I will never forget March 1, 2001, when John Howard – unpopular, making heavy weather of the GST, and harried beyond belief over rising petrol prices – called a press conference.
His announcement was truly startling. Having explained incessantly over the preceding months how irresponsible it would be for him to make a one-off reduction in petrol excise to help motorists, he proceeded to announce just that – a 1.5c excise cut. But he went further. He abolished the twice-yearly indexation of petrol excise that had been in place for nearly 20 years, with the result that petrol excise – the amount of money from every litre of petrol we buy that goes to the Government – has been frozen at 38.143c ever since.
It was, politically, an astounding moment. And in the intervening decade, that decision has become a budgetary depth charge. Every year, the gap between the revenue the Government would have collected under the old system and the revenue collected under the excise freeze widens. It's now at about $5 billion a year, which means that Wayne Swan is paying heavy compound interest today on the price of springing John Howard from political prison in 2001.
Not that Wayne Swan is entitled to complain too loudly. When John Howard and Peter Costello launched their doomed bid for re-election in 2007 with a staggering $34 billion promise of future tax cuts, Mr Swan and his leader Kevin Rudd matched them with barely a murmur...
It's here, at The Drum.
. Tax expenditures. Notice how the big ones go to the best off
. Labor's tax policy: nine parts me-too, one part Robin Hood
. Tuesday column: Bring on the evidence