There’s good and bad news in all the data your government churns out. Mostly good. To the bad news first: income tax cuts are not on. Virtually all economists agree John Howard’s tax cuts before the 2007 election put us into structural deficit. We now have to get out of it.
And we cannot borrow more money from abroad. That would be highly damaging.
The rest is all good news. A surplus is achievable. You can start repaying the debt. You can slash the company tax rate. You can satisfy those ornery senators. And if you explain this honestly to the electorate, you can win the next election.
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Here is where we will be this June, Scott, based on last week’s Finance Department March update:
Obviously, disastrous. But you can blame your predecessor for that. To fix it, however, we can’t cut total outlays. We actually have to spend a bit more to meet the urgent priorities, including Gonski, hospitals and cost-of-living increases for welfare recipients. But not much more.
Here’s where we need to be in June 2017:
Clearly, non-essential spending will have to go: political witch-hunts, public relations, travel and other perks for MPs and their six-figure pensions. Major cuts must be made to defence, border security and offshore detention. Let’s face it, Scott, whichever former immigration minister spent $55 million settling four refugees in Cambodia (and two of them have left already) was foolish indeed.
On capital investment, no, we can’t have 12 submarines. We can have six. But that’s no problem. Italy has the world’s ninth largest navy and gets by with six. Germany and Brazil each have five. Canada manages with four. Spain and Argentina have three. These countries all have much larger populations than Australia, and arguably higher security threats. So six subs. There’s $20 billion in forward spending savings already ($30 billion if they are built in France).
Now, to revenue increases. Column A shows where we will be this June. Column B shows where we need to be next year. Column C shows the percentage increase required.
Most categories only need a 10% increase. That’s close to what would happen without tweaking the rates at all. Lift them one percentage point just to be sure.
Tax from individuals has to go up 12.5%. This is best achieved by cutting the rorts at the top end. So you won’t need to lift the tax rates. Just whatever you do, don’t lower them.
The great news is that you can slash company tax from 30% down to 24%. You then just have to make sure companies actually pay the 24%. The current joke — most big companies paying between zero and 10% — is no longer funny. So cut the unjustified exemptions and go after the cheats. The Tax Office is hot to trot on this. Give them back the audit staff Tony Abbott took away.
Now, some marketing tips:
- Emphasise taxes now are not high. Of the 34 rich countries in the OECD, Australia is in the lowest six by tax revenue as a percentage of GDP.
- If your colleagues get jittery over personal tax rising 12.5%, show them last Tuesday’s Bureau of Statistics tax history. Wayne Swan increased it by 11.3% in 2010-11 and then another 10.8% the next year. What did that get him? World’s greatest treasurer!
- If anyone arcs up over the fringe benefits tax going up to $6108 million, show them it was $3754 million in 2006/07, so has risen less than 5.0% each year. Their perks have gone up heaps more than that.
- If anyone queries the company tax hike to $90,095 million, show them it was $60,131 million 10 years ago, so it has gone up less than 4.2% each year. Compare that with profit increases over the journey.
- If you cop grief over anything else, point out the stupidity of piling on debt. You are now paying more than $43 million dollars each day in interest on the debt. Two-thirds — $29 million — goes to non-residents. Every day. With the Aussie dollar in the toilet, they can’t profitably exchange it, can they? So they are buying up nearly every pastoral property that comes on the market. Not to mention bidding up prices on city real estate. This cannot continue.
Do this, Scott, get back to surpluses, and you will be treasurer for as long as you want.