Australian Lefty on Politics, Governance, Science and Info Management

GST cut?? Please no!

Posted by Dave Bath on 2008-11-24

Normally, I can see what Peter Martin is driving at, and can see merit in his views, but having just read "Why Not Cut GST?" (2008-11-24), and I’m shaking my head.

Sure… it doesn’t just benefit irresponsible borrowers.  Yes, the discount might have a sunset clause of a year, but I can’t see any government in the last year of a term, with 2009 probably being even worse than 2008 as far as main street is concerned, increasing taxation.

OK, OK, Peter is just quoting someone else, but still…

We’ve got rusted-out infrastructure, a whole lot of other capacity constraints, so even if we keep spending as individuals, we’ll be in no better shape when the economy starts moving again around the world.  We won’t rise with the tide… we’ll still be anchored to the seabed and drown.

With things about to get really ugly, it’s not an extra couple of percent in your pocket this week that inspires confidence… it’s your opinion of whether you’ll have a job in a couple of months.

As I’ve outlined before ("Sarkozy’s Smart Move" – 2008-11-09) buying back the farm (to be sold at a tidy profit in a few years) and giving confidence to mums-and-dads by bringing back a strong and deep public service, rather than have people worry if they are working for subcontractors, as well as putting down infrastructure when labor and resources will have little price pressure, would leave us in much better shape down the track.

Besides, lowering GST simply gives the greatest dollar benefit to those who have siphoned off the money over the last few years.  It’s not exactly a money-multiplier strategy, but another leap of faith in discredited "trickle-down" theories.

How would lowering GST for a year help us become more productive, more competitive internationally?  There are many ways, with relatively minor changes to spending patterns, that we can become prepared for the next decades, redirecting the efforts (but not changing the skill or toolset) of the car component industry into something other nations might want to buy from us, as I outlined in "Support car industry – kindof" (2008-11-14).

The kind of growth (yeah, like that will happen anytime before 2010, if then!) advocated by Koukoulas (quoted by Peter Martin) is the same type of "growth" that got us into trouble in the first place – despite Koukoulas’ criticism of Howard/Costello.  As I noted in "Not all GDP growth is good" (2006-11-12)

Economic growth as measured by an increasing GDP is like measuring the growth of a child in kilograms: sometimes increases are bad, falls are good.

Given my general opinion of Peter Martin as one of the more sensible economics commentators – most deserve to be pilloried (see "Missing in action: credible economics commentators" 2008-03-10) – and the fact that the entire argument in Martin’s post is a quotation, I must wonder…

Is Peter merely flamebaiting?  Is he seeing how well the short-term money-in-my-pocket delusion still plays with the Australian public?


2 Responses to “GST cut?? Please no!”

  1. Guy said

    Thankfully it appears Rudd has already ruled out the GST cut. The whole debate seems to have been kickstarted by Labour adventuring down that path over in the UK. I can’t see it ending well for them, myself.

  2. Thank you. Not bad submissions you have here. Got some more sites to link to with a bit more info?

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