Rob Oakeshott is quite correct in complaining we have a problem in our politics if we can't have a serious debate about the GST. Indeed, the letters "GST" appear to cause a profound terror in any party politician confronted by them.
The GST, the best economic reform of the Howard government after the independence of the Reserve Bank, was damaged right from the outset by the stupidity of the exemptions imposed by Meg Lees as part of the deal for her support -- a deal that, as if to demonstrate there is indeed some justice in politics, destroyed Lees's leadership, not to mention the rest of her party.
The case for restoring fresh food to the GST is now stronger than ever. The once-high growth tax has fallen back to earth and is now cramping the capacity of the states simply to maintain their levels of basic services. That is partly because Australian consumers have not merely stopped spending as much, but they are spending more on food compared to other goods and services. The result is strong consumer spending growth in an area substantially exempt from the GST.
Treasury's most recent estimate is that restoring fresh food would recoup nearly $6 billion in additional revenue, which would flow directly to the states, or be split between offsetting state taxes and topping up state coffers.
But no political party will touch it: Labor and the Coalition both prefer to suggest their opponents have a secret agenda to raise the GST. Even the Greens won't go near it.
What we need is an independent initiative to break this deadlock. A Productivity Commission reference would require government support, which is problematic. The Parliamentary Budget Office could examine the matter, but only confirm or dispute Treasury's costing; the PBO is not equipped to offer full-scale economic advice. But a bipartisan proposal from the states to remove the food exemption (which should be the first reform proposed, certainly ahead of lifting the rate) could initiate some rational debate.