Lots of demands for sensible reform on the weekend, triggered by an absurd Depressionberg. Via the AFR:
“I notice in the Financial Review today, not everyone is a Keynesian and thinking about income support. It is important to go to the supply side. Thatcher, Reagan, that’s an inspiration,” Frydenberg told reporters on Friday’Reform like we’ve never seen’
[Bernie] Fraser tells AFR Weekend. “Interest rates are neither the cause nor the solution. The solution now is that the government has to take the lead and spend its way out, encouraging the private sector to invest. But the government has to spend the money on investing in the right productivity-enhancing reforms.”
…This week, former Treasury secretary and tax reform architect Ken Henry told ABC’s Radio National “we need economic reform like we’ve never seen before”.
He suggested four key areas of focus; a simple business cash flow tax to replace the GST, payroll taxes and all state and territory taxes on consumption; a progressive set of land taxes to replace state and territory stamp duties on property transfers; a comprehensive road user charge to replace fuel excise, motor vehicle registration fees, stamp duties on motor vehicles and the luxury car tax; and finally, exempting from tax all scholarships, pensions, allowances and other government transfer payment.
…”As the Prime Minister has indicated, we are not about to announce a shopping list of reforms. We are in the ‘harvesting phase’, during which we will look at new and old reform proposals with fresh eyes,” Frydenberg has been saying.
The focus so far looks to be on cheap gas for industry on the east coast, using government procurement powers to secure domestic manufacturing of essential products and investment allowances rather than on the bigger ticket items like company tax cuts and enterprise bargaining.
Let’s keep it simple as we hose off this reform dumpster fire. The notion of “cheap gas for industry on the east coast” is instructive. Scummo had cheap east coast gas in the palm of its hand after a domestic gas reservation deal with Centre Alliance to break the gas export cartel. All he had to do was implement it. Instead, the Government has thrown that out in favour of investment in Narrabri, NSW, with the gas export cartel. Narrabri is reserved for domestic use but that only enables the cartel to shift other, cheaper, unreserved gas currently sold locally, into its languishing export trains in QLD, thereby sustaining the artificial local shortage. In short, Narrabri will raise the price of domestic gas.
Herein is the dark hilarity of this Government. Generally speaking, reform is about governing markets to produce more efficient outcomes. Sometimes this will mean breaking cartels with more competition or tax changes. Sometimes it will mean breaking them with more regulation. In the case of gas, where we have a clearly failed market, reform should either mean anti-trust action or price-fixing. Either is easy to do. The cartel is on its knees amid COVID-19 and there are heaps of votes in breaking it because utilities prices would crash. Yet Scummo and Depressionberg did a deal with the cartel instead, thanks to corruption and the fear of reform backlash.
This political cowardice and avarice is very important as we contemplate wider reforms, to taxes, to market structures, to economic incentives – in banking, property, retail, etc – given the losers will be far more abundant in those sectors for the collective gain, and the political pressures from mates and large interest groups therefore infinitely greater.
Scummo and Depressionberg have no intention of doing it. Indeed, they were explicitly elected NOT to do it. Shorten Labor had substantial reform plans, most obviously for banks and property. Scummo got elected on a scare campaign against it. COVID-19 changes nothing. To wit, today:
Prime Minister Scott Morrison and Treasurer Josh Frydenberg are privately throwing the pressure back on NSW Treasurer Dominic Perrottet to “walk the talk” on state tax reform after more than a year of publicly floating potential changes.
Mr Perrottet has said increasing or broadening the 10 per cent goods and services tax should be on the table, has backed axing stamp duty in favour of land tax, and expressed interest in overhauling payroll tax.
How is NSW going to reform a federal tax? There is NO federal intention to reform.
So, what is the Government’s plan for lifting living standards? It has none. What it does have is a plan to hide falling living standards derived from its own reform failures. That’s also easy. The Government is an expert at it. All Scummo and Depressionberg need to do is return to open the borders to get mass immigration roaring and juice house prices plus GDP while making GDP per capita a “racist” notion.
That’s the plan. Last week’s Budget update boldly assumed the borders will reopen in January next year. The Government is already preparing destructive incentives to stuff in a new wave of foreign students at the top of the population funnel by issuing work rights to far distant online international students. There is only one rationale for that lunacy.
Which brings me to the title of this post. For this plan to work in a COVID-soaked world, we must have the virus. If we were to eliminate it, which is entirely possible – see NZ, WA, QLD, SA, NT, ACT – then the borders would be shut for years and the immigration-growth plan would collapse. But so long as we have the virus then we can start bringing in infected foreigners as well.
That’s what Scummo’s “harvesting phase” reform plan really means. It is the opposite of Reagan, Thatcher, and productivity reform. It is to protect existing immigration-cartels in realty, banking, retail etc.
Or, put another way, to kill people for higher house prices.
