Australians don’t hold their politicians in high regard and I’m sorry to say they’re right. It’s not so much that they lie to us, but that they treat us like idiots, giving us oversimplified slogans rather than frank discussion of our problems and our choices about how we solve them.
And then they wonder why so many voters have stopped listening to them.
But it’s wrong to think of them as liars; they’re too devious for that. Any pollie telling an outright lie could expect to be quickly torn apart by their political opponents. Who knows? Maybe even the media would occasionally call them out.
No, what the pollies do is say things that are true in some sense, but are calculated to mislead. As well, they talk down to us, telling us only part of the story. Election campaigns are fought in some imaginary world where everything is nice and nothing is nasty. Price tags rarely get much of a mention.
Labor likes to talk about all the wonderful promises it’s making to spend on this new program and that one. But it doesn’t mention the higher taxes needed to pay for those promises.
The Liberals, on the other hand, focus on our dislike of paying taxes, promising to cut them and keep them low. But there’s rarely a mention of the spending programs that will need to be cut to avoid adding to the budget deficit and our growing public debt.
Now, don’t get me wrong. I’m not arguing that the budget must always be balanced. As a card-carrying Keynesian, I’m well aware that there are times when it’s right and good to be running a deficit, spending more than we raise in taxes.
I’m also aware that, when it comes to spending on infrastructure that will last for 30 years or more, you don’t need to pay for it all in cash up front. Borrowing most of the cost is fine, just as borrowing to buy a house is fine, provided you can afford the payments.
Trouble is, because there are times when running a deficit is fine, it’s too tempting for pollies to act as though now is always such a time. Unending annual deficits eventually become unsustainable. And if there are times when running a deficit is fine, there must also be times when running a surplus is fine.
You run deficits in the tough times, but surpluses in the good times. But the pollies have to be honest with us about whether now is a good time for a deficit, or a good time for a surplus. In the end, there’s no magic pudding. We do have to pay for the level of government spending we want.
But we also have to minimise the amount of spending that’s wasted and, equally, make sure the burden of taxes is being spread fairly. The key to fairness is “ability to pay” – those doing well (including yours truly) should be paying a lot more than those who can’t.
In this, it’s a mistake to imagine that we can shunt most of the tax burden off onto businesses – even big businesses. Why? Because of their ability to shift much of that cost back onto you and me, their customers, in the form of higher prices.
It’s a different matter, however, when it comes to governments using royalties and other means to extract a fair price from businesses buying our natural resources – resources controlled by governments, but owned by all of us.
And that’s particularly true of businesses – often foreign-owned businesses – buying our natural resources for export to the rest of the world. Why? Because such businesses can’t shift the burden of what they’re paying back onto you and me.
Note that royalties and other tax-like arrangements aren’t actually taxes. They’re the owners of a valuable natural resource (you and me) making sure the businesses buying our iron ore or coal or gas pay us a fair price for it, where a “fair” price is one that’s directly related to what the businesses are going to get for our resources when they sell them to someone else.
Now, do you see where this happy lesson in economics is heading? The offshore gas we sell to largely foreign-owned businesses – which, thanks to the fuel crisis, is now worth far more than it used to be – has long been sold by the federal government for far less than it was worth to those exporting it.
Why? Because of the abject failure of the “petroleum resource rent tax” to collect much revenue. It was a great economists’ idea on paper that didn’t work in practice.
This is why so many people are urging the Albanese government to stop mucking about and just impose a simple 25 per cent tax on exported gas.
They argue that, as well as raising about $17 billion a year, the tax would probably force down the retail price of gas to Australian consumers. Why? Because the businesses buying the gas could then make more when selling it locally, so avoiding the 25 per cent tax.
Now, this will shock you: the big companies exporting the gas are vigorously opposing the proposal, warning it would deter further investment in extracting Aussie gas for export. Pull the other one. That’s what they always say. We’ve fallen for such self-serving claims in the past, but shouldn’t do so again.
So a key test of next month’s federal budget is whether it imposes a 25 per cent export tax on gas. Or maybe waters it down to something less than 25 per cent.
As always, the government is short of money. This is low-hanging fruit that Albanese could pluck at no cost to voters and little, if any, threat to the gas industry.
Should he fail to act, we’ll know he’s prepared to put keeping big foreign-owned businesses happy ahead of the national interest.
Ross Gittins is the economics editor.
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