Treasurer Jim Chalmers will need to look for more revenue as spending pressures mount. Photo: Michelle Kroll.
The election has only piled on more pressure for the Albanese Government to deliver on a range of issues, and that will require money.
So, where will that come from?
Without relying on the vagaries of the iron ore price, the government could cut spending in some areas and divert funding to others, but if the proposed super tax changes are anything to go by, Treasurer Jim Chalmers will embark on finally reforming a tax system that inordinately favours the old and well-off and disadvantages the young, who are staring at being locked out of the housing market and a future of declining living standards.
Super was never meant to be a tax shelter for farms, properties and businesses, or a tax-discounted way to entrench inherited wealth. The $3 million threshold is more than generous and only 0.5 per cent of super account holders, or 80,000 people, will be affected.
The move to tax unrealised gains or paper profits stems from people quarantining assets in super funds.
While the usual hysteria is being whipped by the wealth industry and the usual news outlets about the proposed super changes, Labor should remember it was that cohort of Gen Z and Millennials who delivered them big swings across the country.
And they want the generational inequity that John Howard and Peter Costello built into the system dismantled.
That opens the way for Labor to revisit the 2019 platform, to pull back those concessions, such as negative gearing and capital gains tax discounts, which voters rejected after a ferocious scare campaign.
Labor has assiduously kept that political poison in the cupboard, but closing tax concessions that continue to cost the budget and distort a property market that alienates Australia’s younger generations should be rehabilitated.
Post-COVID 2025 is a different country from Scott Morrison’s Australia of six years ago, with a greater appreciation of public services and a persistent housing crisis.
If Labor, returned with a thumping majority, won’t tackle tax reform now, when will it?
Finding new revenues will also be necessary, as spending demands are growing across portfolios.
CBA chief economist Luke Yeaman told a Property Council lunch on Thursday (29 May) that there would be pressure to spend more on defence (and not just AUKUS), health and the NDIS, and if the government could not make headway on its housing targets, then it would come under significant political pressure at the next election.
“Communities expect those services, so I don’t think we’re in a world of really sharp fiscal consolidation,” he said.
“I think we’re in a world of cost containment, just trying to manage the growth rather than actually pulling back hard, and I think there will be discussion about tax across all the governments, as well as about how you actually fund those new priorities to keep the budget condition stronger.”
Mr Yeaman said housing, in particular, was a hot-button issue that voters cared about.
“There’s an intergenerational equity perspective to this. Young voters are very much looking to break into the market,” he said.
The other issue that young voters care about is global heating and climate change through the burning of fossil fuels.
Many will be angered at this week’s decision to give Woodside the green light to extend the life of its North West Shelf gas field ‘carbon bomb’ to 2070.
The trade-off should be that if were are going to do this, then this one-off extraction that will add to the world’s carbon load, climate change and other impacts should be taxed more to fund mitigation, pay for the energy transition, boost revenues and, like Norway, establish a sovereign wealth fund, separate from the Future Fund.
There have been calls for years to reform the Petroleum Resource Rent Tax so it can do just this. Other countries have done it without companies bailing, so why not Australia?
Labor faces a test that it failed under Kevin Rudd, and one that a nation supposedly founded on fairness needs to meet.
Like then, and during the 2019 election campaign, it will face high-pitched squeals from the ‘losers’ who will still be well-off and still enrich their companies and shareholders, just not as much.
But again, if not now, when? Clawing back a more equal society and the public good will take time, so it’s best to make a start.
