Costello’s rare gift for lucidity

An enthusiastic audience braved Monday’s morning chill this week for a CIS breakfast with former Federal Treasurer Peter Costello sharing his perspectives on the Budget in a lively conversation with Simon Cowan.

Mr Costello welcomed the “believable” path back to surplus and reflected on the government’s seven-year personal income tax plan. He affirmed that reducing income tax rates and thresholds is a step in the right direction, but was justifiably cautious about the ability of governments to guarantee tax cuts that take effect so far in the future.

Mr Costello pointed out some mathematical truths about the government’s tax plan — ignored by much of the post-Budget critique — such as a flat tax rate of 32.5 per cent for incomes between $41,000 and $200,000 still seeing high income earners pay a greater share of income taxes.

On the worrying consequences of our high income taxes, he jokingly discussed the appeal of a new lifetime work-retirement cycle for young Australians: earn good incomes and pay low taxes in Hong Kong or Singapore… and once you have children or retire, repatriate to Australia for the social services.

Mr Costello also cautioned against the “crystal ball” mentality of governments in regards to budget projections. He emphasised that it is near impossible to predict tax receipts in 10 years’ time, precisely because no economist can say — at least not with a straight face — what will happen to the economy next week, let alone next decade.

In a further warning, he pointed out the abject failure of compulsory superannuation in reducing reliance on the aged pension — which will become a fiscal “ticking time bomb” for future governments.

Mr Costello demonstrated his exceptional ability as a communicator, with that rare gift for lucidly explaining economics to the general public — a remarkable feat when it comes to tricky and (for many Australians) mind-numbing subjects like taxation and deficits.

This is why, more than 10 years after leaving public office, Mr Costello’s contributions to the public policy debate are respected more than ever.