Thu Mar 30

We need more tax revenue, but don't ask the major parties how we'll get it

Written by Michelle Grattan, Professorial Fellow, University of Canberra

Teal candidates again fell short in the NSW election. Only one who was so labelled was successful, and she rejects the terminology. This followed the Victorian state election in which no teal won.

Inevitably, the two state polls raise the question of whether the teal phenomenon, which saw six win federally last May, was such a product of special circumstances that the balloon might now have burst.

The story is likely to be more complicated.

The federal teals’ campaigns were awash with money – different laws at state level limited resources available to them, even though Climate 200 continued to help. In NSW, optional preferential voting also worked against them.

The specific issues driving the federal teals’ wins (climate change, integrity, women’s equality) were particularly intense in 2022, and the anti-Morrison factor was huge.

When the federal teals seek re-election, there will be no Morrison factor. But the benefits of incumbency will work for them, as will the general and continued disillusionment with the major parties, which means many voters are looking favourably on independent alternatives.

While the changed electoral scene in 2025 (compared to 2022) could make it harder for new teal candidates to win, so might an overhaul of the electoral funding regime.

If, for example, Labor decided to cap candidates’ spending, which would be desirable to stop the financial arms race we now see in elections, that would harm teal candidates struggling for name recognition. On the other hand, given the teal movement, directed at Liberal seats, has benefited Labor, the federal government might keep its changes modest.

The federal teals, although they liaise and collaborate, are not one bloc, and their parliamentary votes have shown they are ideologically diverse. Labor’s lower house majority has meant they do not, to their disappointment, hold the balance of power there.

But they are proving adept at using the forums provided by parliament, making a contrast with many backbenchers from the major parties who, although they might do admirable work in their electorates and sometimes on committees, give the impression of being just numbers in their respective parties. Serious policy discussions in the Labor caucus or the Coalition party room are rare.

The backbenchers in the government and opposition are at their worst in the House of Representatives question time, which continues to be as uninformative as ever.

This government (like its predecessor) uses question time to parade what it is doing, with endless so-called Dorothy Dixers, which must be embarrassing to ask. Apart from questions on the Voice, the opposition asks variations on a common range of questions about cost of living, energy prices and the like, often with a slogan attached – “why do Australian families always pay more under Labor?”

The Coalition questions are predictable and repetitive so the prime minister and practised senior ministers have little trouble batting them away. In the last parliament, question time was frequently painful for the Morrison government; in this parliament, it is seldom difficult for the Albanese government.

Rarely does the opposition produce anything from its own independent research with which to surprise a potentially vulnerable minister. Nor does it effectively use question time to extract information.

Crossbenchers (not just teals) do seriously probe for information and sometimes test ministers.

Question time is frustrating, when you think what it could be. But a much more important fault in current federal politics is this: despite the general recognition that big economic reforms are needed, neither government nor opposition dares go there.

Taxation is the standout example. Over the coming years, total tax will have to increase if we continue to want the services from government we are demanding.

Some 59 leading economists were asked, in a survey ^[2] by the Economic Society of Australia and The Conversation, for ways to find an extra $20 billion a year. They nominated new or increased land taxes, increased resources tax, winding back negative gearing, and broadening the GST as their top four options.

The Albanese government is hamstrung by its election promise to not increase taxes (apart from cracking down on multi-nationals’ tax avoidance). That’s for this term, but its narrow majority is likely to make Labor wary at the next election of bold tax reform promises.

One way of tackling the issue would be to have a comprehensive inquiry into the tax system, but treasurer Jim Chalmers has made it clear he doesn’t want one. Chalmers was a staffer to then treasurer Wayne Swan when the Henry tax inquiry was held and is seared by the experience – the aftermath didn’t go well for Labor.

Nor can we expect the opposition to lead the way on tax. The risks of being a big target are obvious. John Howard, having lived through the disaster of the Coalition under John Hewson offering major reform with its “Fightback” program at the 1993 election, pledged before the 1996 election “never ever” to introduce a GST, only to reverse that after he won government (and nearly lost the subsequent election).

Small target is today’s fashion, the road to power for Anthony Albanese and Chris Minns.

Teal crossbencher Allegra Spender is free of responsibility for a party, although she does have an eye on what the constituents in her Sydney electorate of Wentworth want her to do. She judges them open to a policy discussion about tax.

Spender on Friday hosts a roundtable on the tax system, to which she has attracted a who’s who of experts, including former treasury secretary Ken Henry (of THAT review) and Grattan Institute executive director Danielle Wood.

In her speech to the roundtable, Wood will say: “Australia’s tax system is failing us as a nation. It fails us because it cannot deliver the revenue we need to fund the services we expect. Australia has a revenue problem. Without policy change, we only have two solutions: let budget deficits grow ever larger, or continue to push up taxes on labour income.

"This is unchartered territory for tax reform: we need changes to the system that both boost revenue and improve the efficiency of tax collections. There is simply no opportunity to ‘buy reform’ through overly generous compensation packages – we need to raise more and we need to raise it smarter.”

At least roundtables like Spender’s provide an airing for initiatives that we should be considering. It’s just unfortunate the leading politicians in the major parties are not the ones giving them ventilation, let alone support.