View from The Hill

View from The Hill

Abbott has set the GST hare running

Tony Abbott has opened himself up to a fear campaign about raising the GST. AAP/Dean Lewins

Can you believe it? We’re now debating a second term Abbott government.

On one hand, cautious Tony is presenting himself as careful and unthreatening: bipartisan on disability, accepting the budget’s savings, embracing Labor’s carbon tax compensation (without the tax). Like John Howard running against Paul Keating in 1996, Abbott is trying to minimise the scope for a scare campaign.

On the other hand, brave or foolhardy Tony has also planted long-term time bombs that the scaremongers can exploit.

Two came out of Thursday’s budget reply – a white paper on tax and a white paper on the Council of Australian Governments and federal-state relations. When he released his workplace policy recently he promised a Productivity Commission inquiry into what changes might be needed to the Fair Work system.

Abbott stresses that proposed actions following these exercises would be taken to the following election, due in 2016.

That might be a long time away, but it is pretty big news that Abbott has flagged that three huge areas – the tax system, IR and federalism – are being opened up for major consideration.

Predictably, he has immediately faced questions about the GST and government claims that he’s opening the way to increase it.

There are two ways of looking at what he’s done. It can be seen as making gestures to the concerns of particular constituencies without actually having to address them immediately. Business wants IR and tax reform; the conservative states complain about COAG. OK - let’s have a talk.

From another vantage point, his actions can suggest a more ambitious agenda down the track. Is Abbott keeping his sheep’s clothing on for the moment but planning to let the wolf out later? More likely, the wolves are those within his own party and advisory circle, more ideological than he is, who want to set up a pathway to major reforms.

While the fruits of the reviews would be matters for the voters at another election, the processes would be high profile features of the first term. Debates about tax, federalism and industrial relations would rage simultaneously, as evidence was gathered, consultations undertaken and papers and reports released.

Some in his party and in the business community would seize on these great opportunities to try to push an Abbott government in the directions they wanted.

Take industrial relations. It is hard to think of the Productivity Commission producing other than robust recommendations for reforming the system. There would be many on Abbott’s backbench who’d be cheerleaders for change. Would he be able to control the debate in the way he has been able to in the run up to this election? Probably not.

As for tax, the main reason you would need another inquiry so soon after the Henry one would be to include what was excluded from Henry, most notably the GST.

Pressed about whether he was leaving open the potential for a increased GST in the second term, Abbott said “people are absolutely hyperventilating - we haven’t won a first term, let alone a second term”; but went on to add that “we will have a comprehensive debate about tax reform. Who knows what people mightr put up to us?”

Well anybody who knows anything about tax knows they will put up ideas about the GST. The debate about the need to raise or broaden it, or both, is quite strong even when both sides are ruling out doing anything at the moment.

As for federalism: Abbott has been all over the place on this at various times. Going back into his not-so-distant past, however, he is much more centralist than states’ righter. But his party has plenty of federalists – some of them are currently trying to undermine the Coalition’s formal support for the referendum, to be held with the election, to write recognition of local government into the constitution.

It will be difficult enough for Abbott to manage the normal exigencies of federal-state relations without comprehensively revisiting how the system should work, given his own views and a divided party. He says the purpose would be to “ensure that, as far as possible, the states are sovereign in their own sphere”. It’s hard to think that Abbott really wants to do this, which implies more than getting rid of the waste and duplication he mentions.

At one level, Abbott’s proposal for detailed examinations of these big areas, involving consultations with plans for change going to an election, is a faultless public policy process.

But politically it gives his struggling opponents immediate ammunition, and it could make his first term rougher than he might expect and managing the run up to the 2016 election very tricky.

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