IS AUSTRALIA ABLE TO CHANGE?
Australian politics has been much ado about nothing for decades
Our oppositions have promised that their taxing and spending would more than 99% match those of the government they’re campaigning to replace
And why wouldn’t they? When oppositions did campaign on change (Hewson in 1993 and Shorten in 2019), they lost
And when government leaders proposed change (Rudd in 2010, Abbott in 2014), they also soon lost their job as PM
Meantime, next year will mark four decades since there has been a successful national referendum
Simply put, the Australian electorate loathes change, and so our politicians long stopped challenging us
(OK, the electorate allowed Australia to fight crises such as COVID and the GFC, but those crisis-fighting times were very much the exception)
So it was a break with the patterns of the past when the government’s budget and the opposition’s reply both promised changes
· The government aimed to plug holes in the tax system that allowed some people to cut their taxes in ways that aren’t open to most people
· And the opposition promised to stop the set-and-forget ability of the personal tax system to take an ever-rising share of our wage – the ‘inflation tax’
· There’s lots to like in both those proposals
I recommended personal tax indexation at the government’s reform summit a year ago. And although I think the failure to allow for ‘averaging’ in the government’s changes to capital gains is a big mistake, it is still true that the taxing of capital gains and of family trusts needed a lot of repair
But it isn’t the details of the proposals and counter-proposals that I want to focus on here
It is whether the next few weeks and months show that Australia can change
The post-budget polls are rumbling, and the punters are getting restless. They don’t like the changes to capital gains and negative gearing that have been announced
Yet the first chart shows two lines – the total disposable income of Australians before and after the government’s changes to CGT and negative gearing
(My forecasts of disposable income, and my allocations by year and type of Treasury’s tax forecasts)
For all the horror headlines, the before and after lines are indistinguishable
Ditto if you put it on a per person basis – the second chart below
You can see the difference in percentage terms – the last chart. A decade from now those tax changes are sufficient to reduce disposable incomes by one-fifth of one percent
And yet they dominate the national headlines
To repeat, Australia is terrible at change, and I wonder whether we will
So here’s a crazy thought. Even if you utterly hate these changes (I don’t 100% love them either), I think a part of you should hope that they get through
If they don’t, then I wonder about the long-term prospects of a nation that insists on staying stuck under the blankets
And I wonder just how big a crisis it’ll have to be before something large is finally allowed to change in Australia