The deregulation of the 1980s in Australia was the result of a global movement driven by the ‘greed is good’ mantra championed by Gordon Gecko, the antagonist of the 1987 film ‘Wall Street’. This mantra incentivised deregulation, focussed on incentivising the private sector, emphasising smaller government and provoking the sale of government assets. It also resulted in the rapid acceleration of private wealth across the developed Western countries.

The Global Financial Crisis brought that to an end. Since then, economic reform and wage growth have floundered. However, asset prices have boomed. Those who held the assets have benefited, while those who did not have found it increasingly difficult to acquire them, as rising prices have outpaced wage growth.

How did the situation arise, and is it sustainable? I maintain that the reason we are in this situation is that successive governments have pursued a populist agenda for short-term re-election purposes. We have seen a succession of governments that remain content to pump prime residential housing prices and artificial GDP growth through excessive migration. Combine this with COVID and the acceleration of the welfare state mentality, and today where social programs and the ‘care’ economy are growing at bizarre rates. We face a decade, if not decades, of deficits and a youth generation who will be left with the bills and the hard decisions.

Our government has launched a productivity summit, but it has removed from the agenda GST reform, Industrial relations reform, paring back government spending, and no revision of the Tax code if it involves a reduction in the revenue taken. This leads one to ask what is on the agenda.……. I would suggest tax increases.

We have a millennial generation who have moved away from the main political parties. They see little in the way of political reforms that will inspire them or improve their lives. To them, the social contract of each generation, where the next generation was ‘better off,’ has been broken. So, it should not come as no surprise that the youth support more taxes on those who have profited from the asset gains.

Most government revenue comes from personal and company taxes. A full employment rate and strong migration have kept the tax take up, but in the longer term, as migration declines and automation and AI take effect, the tax take is expected to decline. On the face of it, unless hard decisions are made, budget deficits will continue to grow exponentially, leading to a review of credit ratings and an increase in interest costs.

• What can governments do? They can increase debt (but they are already doing this). They can cut expenses – a complicated and not politically palatable option. Or they can raise taxes. I believe this is the path we are on. In the not-too-distant future, I believe we will see the following:
  Further taxes on superannuants, not just on those with large balances, but the taxing of income streams
• The Family Home assessed for the Aged Pension Asset test
• The Family Home taxed when the value of that asset exceeds a defined threshold, say $3 million
• The continued non-indexation of tax brackets to encourage bracket creep
• A broader and rising Goods and Services Tax (GST)
  The Capital Gains Tax (CGT) discount substantially reduced or removed completely
• Franking Credits revisited and reduced (remember this cost a previous opposition government but is now back in vogue)
• Family trusts taxed to discourage usage

Sounds foreboding, and I hope to be proven wrong, but without a genuine reformist movement which encapsulates a Vision for the Nation and where everything is on the table, we cannot hope to succeed.

The easy way out is taxing, but economic history shows that, in the long run, high taxes without economic reform lead to decline.

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