How the Senate could thwart the audit's proposals

While all the attention was focused on the Commission for Audit report, two events snuck under the radar that will play a profound role in how the commission’s recommendations will play out.

The first was that the iron ore price fell to a two-year low and that one of the world’s largest producers, Brazilian-based Vale, forecast an oversupply of iron ore. Earlier in the week, Wesfarmers predicted even lower prices for coal. This means that Australian tax revenues for 2014-15 are going to be hit, making expenditure cuts more urgent.

The second under-the-radar event was that the WA Senate result means the Coalition has 33 Senate seats and needs six votes to get a majority. The three Palmer United Party senators plus Victoria’s Sports Party senator have an alliance with South Australia’s Bob Day and NSW’s David Leyonhjelm to assist the government in honouring its promises, like abolishing the carbon and mining tax and getting rid of commercial building cartel-style agreements.

Today, Bob Day has given a clear indication that he plans to play a surprisingly large role in government affairs. Like Leyonhjelm, Day has a very clear idea of what Australia requires.

He set out some of those views in his KGB interview.

Today Day will address the Tax Institute of Australia and will use that opportunity to not only oppose Joe Hockey’s planned levy, but to try and return the treasurer to his original undertakings, which stated the problem was spending rather than taxation.  

Day believes that higher taxes don’t work and will cause people to generate less taxable income. He believes the way to lift revenue is to lower taxes. My guess is that Day and Leyonhjelm are going to play a very important part in that working relationship with the Palmer United Party and the Australian Sports Party senators.

The alliance between the six senators is aimed to make sure that the government delivers on its promises. The taxation levy is a clear breach of the firm undertakings delivered in the campaign. 

Middle-class Australia is under great pressure and higher taxes multiply that pressure. My guess is that combination of Day and Leyonhjelm plus the Palmer United Party senators will swing towards protecting middle-class Australia. 

Of course, there is no way that Day and Leyonhjelm will oppose the budget and in any event, most of the budget will be legislated before July 1, when they take their seats.

Day has a passion for reducing youth unemployment and enabling young people to buy a house. If he convinces the Palmer senators of the worth of his plan, they will be a formidable force for middle-class Australia, which is set to be battered by some of the measures being proposed.

The speech to the Tax Institute is the start of a lot more to come.