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Will Albo’s next big idea be to tax the wealthy?

Peter Switzer
27 October 2023

The Paris-based economic think tank, the OECD  (the Organization for Economic Cooperation and Development) has advised the Albanese Government to go hunting for wealthy Aussies and tax the living daylights out of them! While these are my words, this is the implication of their advice to bring the post-pandemic budget, which is heading into deficit, back into line.

But it’s not only the wealthy who the OECD thinks need targeting, but also those benefitting from the big spending of the National Disability Insurance Scheme (NDIS)! The wealthy, who are largely non-Labor voters, might be an easier target but playing hardball with those accessing NDIS assistance is unlikely to happen before the 2025 election.

Tom Dusevic in The Australian looked at the economic advice sent to the Federal Government that says the think tank proposed reforms would result in a $25 billion windfall to Treasurer Chalmers. Significantly, the OECD thinks the deficit this financial year will be $25 billion. Here’s the guts of what it recommends:

  1. Raise the GST. The logical increase is that the current 10% becomes 15%, like the Kiwis’ tax.
  2. Broaden the GST so it affects more goods and services
  3. Remove the lower taxes on super and reduce the $3 million starting point before the tax on super goes from 15% to 30%.
  4. Think about an inheritance tax.
  5. Raise the retirement age to 70.
  6. Replace transfer duties with a land tax.
  7. Give the mining super-profits tax a rerun!
  8. It thinks the Reserve Bank needs to keep interest rates higher for longer but noted the economy is slowing.
  9. Reform the school curriculum
  10. Introduce an employer-focussed skilled migration program.
  11. Apply a more robust Safeguards Mechanism that applies to major emitters, higher fuel taxes and a rethink on existing fuel subsidies.
  12. Reduce the NDIS spending, which Dusevic says “is responsible for one-sixth of the total growth in federal spending over four years, as more people than anticipated enter the scheme and fewer exit.”
  13. Reduce the tax on savings and income from rentals but raise the tax on super that it thinks is too generously under-taxed.

Generally, those economists ‘living it up’ in Paris want the Albanese government to put a cap on spending. They also want the government to bank windfall gains, say from high iron ore prices, into a fund (similar to our Future Fund) to make the budget more recession-proof. It also recommended putting pressure on over-spending states to spend less.

To be fair, any increase in the GST would make it possible for income taxes to be cut, which would appeal to younger voters in particular. The OECD thinks older Aussies are living the life of Reilly. This lines up with what Treasury secretary Steven Kennedy revealed recently that only 18% of Australians aged 65 and above pay income tax.

Why do we need all these changes? Dusevic summed up the OECD’s arguments for these reforms this way: “…to pay for the burgeoning cost of aged care and health, ease the clean energy transition and spur economic growth.”

The big question for Albo and future governments is to what extent are the majority of voting Australians prepared to accept all or many of those changes recommended by the OECD?

In reality, it would take a politician of enormous national magnetism and popular appeal to have a conversation about many of these reforms, let alone pulling them off.

I suspect the only way that many of these changes could be put forward would be if a government pitted younger over-taxed Australians against older under-taxed Australians. But hell, that would be a huge political gamble, and I’m sure Bill Shorten, after his electoral experience, would agree.

And given the PM’s ‘Voice’ failure with 60% of voters, I suspect he won’t be keen to try many of these OECD ideas.

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