can see the obvious disadvantages.
Unless this is all a very subtle softening up process. The government may be conditioning the electorate to a widening of the GST, rather than an increase.
I don't think the Prime Minister is insane. In fact, I think we are fortunate to have, as Prime Minister, a merchant banker with a sophisticated grasp of finance and a keen knowledge of China's economy.
We need such skills because Australia is in the grip of the Great Adjustment. After 25 years of uninterrupted economic growth, many Australians, especially the young, are having to adjust to a lower standard of living.
The Great Adjustment extends to China, which is being forced to make some far more dramatic and consequential changes than Australia.
The Australian boom and the Chinese boom were intimately linked. It will be the same on the way down.
China is sitting on a banking debt bubble even larger than the one in the United States in 2007, which stressed the global economy and caused an American economic emergency.
China's banks hold liabilities equal to 350 per cent of China's gross domestic product. The inevitable deflating of this debt bubble will have global consequences, especially in the Asia-Pacific region.
When Beijing begins the massive quantitative easing (money printing) required to recapitalise the banking system, the waves will be felt by every country with a heavy reliance on Chinese trade. Which includes Australia.
This is why so many Chinese have been zealous about getting money out of China and into hard assets overseas in recent years. Hello Australian property market.
This is why the capital flight out of China is now so great the government is having to impose tighter curbs.
The last time Australia faced a financial stress test of this magnitude, in 2007-08, the federal economy was led by two Queenslanders, Kevin Rudd and Wayne Swan, who were over-matched by the challenge. They simply spent their way out of it, leaving the bill to be picked up later.
Later is now. Nine years and one commodities bust later, the government needs to buttress Australia's economy in a turbulent, debt-soaked world by putting the brakes on the growing federal debt and deficit.
It has to make hard spending cuts. It has to raise more money. It has to make some tough choices.
This is why the politically insane 15 per cent GST was floated in the first place.
After almost five months as prime minister, Turnbull has not yet had to make any hard choices. Soon, he will have no choice. In less than three months his government will present its first budget.
We are way past pretending that Australia is going to magically grow its way out of structural deficits. Cuts have to be made and revenue has to be raised.
As former prime minister, Paul Keating, who handed down nine budgets as treasurer, wrote in these pages on Wednesday, in arguing passionately against a 15 per cent GST: "The big falls in commodity prices mean that Australia's income has been cut. We cannot pretend we can go on spending as though nothing has happened. The world has trimmed us down – we now have to trim ourselves down. Trim our spending and not accommodate more of it by even more taxation."
Another distinguished former federal treasurer, Peter Costello, who handed down 12 budgets, chimed in with the same message, that spending discipline was more important and more realistic than raising the GST.
Keating offered no elaboration on what cuts had to be made. Costello was not very specific, either. Selecting those cuts is the hardest part of the politics.
One obvious option would be to freeze all federal spending that is not tied by law to increases via indexation.
Superannuation tax breaks represent a politically expedient area for cuts.
The government also needs to raise revenue. The electorate wants to see more tax extracted from tax-minimising American corporate behemoths such as Amazon, Apple and Google, so that horse has much longer to run.
The government could tinker with the GST, without touching the 10 per cent level. Australia's GST extends to less than half of economic activity, so it could be extended to some areas, notably financial services, without incurring serious electoral blowback.
Turnbull has the wherewithal to explain the need for budget discipline. By the time his first budget rolls around, the global debt challenge may have come into clearer focus. And, presumably, by then, he will not have admitted himself into an asylum for the politically insane.
Paul Sheehan is a columnist and editorial writer for The Sydney Morning Herald, where he has has been Day Editor and Washington correspondent. He is the author of two number-one best-sellers, 'Girls Like You' and 'Among The Barbarians' and been published in The New Yorker, The Atlantic, The New York Times and numerous anthologies.
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