Australian Politics 2015-04-01 15:51:00


Labor punishes wage earners with stance on GST reform

On the first day the tax discussion paper was released — indeed, before the formal announcement — the Labor Party rejected the ­central idea of GST reform which is essential to resolving so many defects in the system.

Amid the near worthless mantra of comments about economic reform since Mike Baird’s impressive NSW election victory last Saturday night, the pivotal factor has been ignored — the long and ever mounting collapse of ­Liberal-Labor co-operation and goodwill on how to salvage the ­decline in Australian living standards growth.

This now poisons virtually every area of major policy and it occurs on the major themes. Opposing economic reform has become the main method by which oppositions seek to win office. Baird’s success is a decisive event but extremely difficult to emulate as the response to the tax paper reveals. Commentary that the secret now lies in being popular or having a non-politician’s smile is a joke.

Labor’s position on the GST is political and ideological. It has clung to this position with a longing desperation since the late 1980s and at virtually every campaign it rolls out a GST scare.

Labor’s closed mind was obvious this week. It had no interest in engaging in any of the GST related arguments in the tax paper, declared its non-negotiable stance and began stirring another GST scare.

There are three certainties in this country — death, taxes and ALP hopes to win another election by opposing a GST.

Labor’s opposition to the GST was pivotal to its 1993 election win. It campaigned on the GST at the 1996 election. It nearly won the 1998 election when opposing John Howard’s GST-led tax reform. It campaigned on GST rollback at the 2001 election.

Indeed, it is extraordinary that the introduction of a GST by Howard and Peter Costello left Labor unmoved. While Labor declined to abolish the GST in office it opted to freeze the tax, remove it from the Henry tax review and was on constant alert during the Rudd/Gillard era to relaunch the scare. It tried to make the GST a frontline issue at the 2013 election. If given the chance, it will run on the GST at the 2016 election.

The consequences are now on display in the tax paper. The people being penalised are the middle Australian wage earners.

Our tax system is heavily geared to personal income tax and company tax. In this respect it is out of step with many of our competitors. The paper says personal and corporate income taxes ­constitute about 70 per cent of tax receipts.

Company tax at 30 per cent is far higher than many other nations and uncompetitive in Asia. Just 12 companies pay one-third of all company tax, pointing to ­dangers from corporate mobility.

The burden is carried excessively by wage and salary earners. Reliance on personal income tax is projected to increase further over the next decade as a result of “bracket creep” (taxpayers moving onto a higher rate). Without reforms, more than two million more taxpayers will enter the third tax bracket (taxable income $80,000-$180,000) over the decade and more than 750,000 more taxpayers will enter the fourth tax bracket (above $180,000).

The major logjam is the freeze on the GST. Our GST rate at 10 per cent is one of the lowest among ­developed nations.

The OECD average rate is just under 20 per cent, nearly twice our GST rate. Not only is Australia’s rate low but its exemptions are high. Our GST is paid on only 47 per cent of all goods and services with the main exemptions ­including fresh food, health and education.

The discussion paper focuses on the issue Labor wants to deny — the risks in this tax structure. It shows the current direct/indirect tax imbalance remains similar to the 1950s and is inadequate for the globalised economy of the 21st century.

Opposition Treasury spokesman Chris Bowen said Labor wanted to play a “lead” role in the tax discussion. The item Bowen and Opposition Leader Bill Shorten advance is tightening tax breaks for superannuation that favour high income-earners. There is much force in this view and these breaks should be altered.

But this is a side issue in a bigger debate the nation deserves to have. Labor’s purpose is apparent — to push a Labor priority while undermining any wider discussion about the tax system overall.

Contrary to Labor claims there is no great principle involving the GST. There is no necessary link between a low GST and an equitable polity.

Indirect taxes with a broader base and higher rates than Australia operate across most OECD nations including in many once loved socialist nirvanas. The Scandinavians specialise in high indirect taxes running at about 25 per cent within an overall equitable polity.

The real issue is explicit in the tax paper: “It is not the progressivity of any particular tax base that ultimately matters but, rather, that the tax and transfer system as a whole delivers fair outcomes.” In short, the test that matters is the fairness overall of the system.

Labor almost never mentions the highly progressive nature of our tax system because it wants to focus instead on whether any new measure is progressive in its own right. This is a misleading and phony test. Nobody advocates GST reform alone. Changes to the GST would only be made as part of an overall package, including both compensation and lower income taxes. The GST is our third-largest tax. It is regressive since higher-­income households spend less of their income proportionally than lower-income households.

Yet the consequences of the current GST freeze only punish wage earners via income and company tax while denying the option of rebalancing the system.

Tony Abbott and Joe Hockey are pledged to take any tax reform, including GST reform, to the next election. Abbott could recruit Baird and Howard to his cause and still have no hope against any anti-GST frenzy.

Any change to the GST requires the unanimous support of state and territory governments and passage of laws through the national parliament including the Senate.

There are multiple obstacles, any one of them being lethal. Still, it is important to have the debate. We need to seize whatever policy breadcrumbs are available.


Christopher Pyne asks al-Taqwa principal to explain himself after Islamic State comments

Federal Education Minister Christopher Pyne has asked the principal of al-Taqwa College to explain why he told students that Islamic State was a Western plot.

The move comes as a former teacher at the school said principal Omar Hallak also told students that Israel did not exist and Jews were horrible people.

Mr Pyne condemned the principal's controversial statements on Wednesday and said he would write to al-Taqwa, which is the largest Islamic School in Victoria, seeking an explanation.

Mr Pyne will also write to Victorian Education Minister James Merlino to ask what action the Education Department is taking.

"The comments of the al-Taqwa College principal are wrong and damaging," he said. 

Ajit Somers taught at the school in 2001 and said Mr Hallak had "shockingly" anti-Semitic views.

He said the principal came into his class and set an assignment in which students had to research a country of their choice. When the principal discovered one student had chosen Israel, he became furious, Mr Somers said.

"He said there is no such thing as Israel and how dare you say Israel. He said Jews are horrible people."

After Mr Hallak left the room, Mr Somers said he told students Israel existed and was a member of the United Nations.

A number of former al-Taqwa teachers have raised concerns about the principal's views following revelations by Fairfax Media last week that he told students not to join Islamic State because it was a plot by Western countries.

He then went on to say that he believed IS was a scheme by Israel and the US.

Another former teacher at the Truganina school in Melbourne's outer west, who did not want to be named, said teachers who were not Muslim were treated as "second-class citizens".

The teacher said she was told off by the principal after she drew a star on a whiteboard to reward good work.

"He said 'that is a Jew symbol. If you do it again I will kick you out'."

Mr Hallak has been called to a meeting with state government officials to explain why he told students that IS was a plot by the West.

State government officials  will meet the college after the school holidays to "develop a program of cross-cultural understanding".

Mr  Merlino said earlier this week that the principal's comments were "a real concern".

"The comments made have no place in our schools and we look forward to working with the school community to address the issue."

Mr Hallak did not respond to questions.

The Truganina school received $11.2 million in federal government funding in 2013, and $4.7 million from the state government, according to the My School website.

In 2005 The Sunday Age reported that a visiting imam told al-Taqwa students that Jews were putting poison in bananas and they should not eat them.


W.A.: Public hospital bosses warned of 'significant consequences' before bowel unit death

Fiona Stanley Hospital management were warned in November that cutting specialist inflammatory bowel disease nurses would result in "significant clinical and financial consequences" – four months before a 41-year-old man died in an apparent medication bungle.

Jared Olsen, who suffered irritable bowel syndrome and suspected Crohn's disease, died in early March after apparently taking mercaptopurine – a potent drug used to treat acute leukaemia that he should never have been prescribed to him.

On Tuesday, Mr Olsen's devastated father Phillip revealed his heartbreaking loss to 6PR Radio's Mornings host Gary Adshead, amid concerns vital blood tests that would have revealed his son had an enzyme deficiency and should not have been prescribed the mercaptopurine.

Concerns were raised that the Centre for Inflammatory Bowel Disease, based at Fremantle Hospital, was not relocated in its entirety in the service's transfer to Fiona Stanley Hospital.

But on Wednesday it emerged hospital administrators were warned of "significant clinical and financial consequences" about cutbacks to the service after staff aired concerns in a letter in November last year.

"Many IBD patients require immune-suppressing medications, regular blood test monitoring, drug infusions, investigations, endoscopies and urgent clinical reviews to avoid hospital admissions," Adshead read from the letter on air.

"The IBD nurses provide telephone advice as well as co-ordinate all of the above services.

"We cannot emphasis enough how concerned we are about failing to provide an ongoing adequate IBD service to this frequently young, chronically ill and vulnerable group of patients."

Mr Olsen was admitted to Fiona Stanley Hospital on February 4 with extreme stomach pains and was discharged a week later with a list of medications to take, including mercaptopurine.

A month later, he presented at the hospital's emergency department after collapsing at home.

But Phillip Olsen said his son should never have been given the drug without a blood test to determine if his body could cope and has discovered that one in 300 people do not have a vital enzyme called TPMT needed to prevent the potentially life-threatening side effects of the drug.

Alan Robbie, who lobbied for the Fremantle unit to remain open, said the unit was effectively disbanded in the shift to Fiona Stanley Hospital and a 24-hour health phone line for the patients was cut in February.

Mr Robbie told 6PR Radio the specialist IBD nurses were a "vital cog in the wheel" in the management of patients with this life-changing condition.

"Ulcerative colitis and Crohn's are insidious diseases. They are with you all your life. And you have flare-ups at any you have to have a person on the other end of the (phone) line who intimately knows your pathology and what's happening to you because each patient is unique," he said.

Fiona Stanley Hospital chief executive David Russell-Weisz, who will soon take up the role of Health Department director-general, said the unit was functioning at FSH but conceded there had been some difficulties recruiting a senior nurse to the team.

Mr Russell-Weisz said under hospital policy, blood tests should be before or at the same time when the drug is prescribed and there would be a full investigation into Mr Olsen's treatment and ultimate death at Fiona Stanley Hospital.

He said the coroner had been informed and the hospital was treating Mr Olsen's death as a "significant adverse event".

"There is no doubt there was significant concern that the service, as it was, was not going to come across because we were going to lose at least two out of the three nurses. And also, there was a view that the service, whilst an excellent service, was going to be enhanced – and that's what we have tried to do," he said.

Of the three-nurse team at Fremantle Hospital, Mr Russell-Weisz said one was transferred to FSH, one resigned or took redundancy and the third moved into a research role.

Since then, the hospital has had difficulty recruiting a senior nurse, with one just appointed and additional approval recently granted for an additional nurse, he said.

He said hospital management had met with Phillip Olsen and would meet with him again next week.


Defence bureaucracy to be cut

The Department of Defence's job-for-life culture has received a massive shake up with the federal government endorsing a review to cut 1650 civilian public servants, abolish the Defence Materiel Organisation as a standalone agency and give managers greater workloads.

Voluntary redundancies have not been ruled out to achieve the workforce reduction which is part of "transformational change" set out in the First Principles review headed by former Rio Tinto Australia managing director David Peever.

On top of the civilian workforce reduction, another 1000 Australian Defence Force members doing public service jobs will move out of their existing jobs in the bureaucracy and back to Navy, Army, Air Force and joint operations positions.

The government will save money by only using ADF members for public service roles when critical and in doing so has listened to unions which argued uniformed personnel "driving desks, not tanks" was expensive.

The Defence Materiel Organisation, which oversees $12 billion of spending a year, will be absorbed into the department and become the capability acquisition and sustainment group.

Defence Minister Kevin Andrews said the review found a "proliferation of structures, processes and systems with unclear accountabilities, which in turn cause institutionalised waste, delayed decisions, flawed execution, duplication, over-escalation of issues for decision and low engagement levels amongst employees".

The government has accepted 75 of the 76 review recommendations, which will be implemented over the next two years.

To address concerns Defence is too top-heavy, one three-star general position will be abolished, along with six deputy positions in the upper reaches of the public service.

Defence will reduce the thick layer of middle managers - there are up to 12 layers of management between department secretary Dennis Richardson and his frontline staff.

Community and Public Sector national secretary Nadine Flood said her organisation's submission to the review to suggest no more cuts to the Defence workforce were ignored.

"It is deeply disappointing the minister is giving the green-light to slashing another 1650 jobs," Ms Flood said.

"Last year the Abbott government cut 11,000 public sector jobs."

Ms Flood was pleased the review recognised cutting public service jobs should no longer be looked on as the primary savings method.

Professionals Australia ACT director David Smith, who represented engineers and technical staff said the review lacked vital detail.

"There is recognition of the problems and risks associated with the Defence engineering and technical workforce but no recognition that this has been known for years or any real recommendations, with teeth, to address the deficiencies or mitigate the risks created by these deficiencies," Mr Smith said.

"Indeed the recommendation to 'ensure committed people with the right skills are in appropriate jobs to create the One Defence workforce' can't be implemented as the current job freeze has just turned into an ice cap."

The 1650 job cuts and 1000 ADF members sent back to the services will happen on top of a reduction to the civilian workforce of 3000 since 2012.

These figures did not take into account what might be recommended in the looming Force Structure Review and the 2015 Defence White Paper, although the First Principles review recommended it alone should be the road map for reform for the next five years with no other reviews in that period.

The government and department will spend the next three months planning how to make the changes and the reforms would be finished within two years.

At the end of this the department's public service workforce will be between 17,000 and 18,000.

The review recognised how hard it could be to reform the organisation.

It said Defence staff were the most likely, out of all Commonwealth public servants, to have worked in one agency.

"It is a cradle to the grave model which is not without its benefits," the review said.

"However, on balance we would contend this insular approach and lack of diversity contributes to the inability of Defence to change."

The review recommends selling off more parts of the Defence real estate but Mr Andrews said a timeframe would not be placed on the sale of the 17 sites identified in the 2012 Future Defence Estate Report.

The report noted: "A conservative net present value estimate of the disposal of these sites over 30 years is $1.4 billion, including property sales of $570 million ... but this does not take into account future maintenance savings."

Fairfax Media revealed in December the government had $1 billion of unfunded work to do an the estate as it fell into dangerous disrepair.

The "first principles" review is the most thorough in four decades and calls for a restructure of the department to cut waste and simplify processes.

The review effectively proposes the biggest overhaul of the department since former Defence department secretary Arthur Tange rationalised and brought the different Defence services under one banner.

On Wednesday there was some confusion about how many job cuts there would be with talk of 1650 and 1000 public service job losses but a department spokesperson later clarified it was 1650.