The Government today appointed its Commission of Audit into the functions of government. The terms of reference are here.
I’d like to take a look at a few of the premises of the terms of reference.
The West Australian has a scoop today on one possible policy that could emerge from the new Government’s Commission of Audit:
The university education debt of millions of Australians could be sold off under a proposal to be examined by Prime Minister Tony Abbott’s inquiry into the state of the nation’s finances.
In a move that could boost the Budget bottom line, up to $23 billion of outstanding Higher Education Contribution Scheme debt would be effectively privatised under a plan that has already won support in some financial circles.
One proposal that has backing in the financial sector is to convert the $22.6 billion in HECS debt held by 1.6 million Australians into a financial product. In a process called securitisation, the responsibility for HECS debts would be bought by the private sector and then sold to investors.
One of the key economic policy battles in the first term of any government is to shape the public’s understanding of the previous government. Howard and Costello successfully associated the Keating and Hawke governments not with a massive program of economic liberalisation, but with “Beazley’s black hole,” a supposedly hidden fiscal deficit that was used to justify sharp spending cuts. The first Rudd government could and should have made more of Howard’s failure to make the most of the mining boom, squandering much of the benefit in unsustainable tax cuts, but they failed to ram this message home.
A couple of years ago, the government changed the rules so that families on $150 000 a year or more wouldn’t be eligible to receive family payments. There were the predictable cries of ‘class warfare’, but there were also claims that $150 000 in Australia leaves you struggling to make ends meet. The Daily Telegraph found a couple on $150k who said “you can survive on $150,000 but you definitely aren’t doing well,” while in The Australian, a couple on $200 000 said “the government are making it bloody hard.”
I can understand why libertarians might favour a flat tax on superannuation contributions and on ordinary income. I disagree vehemently with that position, but it’s logically coherent to me. Personally, I favour a progressive tax on both of those things, and I think that position also makes sense. What isn’t coherent to me is the idea that we should tax ordinary income in a progressive way, with higher income earners paying a greater proportion of their income in tax, but we should tax super contributions with a flat tax. How does that make sense?
The Australian editorial, 11 January 2013:
Australia’s welfare system is crying out for comprehensive reform… Is it fair that a couple with one child and a household income of $160,000 a year receives a family tax benefit, or that a young couple buying, for their first home, a $700,000 apartment in Toorak are paid the first-home owners grant? The old principle that welfare should exist only for those who genuinely need it appears no longer to hold.