That was the title of Phillip Coorey’s article in the AFR about Ken Henry’s withering speech to the Committee of Economic Development. For those who came in late, Dr Ken Henry was secretary of treasury from 2001 to 2011, appointed originally by Peter Costello and served during the Rudd/Gillard years. He is now chairman of the NAB board.
I think it was the news story of the week.
- NAB chairman and former Treasury secretary Ken Henry has damned modern politics for degenerating into trench warfare where populism is the ammunition and the reform narrative has been replaced by the language of fear and anger.
In a withering speech to the 2017 Committee for Economic Development of Australia summit, Dr Henry said politics is failing the people on budget repair, tax reform, population growth, infrastructure, energy security and climate change.
He called on the business community, which largely shares his views, to step up where it could to deliver policy.
- “today’s dysfunction” was in stark contrast to previous periods of policy success when politics was every bit as adversarial and partisan “but when the tribal tensions within parties were generally well-managed and the political contest appeared to energise policy, not kill it”.
- “The reform narrative of an earlier period has been buried by the language of fear and anger. It doesn’t seek to explain; rather, it seeks to confuse and frighten.”
He identified four priorities:
- budget repair,
- a plan for a growing and ageing population,
- a settled policy for energy security and climate change,
- an approach to “make the most of the Asian century”.
He said we need to build a city the size of Sydney or Melbourne every decade, but our only plan was to stuff more people into Sydney and Melbourne.
The biggest challenge confronting the energy sector was the “shambles” masquerading as climate policy. We’d known 14 years ago that we needed to do something, but the whole thing is now very much worse.
Every government proposal of the last 10 years to reform the tax system has failed.
We used to be an optimistic nation pioneering some of the world’s best policy and nurturing world-class institutions, but no-one looks our way now to see what we are doing.
He said the four priorities could be met by adopting, as a minimum, eight reform proposals. These are:
- Apolitical infrastructure planning and pricing, including the widespread use of road user charging;
- A much lower company tax rate achieved much more quickly than is presently under consideration by our Parliament;
- The removal of stamp duties on residential property;
- Symmetrical tax treatment of interest and capital gains;
- An overhaul of state-based royalties;
- Market-based price signals to guide climate change mitigation and long-term investment in the energy sector;
- A broader base and higher rate of GST;
- A substantial adjustment to roles and responsibilities between the Commonwealth and the states.
The main thing missing for me is skills development and research.
Not surprisingly, Malcolm Turnbull thinks he’s doing OK. Not sure what he actually said.
On Friday, Reserve Bank Governor Philip Lowe took aim at negative gearing, and questioned the wisdom of a global race to cut corporate taxes.
- Australia could “take the heat out of the housing market” and make home prices more affordable by cutting negative gearing and capital gains tax concessions, the head of Australia’s Reserve Bank admitted.
He wasn’t advocating that as a policy, he was just saying. Anyone listening?
I note that Ken Henry says we should cut corporate taxes hard and quickly. Lowe is saying that globally that just changes the location of investment, it doesn’t increase it.
I heard an extended commentary on corporate tax cuts a few weeks ago. The essence was that, for us, the Government’s salami-slice approach would make no or negligible difference. However, if you went low enough to join the race to the bottom, then yes, companies would invest here, or move here, and our tax take might even go up. It’s a big bang approach, or not at all.
I think no-one in politics here has the balls to try. In the long run I suspect we’ll conform closer to international norms on corporate tax and the GST, but we’ll have to fix our political/media culture first. Malcolm Turnbull was the one who said:
- our nation required a style of leadership that respected the people’s intelligence, that explained complex issues, then set out a course of action and made a case for it.
The chances of that happening while he’s there approach zero.