Federal Treasurer Joe Hockey
IF the Abbott government thought that removing $80 billion from state health and education budgets over the next 10 years would prompt the states to mildly request an increase in the rate and coverage of the GST, it was mistaken.
That would have been preferable, of course, from the federal Coalition’s point of view. Because, under the proposed plan, Mr Hockey would get to keep the $80 billion for federal coffers and then look like a white knight, riding to the rescue of the struggling states when they begged for a higher GST to be imposed on the entire Australian population.
There are obvious problems with that, however, from the states’ point of view.
For a start, the cuts are more or less immediate, while any boost from extra GST funds would take years to appear. Trying to get re-elected when they’ve had a massive budget cut foisted on them would be challenging for the state governments, to say the least.
Not only that, but the state governments would also then be cast as the villains behind the push for a GST increase – another bad look.
There is nothing inherently wrong with the idea of raising the GST or with broadening its application to cover some goods and services – such as food – that are currently exempt.
But any changes in the GST should occur in the context of broad tax reform. They should not be enacted in isolation and they should certainly not be enacted as the result of what many will see as a piece of bullying by the federal Coalition.
Prime Minister Abbott appears to believe that he can afford to make enemies in his first budget, since he has the rest of his term to make up lost ground in the popularity stakes.
This too, may prove to be a miscalculation.
The states’ mostly Liberal premiers and chief ministers appear unanimous in their condemnation of the federal government’s tactic, which they insist contradicts everything they were led to believe before the budget.
NSW Premier Mike Baird, who has described the cuts as ‘‘a kick in the guts’’, will host his interstate counterparts at a weekend meeting to discuss a response. Mr Abbott has already hinted at some form of compromise, but it isn’t yet clear what this might be.
Meanwhile, the widespread backlash against a number of aspects of the budget may have emboldened the government’s parliamentary opponents, some of whom have sworn to block particular measures in the senate.
Mr Abbott has also stated that if the Senate (which his Party does not control) do not pass the budget (or parts thereof) then he will petition the Governor-General for a double dissolution of parliament. This may prove to be the biggest miscalculation he could make. Since coming to power, Mr Abbott has made few friends on either side of the House, with continued gaffes, unfortunate comment and sexist attitudes. Mr Abbott cannot afford a double dissolution. Such an action may well end his Prime Ministership and would certainly would cost some of his Liberal Party colleagues their places in Parliament!
Such a move would be surprising if even as bold a punter as the Prime Minister would risk a gambit with such an uncertain outcome.