PM puts lid on GST hikes, pledges boost for business

The prime minister has trimmed expectations Australia’s goods and services tax could be raised as part of a suite of changes that includes lower income taxes.

While he did not want to rule any policy changes in or out of the government’s economic reform agenda, Anthony Albanese was far from supportive of increasing consumption taxes in comments to a News Corp event on Friday.

Some economists have called for the GST to be lifted from 10 to 15 per cent and the base broadened to include items like private health insurance and fresh food to provide revenue in order for other levies like income tax to be lowered.

But that would mean making the tax system more regressive, resulting in lower earners contributing more as a share of their incomes.

“I’m a supporter of progressive taxation,” Mr Albanese said, in the clearest indication yet that GST won’t be increased after an economic reform roundtable in August.

“Consumption taxes, by definition, are regressive in their nature. So that’s something that, you know, doesn’t fit with the agenda.”

Outside of tax changes, Mr Albanese promised to get out of businesses’ way to help the private sector resume its “rightful place” as the primary driver of Australia’s economic growth.

Unlike in his government’s first three years in power, when fighting inflation and easing cost-of-living pressures took up much of the government’s bandwidth, boosting productivity has been identified as Labor’s main concern this term.

“In a strong, dynamic and ­productive economy, government should be a driver of growth, but not the driver of growth; facilitating private sector investment and job creation, not seeking to replace it,” Mr Albanese said.

While tax reform would form an important part of the conversation, he acknowledged the need to cut red tape to make it easier for businesses to create jobs.

But any businesses hoping for a relaxation of industrial relations protections will be disappointed.

Despite boasting higher wages than other countries in the region, Australia could recapture its manufacturing edge without cutting labour costs, the prime minister insisted.

But the nation must make the most of new technologies and capitalise on its ability to locate industrial facilities alongside renewable energy resources.

“In the years ahead, comparative advantage in manufacturing will not be defined by minimising the cost of labour,” Mr Albanese said.

“It will be secured by the most productive use of technology, by cutting transport costs and by cheaper, cleaner energy.”

Mr Albanese’s message was met with cautious support from the opposition.

Coalition frontbencher Bridget McKenzie said the government had spent its first term “smashing” small business through industrial relations policies and regulations and needed to use its landslide election win to help the country become more prosperous.

“Use the huge mandate that the Australian people have given you to set our country up for the future, and we will back you the whole way,” she told Sky News on Friday.

“If Labor wants us to be more productive, wants the private sector to grow and prosper, then it needs to look at removing red tape and make tough decisions that their traditional supporters might not like.”

Jacob Shteyman
(Australian Associated Press)