Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

National Reform Summit good, bad and ugly

Simon Cowan

28 August 2015 | ideas@thecentre

forumOn Wednesday, KPMG hosted Australia’s opinion leaders at the National Reform Summit. Trade unions, business leaders, community and interest groups, even the odd think tank researcher, sat down for the day to try and break the reform gridlock and find some common ground across the political divide.

Having not been invited to awkwardly stand around the Prime Minister at the 2020 summit, this was my first experience with a grand coalition and, from my perch in what we dubbed Freedom Corner, it appeared the results were mixed.

The Good

The most positive element of the summit was the desire of senior figures on both sides for a serious discussion of policy, without shallow partisan bickering. That the media overwhelmingly responded with serious analysis of that policy debate was more heartening still.

One sharp little exchange occurred late in the day over tax, where in response to a chiding by ACTU’s Ged Kearney that former Treasury Secretary Martin Parkinson was being too tricky by half, the ex-Treasury boss responded that he it wasn’t being tricky, it was “just economics”.

The Bad

Bad news for Treasurer Joe Hockey on tax reform, which is perhaps why he tried to gazump the summit with a renewed push for a republic. No-one listening to the debate on tax reform could mistake the vast distance between the two sides of the ideological divide on the topic.

It was as if the two groups were talking about completely different topics.

The left wanted only to discuss redistribution, fairness and soaking the rich for more revenue. The right wanted to talk about efficiency and competitiveness, particularly in relation to company tax.

The Ugly

A couple of disappointing notes: industrial relations barely rated a mention, with the union representatives making clear that they didn’t even want to discuss ‘low road’ reform that might involve lower pay and conditions.

And while a lot of comparisons were made to the OECD (mostly by the tax and spend brigade) almost no-one even mentioned Asia. So much for the Asian century.

On the other side, the absence of climate change from the summit statement raised some eyebrows.

However, the big unknown is how the politicians will respond. Will they take up the challenge of reform? Do they even still know how?

Simon Cowan is a Research Fellow at The Centre for Independent Studies, he co-authored the CIS submission to the National Reform Summit.

Bigger not better

Robert Carling

28 August 2015 | ideas@thecentre

tape measureA recent advertisement in Sydney papers proclaims “It’s time to get councils working better for local communities”. So says the state government’s Office of Local Government. The ‘a’ word did not appear, but the ad was clearly the start of a softening-up campaign for the Baird government’s local council amalgamation policy, which few citizens seem to want.

No government should use taxpayer money to promote policy proposals through advertising. Every opposition agrees, but only until they get into government. But that’s not the main point of this commentary.

Sometimes governments are justified in pushing a policy hard against public opinion – that’s what leaders do. But just why the Baird government is determined to push hard in this instance is unclear. Why does bigger have to be better? The functions local government performs in Australia don’t require huge scale for effective delivery.

Many small communities welcome the greater accessibility and responsiveness of councils that are close to them, want to keep their own identity, don’t want to be absorbed by a large, impersonal entity, and are willing to pay if having their own local council means overhead costs are a bit higher.

Judging by the advertising, the state government’s case is tendentious. It tells us that New South Wales has “nearly twice as many councils as Victoria or Queensland”, as if this is shocking. But can’t NSW be right and the others wrong?

“The system is not working as well as it should.” What system of government is? Local government has it problems, but why is amalgamation the answer? In some cases it may be, but not as a generalisation.

You know they’re scraping the barrel when they assert the happy outcome will be that councils “can invest in better services and facilities.” Investment always sounds good, but there is no evidence that fewer, bigger councils would ‘invest’ more in the true meaning of that word, or on better things.

Robert Carling is a Senior Fellow at the Centre for Independent Studies

Two cheers for Treasurer

Michael Potter

28 August 2015 | Ideas@TheCentre

hockeyOn Monday, the Treasurer, Joe Hockey, made a speech arguing that personal taxes should be cut, particularly to address bracket creep (when taxpayers pay a greater proportion of their income in tax as a result of inflation and wage increases).

He argued that bracket creep is reducing Australian’s income and employment, cutting incentives to work harder and invest, and reducing financial security.

These are all welcome sentiments.

But the speech was merely an announcement that the government is going to make an announcement about tax options; then announce which option it will choose, then (probably) take this option to the election, and then present legislation to implement this option to Parliament. There are many steps between the speech and addressing the actual problem.

There are more problems with messaging. Treasurer has stated he want to reduce income tax before, and this message has been greatly confused by the Government’s actions to increase the top marginal tax rate, broaden the tax base and continue discussions on increasing the Medicare Levy.

This all stands in contrast with the Treasurer’s arguments in the speech. He rightly argues that bracket creep is a stealth tax increase. He also notes that, if nothing is done, the number of taxpayers in the top two marginal tax brackets will increase from 27% today to 43% in 10 years’ time. Mr Hockey also states that bracket creep hits low and middle income earners the hardest and that the lack of personal tax reform is making Australia less competitive with other countries in our region. Separately, the Commonwealth Treasury has argued that bracket creep will result in a tax increase of $25 billion over the next four to five years.

But all these sentiments argue for action now. Not Monday’s announcement of a plan for a plan for a plan for a plan for a plan.

Michael Potter is a Research Fellow at the Centre for Independent Studies