Wednesday, September 15, 2010

This minority government could actually be good - Ross Garnaut thinks so

I reckon he's right

Australia's new minority government should be welcomed as an opportunity for good decision making according to economist and climate change expert Professor Ross Garnaut who told a Canberra seminar yesterday it could "end the great Australian complacency".

Identifying crucial stumbling blocks to lifting productivity he said in only one would the new arrangements be unlikely to help.

That was the role of the states who were prevented from acting as states by the Commonwealth which interfered at will.

"Successive use of tied grants has turned virtually every important function of the states into a joint function with the Commonwealth with no-one really responsible for anything," he told the Melbourne Institute seminar.

"Transport planning in Sydney - one of the very important challenges of our country, and one for which the NSW government should be held to account - becomes a big issue in a federal election. This completely blurs responsibility."

Grants Commission revenue sharing arrangements stopped states bothering to raise revenue.

"Why was it left to the Commonwealth rather than Western Australia to put up mining royalties?" he asked... "Because if Western Australia put up royalties the gains would go to governments in South Australia, Tasmania, Victoria NSW and Queensland."

His climate change review recommended a price on carbon. Instead the government and opposition wanted regulations that would do more damage. The agreement with independents provided an opportunity to get a carbon price after all, and would allow those decisions to be made in the context of the Henry Tax Review.

"There are important links. An efficient carbon tax or a carbon price is going to raise big revenue. A lot of that should go back to the household sector. It can help finance personal income tax cuts."

Considering the Henry Review piecemeal had led to absurd results such limiting the resource tax to only two commodities, ensuring company tax cuts meant other mining super profits were even less taxed. Australia's resource boom would ease soon leaving less super profits to tax.

It would not be easy to get big changes across a wide range of policies in the new parliament. "But it could be a parliament in which we make big progress in a smaller number of important areas," Professor Garnaut said.

Treasury Secretary Ken Henry told the conference Australia was "facing again the challenges of an economy operating at near to full capacity and said big challenges would include the rise of China and India, climate change, population growth and aging and technological change.

Published in today's SMH and Age

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