Saturday, July 02, 2011

About that bigger surplus. Perhaps not - Hockey

Shadow Treasurer, Joe Hockey, has broken with the Coalition's commitment for bigger surpluses, telling Melbourne Institute conference he would be prepared to accept a smaller surplus if it meant giving people tax cuts.

In his first public qualification of his commitment to deliver a bigger budget surplus than Labor, Mr Hockey said he would be prepared to hurt the budget bottom line if it meant cutting taxes.

"The truth about tax reform is that you have to leave money on the table for people, even if it means you are reducing the size of the surplus," he said.

"If you are taking people on a journey where they are going to restructure their affairs, it costs them money. Many Australians are actually prepared to embrace tax reform, but they have to believe that for the pain they go through they are going to be better off."

The Coalition had pledged to return the budget to surplus sooner than Labor, which it is planning to do in the next financial year. It had also pledged a bigger surplus than the $3.5 billion promised by Labor.

Mr Hockey also backed tax increases... telling the conference he opposed capping local government rates because "the people who are accountable for spending the money should also be accountable for the way they raise the revenue".

"A fundamental principle I want to see developed over the next few years is that the governments that raise the money spend the money, the governments that spend the money raise the money," he said.

The Treasury secretary, Martin Parkinson, was pessimistic about the likelihood of future tax reform, telling the conference Australians had become complacent.

Around half the workforce had never experienced anything other than sustained economic growth, he said. Even mild reforms such as trimming access to family payments were "easily undermined by the populist media campaigns that we saw after the budget", he said.

The Treasurer, Wayne Swan, told the conference before the May budget there were "wide-ranging calls for cuts to family payments to so-called middle class families".

After the budget, he faced cries of anguish "from the very same voices in the media that had previously called for even tougher cuts".

Dr Parkinson said the changed environment meant governments had to be careful not to try to do too much.

"If you think you can do 10 different reforms all at the same time with limited political capital, you run the risk you may not be able to implement any of them effectively," he said.

The defeat of the originally-proposed mining super profits tax was particularly unfortunate. "Australia is selling non-renewable assets. Yes, we have large supplies, but once sold those assets cannot yield any further return," he said.

"This means that it is critical that society receives an appropriate return on the assets, rather than the value being captured solely by the Australian and foreign shareholders. Arguably, this is not presently the case."

Mr Swan said he would release a "framing paper" this month to encourage debate in the lead-up to the October tax summit.

Published in today's SMH

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