Shorten's fiscal plan is also a lie

With all the recriminations against Prime Minister Abbott's ‘lying about lying', there is virtually no attention focused on Opposition Leader Bill Shorten's ‘lying about having an alternative plan to the Abbott agenda'.

And yet it really is that bad. Without wishing to diminish Abbott's duplicity in back flipping on so many election promises, media commentators are spending a lot of time on the ‘liar, liar' stories and not enough asking how we can stop Australian fiscal policy skidding off a cliff.

At the time of writing the ASX 200 is closing down 1.98 per cent, led by energy-related stocks. The dollar has taken a walloping. New Deloitte Access Economics data point to a further shredding of federal tax revenues. And house prices in national hotspot Melbourne have dropped 2.5 per cent month on month.

There is plenty of other bad news to add to that list, but it will do for now.

In question time Treasurer Hockey, following his leader's renewed “aggressive” stance in answering critics, thundered that the Coalition were “the only ones with a plan” to fix all that.

Well, he's right, but that doesn't mean it's a good plan. It's based on the ideological claim that Labor had a “spending problem, not a revenue problem” --a claim that never stacked up when put in context of the past decade or so (see: What we talk about when we talk about tax, May 2).

Labor supporters may wonder why, two years out from the next election, am I suggesting Bill Shorten ‘telegraph his punches' by revealing the economic plan he'll take to a 2016 poll?

Well, because certain punches have been flying for some time. The big ones are the expenditure haymakers -- think NDIS, Gonski, replacing welfare cuts, replacing ABC funding and so on --  and, secondly, the GST jab.

Shorten, and Labor premiers Jay Weatherill and newly elected Daniel Andrews, use the GST jab whenever they can to hurt Abbott, and to begin the process of scuppering his tax reform white paper process next year.

So, while everyone knows -- and many like -- the fact that Labor wants to spend more on health, education and welfare, few Labor voters know how obstructionist the party is planning to be next year on the revenue side.

At face value, opposing the broadening and raising of the GST rate would seem to be driven by ‘core Labor values'. Many within the party argue that including items such as food and educational goods, and raising the rate to, say, 15 per cent, will hit the poor hardest.

They all say it. Shorten says it. Weatherill says it. And when former Victorian premier John Brumby actually said raising the GST was a good idea, Daniel Andrews said, “John Brumby is wrong on this and John Brumby doesn't make Labor Party policy anymore.”

That's how scared incoming Premier Andrews is of the GST -- like other Labor luminaries, he has calculated that a GST hike would decimate his electoral support.

But the logic of this position does not stack up.

A political leader of courage could explain clearly to the electorate how a portion -- even a large portion -- of a GST increase could be hypothecated, by agreement with the states, for those ‘poorer' Australians.

Can't be done? Well Labor did exactly this when it introduced carbon pricing. In its first year it raised around $4.1 billion in carbon tax revenue, of which half was reserved to increase pensions and family benefits (the other half being recycled into clean energy projects). The scheme actually over-compensated ‘poor' Australians so that they would not kick up too much of a fuss.

Well it didn't work, because Tony Abbott's opposition made carbon pricing its foremost weapon with which to attack the Gillard government.

The tax white paper process next year will be quite different. A responsible alternative government would say ‘yes, let's look at increasing the GST ... and we'll make sure half the revenue is directed to help Australians hit hardest by the tax'.

The GST is the second least economically distorting tax available for broadening the tax base -- a broad-based land tax being more efficient.

The ‘it'll hurt the poor most' line must be exposed for what it is -- a political posture that overlooks the more obvious fact that as federal tax revenues fall, the poor are going to do it tough anyway.

It should be considered by Labor, because Labor is already planning to spend the extra money.

And now is the time for commentators to begin reminding ALP figures who share Brumby's view that they should speak up so that next year's debate on this important reform can rise above political point-scoring.