Herein lies another problem

In an attempt to slap down Peter Dutton’s leadership run, Treasurer Scott Morrison described Dutton’s plan to exempt power bills from the GST as a “budget blower”.

This proposed policy is estimated to cost $7.5 billion over 4 years.  Let’s just assume that this figure is correct.

Over the same 4 year period, total GST revenues would be, perhaps, $1.3 trillion.  So a $7.5 billion reduction would represent a 0.57% reduction.  Not exactly a terminal hit.  (NB In earlier version, Spartacus made an arithmetic error.  Corrected now).

But more to the point, the default response from Treasurer Morrison to a loss of revenue is not to consider where spending reductions could be found, but rather to suggest that the revenue would need to be found elsewhere.

With regard to Dutton’s proposal, Spartacus is torn.  Another distortion in the tax system is bad.  But a tax reduction, any tax reduction is good.

The real problem is that Treasurer Morrison seems unable to countenance any reductions to the size of the government.  Every “tax cut” he is proposed thus far has not been from reduced government expenditure but rather from increase taxation elsewhere (including through bracket creep).

So much for a party of low taxes and small government.  Treasurer Morrison.  Where the bloody hell is your spine?

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40 Responses to Herein lies another problem

  1. braddles

    The proposal does nothing to hinder the subsidy farmers or to stop the big players ripping off customers. If anything, it will embolden them to even bigger ripoffs.

  2. RobK

    I dont think a gst exemption on energy is a good thing. It’s no relief for companies. It undermines the broad base tax. It over looks the real issue, which is the RET.

  3. H B Bear

    Maths isn’t SloMo’s strong suit. Only a true Lieboral could stand there and announce that they were abandoning company tax cuts with $30bn in foregone revenue and yet doing the same to GST on energy bills would jeopardise the whole Budget.

  4. H B Bear

    As I said yesterday, Dutton’s proposal is straight from The Father of Middle Class Welfare’s playbook. Relatively cheap headlines, easily understood, not particularly expensive and gets it off the front page of the papers for a while.

  5. Fred

    Politicians who believe in nothing come up with gimmicks.

    Take GST of tampons & electricity. What’s next? Toilet paper.

    Burn coal if you want lower electricity prices.

  6. Euripides

    Just a cut to renewables subsidies would easily balance the shortfall..

  7. Jonesy

    7.5billion over 4 years….Our power industry is only grossing 75billion over 4 years??? 75 billion across 7 states and territories? This guy is a treasurer?

  8. Jonesy

    Make that 83billion…multiply by 11 to get gross…!

  9. Jonesy

    …does that mean Id make a better treasurer than ScoMo?

  10. Just get rid of the ruinable energy subsidies and Australia will thank whichever political party does this.

  11. a happy little debunker

    $7.5 Billion over 4 years.

    That sounds vaguely like the additional tax ScoMo was prepared to get from the banks?

  12. candy

    Seems quite helpful to the consumer.

    Also puts the premiers on a bit of notice about their encouragement of renewables that put up prices up anyway, so they will have to budget better.

    I don’t mind the idea of an RC into power companies either. It would have been better than RC into banks which could have been handled by sacking the ASIC characters and starting with a fresh bunch who knew their job properly.

  13. Investoid

    Knowledge and skill are the value drivers today. Governments of the kind Australia is getting used to are driven by emotion, ignorance and cant. Whether it’s Shorten or Abbott, it is no matter. Our kids will inherit a dumbed-down, resentful and divided country. Both major parties are controlled by a tiny minority of self-seeking haters. Both parties are redundant.
    It cannot be long before we get a new party of people who want government so they can actually govern.

  14. I don’t mind the idea of an RC into power companies either.

    I suggested a Royal Commission into the entire energy industry a while back. If you think the Banking Royal Commission brought out the crooks, that would be nothing to what an Energy Royal Commission would produce.

  15. yarpos

    I’d suggest the 0.57% is way less than the order of accuracy of the budget. In any case you shouldnt confuse a budget , with what is really happening.

  16. H B Bear

    I suggested a Royal Commission into the entire energy industry a while back. If you think the Banking Royal Commission brought out the crooks, that would be nothing to what an Energy Royal Commission would produce.

    +1 The NEM has been gamed by the likes of AGL and the big generators since it was established. Put a few people in the witness box and let’s see what they have been up to.

  17. BoyfromTottenham

    For what its worth I sent an email to Dutton yesterday suggesting that just reducing the $65/MWh certificate shortfall penalty in the LRET legislation to $0.01/MWh would be easier and achieve not only a similar reduction in electricity prices by stopping the $85/MWh subsidy from consumers to ruinables, but would also allow base load generators to be profitable again. But will he do it, or mess around with the GST instead and by default let the LRET subsidy destroy our baseload fleet?

  18. Andre Lewis

    Cutting GST on en energy would work if the Federal subsidies of renewables are cancelled at the same time AND the feds don’t top up the GST pool and let the States wear the cost. Simples!

  19. Climate change:

    Late Oct 2016:

    Mid-November 2017:

    Even in mid-November there was a solid covering of snow on the mountain tops. And no matter what some ‘experts’ suggest, around our way, everyone is saying it’s been one of the coldest Winters for a while.

  20. Burn coal if you want lower electricity prices.

    I prefer to refer to it as liberating fossilised sunshine, as a way of annoying my lefty mates.

  21. Habib

    It’s a shithead idea anyway, targeted at the indigent who don’t pay for anything, and can usually wheedle a sling out of some dumb charity to make up for their poker machine losses. It doesn’t address the real issue, which is the RET and all the other market manipulations by those fuckwits and their even more addled state compadres. If Hydrocele Boy gets in I can’t see any real difference.

    Oh and Morrie is an infected bowel polyp.

  22. It’s a shithead idea anyway, targeted at the indigent who don’t pay for anything, and can usually wheedle a sling out of some dumb charity to make up for their poker machine losses.

    Habib, you are a master of invective and the bon mot. I dips me lid.

  23. J-man

    Gst revenue is in the order of $70 billion per year. For years worth makes about $280 billion. So closer to 3%.

  24. Roger

    But more to the point, the default response from Treasurer Morrison to a loss of revenue is not to consider where spending reductions could be found, but rather to suggest that the revenue would need to be found elsewhere.

    Morrison is like a cushion; he bears the impression of whoever last sat on him.

    At the moment that’s the Treasury boffins.

    He’s reportedly throwing his hat into the leadership ring, too.

  25. Genghis

    Bur Scomo did not bring into account that electricity suybsidies would be reduced. Ingorance upon ignorance.

  26. Dutton at $1.40 at Sportsbet. Morrison $2.65; Bishop $10.00; and Mr Harbourside Mansion $36.oo.

  27. Spring is coming

    Sh!tholeification Batman! Dutton or Morrison, are they our only hope?

  28. Tony Abbott at $36.00 which underlines the continuing success of the ABC and Fairfax hatchet job.

  29. You can bet the ABC and Fairfax are frantically searching their files for a photo of Dutton in budgie-smugglers.

  30. BoyfromTottenham

    Can I get the odds on Cormann?

  31. duncanm

    subsidies are the problem.

    We’re paying taxes (GST) on levies (subsides to renewballs)!

  32. Justin

    Spartacus, perhaps you might post my comment below. It goes to the heart of the Liberal mess and why in MHO Dutton should be given a go over the disappointing ScoMo and why all these labels and debates centred on Left, Right, Moderate, Far Right you name are vacuous and detract from the mess the Liberals find themselves in. So, below is my comment / thread if you see fit. I could elaborate but for time sake and far more important priorities (kids guitar lessons) this my take on the shambles.

    All this Left and Right divide is vacuous. I challenge journalists or even politicians to define the centre or better still the centre right. The so called “far right” is nothing more than a dog whistle screaming “racist” for anyone not of the far Left. The Liberal’s problems go back two decades or more. They have constantly appeased the Left, vacated the policy battleground of ideas, and /or lost the courage to fight for what would be once considered the sensible centre-right. The Liberals have thus drifted Left (catastrophically under Turnbull), Labor has moved further Left in response, and the Greens start seeming more moderate than the nihilistic Marxist socialists they are. Abbott’s is being hailed as a great conservative. Yes on some social issues and in my opinion badly so (i.e. knighthoods) given they were mostly low order issues not worth losing political capital on. Strangely, on ones that did matter like 18C he capitulated. But Abbott has had a history of interventionist and centralist policy thinking with all roads leading to Canberra. That is not a conservative in the Menzies tradition. What we mostly need is intelligence, principle, courage, common sense (unfortunately not very common) and cut through leadership (from the PM down). And most importantly a leader willing to implement and do whatever that takes a la Trump. The Left rampage through the institutions is a large part of the problem but the Liberals have done nothing to reassert balance or heaven forbid assert control. If you stand for nothing then the rational to vote for you is also nothing. Turnbull thought he could get away with tactics and a transactional approach wedded to nothing. That might work in the world of investment banking but in politics you have to invest in principles if you want the punters to invest in you! ScoMo would be just another Photios puppet devoid of strength or leadership. He has been willing to play Turnbull’s patsy since the start. If they don’t get behind Dutton (unopposed would be smart) they are finished. The challenge for Dutton is to shake things up fast. The policies, the team, the tactics and strategies. My bet is the Liberals will stuff up the replacement of Turnbull. So long as backroom powerbroker influence the Party it has zero integrity and zero ability to do what is necessary to be competitive. If ScoMo challenges and loses he should be consigned to either the backbench or Assistant Minister for Women!

  33. Rohan

    This is what should be done:

    Do the Dutton GST exempt thing on electricity, cancel Snowy 2.0 AND cancel the RET. Net savings of over $20 Billion over the forward estimates.

    Put out to tender for the new construction of 1-2 Hazlewood sized HELE plants in each state, giving the existing generators first right of refusal to replace ageing infrastructure and a water tight, green proof contract to generate over a 30 year period.

    Banish Trumbal and his Termites to Antarctica where the spend their remaining days mining for salt with a toothpick and a pair of tweezers.

    But no, we’re stuck with these dipshits irrespective of what happens today.

  34. Sean

    I think you are right, all this crap around the edges doesn’t solve the main problem. More reliable base load power is needed to cut costs.

  35. Justin

    Spartacus, I know your are an avid fan of PVO at The Australian. You should check out his latest pearls of wisdom at:

    My comment was as follows:

    How you manage to hold down a position as an “academic” is beyond me for the drivel you put out. You have absolutely no intelligence, knowledge, acumen, insight or wisdom as far as I can see. For the record using the word “reactionary” to try and fake your academic cleverness fools know one. It’s just plain pretentious from someone faking to be smart. Let’s be clear. Turnbull found himself in a hole of his own making (I would say the same about Abbott by the way). He has failed on almost every level. Too many to document in a comment. But he called the by-elections a test of his leadership and they got trounced. Poor political judgment. He proclaimed victory on the NEG (a pathetically inept policy) only to get rolled by the states, the party room, and anyone who mattered. Failure. His signature company tax cuts are in the trash can. He incredibly botched energy policy chasing emissions over cost of living. He called the spill and Dutton put his hat in the ring. Hardly Dutton’s fault. Another bad / desperate call from the PM. That you openly side with a Photios backed Morrison speaks volumes about your political bias. I am struggling to recall a single political prediction you have called correctly. Please refrain from signing off your articles as a learned professor. History shows you are anything but. The thought you might teach and influence future generations is terrifying. No wonder our academic standards in this country continue to decline!

  36. I am surprised that the economics gurus at RMIT have not commented. GST is a states tax which is collected by the federal government and unfairly distributed back to the states. It should be collected by the states as it is in Switzerland and USA. If the states collectively decide to abolish GST on power sold in their state they will get less revenue and the price of electricity in their state will go down somewhat because the producers of the power will not get GST refunds ie it will be input taxed similar to financial services or education services & products. The states at present benefit from higher electricity prices particulary SA which benefits from higher GST as well as the supposed redistribution for poor performance but also subsidised electricity prices. Something needs to be done to stop stupid states like SA, Victoria, Tasmania & NT from gaming the system for incompetence. If each of the states collected their own GST and had no additional commonwealth money apart from their own existing taxes such as gaming, royalties etc. there would be more movement of people to economically sound sates as in USA movement of people and companies from California to Texas. Maybe then the voters would take action on their governments but it can take time as the stupid voters in California have not yet woken up.

  37. Squirrel

    Selective withdrawal of the GST on electricity is not exactly the most practicable idea we’ve had on this subject, but what really made me despair was “Budget blower” – it’s the glib, vacuous, simplistic, selective with the facts, and all-too-often alliterative (for the benefit of supposed dimwits who can’t deal with more than two or three punchy words at a time) slogans which have become the curse of contemporary politics.

  38. .

    How about instead we kick out all immigrants on welfare, stop giving money to foreign governments, to the UN and to corrupt organisations like the Clinton Foundation. We also stop giving money to unviable business like daycare centres and we freeze pollie payratee. Then we don’t need so much tax.

    That is pretty much LDP policy word for word. Well done.

    If we kick out all muslims we could also cut back on intelligence and policing.

    How the fuck are we going to kick out half a million citizens without civil unrest? Where is your police and intel. budgeting now?!

    “No Muslim immigration” is a lot more sensible.

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