Q+A: IMF says to hike the GST. Have they got a point?

In its annual report on the Australian economy, the International Monetary Fund has identified a bunch of options for reform, from increasing the GST to getting rid of tax breaks. But is it all a little too removed from reality?

Sean Aylmer and Michael Thompson discuss the potential for reform, and why a shopping list of changes from a US-based organisation can be problematic.

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Episode Transcript

Speaker 1 (00:05):
Welcome to Fear and Greed Q and A, where we
ask and answer questions about business, investing, economics, politics and more.
I'm Uchael Thompson, and good morning Sean Aylmer.

Speaker 2 (00:14):
Good morning, Michael Sean.

Speaker 1 (00:15):
The International Monetary Fund has released a report analyzing Australia's economy.
They do this for every economy, but let's just focus
on Australia because it's got you riled up. They pointed
out the good things. The economy is gaining momentum, inflation
has declined, the jobs market is strong, the private sector
is recovering. But but the report then goes on to

(00:36):
urge a whole bunch of different things, including significant reform,
increasing the gst ending, a bunch of tax cuts, a
whole stack of other things. So my question for you,
knowing that this is something that gets you a little
bit fired up, what's the point. Is this just pie
and the sky stuff? Does the IMF have any reason

(00:57):
to do this? And is anybody in Australia, including government,
actually going to do any.

Speaker 2 (01:02):
Are they listening? I don't think so. Look, the IMF
itself is a great institution and it looks across economies
across the globe and you know makes its prognistations on
how they could improve. I think it really got me yesterday. Right,
So the IMF said Australia should embark on a series

(01:23):
of reforms to taxation, the budget, technology, competition, labor markets
and the green transition because that will burst productivity. What's
of course those things will boost productivity, but seriously, unless
you can tell us how to do it. I mean
the GST. We have argued this ever since the GST

(01:47):
was introduced twenty five years ago. A higher GST rate
or a broader GST would be a good economic decision.
It isn't necessarily a good equity decision. And it's not
a good political decision. Now maybe some government at some
point will make a call on that and they'll be
able to do it fair enough. Mining tax, I mean,

(02:08):
it's kind of the Rudd Gillard given government stuffed up
the mining tax. Maybe there's a good argument for it. Similarly,
the green transition. We've had this week all the big
banks coming out saying hey, we've got to rely on gas,
we've got to keep going towards renewables. We've got the
Coalition saying we're dropping that zero I mean what the
IMF saying. Of course it makes sense, but it's hard

(02:31):
like just coming out and saying this is what you
should do. Well, you run the country, now you go
to keep you go and tell people that you know,
the coal mining town community in Queensland that you guys
are all going to lose your jobs. Now what is
the IMF go and tell on that. And I'm not
against the gist of reducing our reliance on coal fired power.

(02:52):
Absolutely we do. We need to go to renewables, but
it's much harder to do than actually say it. So
I'm on reform the labor great idea, let's reform the
labor market. But you know, we have a union movement
in Australia which does broadly does an incredibly good job
as a collective negotiating tool which employers prefer. You have

(03:13):
a modern ward arrangements.

Speaker 1 (03:15):
There are rules.

Speaker 2 (03:16):
Now, sure you could just totally deregulate the labor market,
but what happens to the worker in that instance?

Speaker 1 (03:22):
Okay, So basically this is as a report that kind
of has some broad ideas, is it just entirely devoid
of any realistic perspective on Australia's politics? For one thing,
because the GST debate. I mean, we have had this
year probably the greatest opportunity for meaningful tax reform in

(03:47):
this in this term of government. The federal government even
had a reform round table in Canberra where they sat
down for a couple of days and went through a
whole stack of ideas. Reform wasn't even considered. It was
ruled out before they got there. And so this is
with a government that has a very very significant margin.

(04:09):
It has got a very large majority, but there is
no political courage here for meaningful reform. So is there
any point in a report like this?

Speaker 2 (04:20):
Well, I mean, ironically, the IMF said that productivity round
table was a good idea, but they've just got to
keep going with the ideas. So I appreciate that. I
think that's very true. Is there any point? I space,
it's not a bad idea about being reminded occasionally of
these things. And I totally agree with you. The mandate

(04:44):
that this government has should allow it to be a
reformist government. I'm not saying they should increase the GST.
I'm not saying they should have a mining tax. I
think they should reduce taxation on companies and income and
personal income taxes. Jim As yesterday that day said well,
we have been reducing taxes on personal income, which is true,

(05:04):
though that was a federal coalition policy originally. I I
suppose it's aka to be reminded on it, and the
thrust of it is all makes sense. I don't know.
It's kind of listening to the media telling you exactly

(05:25):
how you should think.

Speaker 1 (05:25):
I just find that frustrating, unless it's a podcast.

Speaker 2 (05:31):
In which God fearing greed, in.

Speaker 1 (05:33):
Which case you should absolutely think the same way as us.
Was highly encouraged. I did enjoy the fact that this
report emphasized the importance of fiscal coordination across the federation
across climate change and tax reform, and said that the
Parliamentary Budget Office should be given oversight of state budgets

(05:55):
and everything as well. This is significant reform and it's
got absolutely buckley chance of actually being done right.

Speaker 2 (06:02):
That's kind of why I find it frustrating with the IMF.
What do they actually give us stuff that we could
work towards. So what they're basically saying is get rid
of the states. Yeah, you know, we don't need the
states when it comes to a bunch of issues which
are state based. Just have the Commonwealth look after that.
The whole the renewables debate. Whether you like or dislike

(06:24):
the fact that the Coalition has dropped net zero, that
is its position that needs to be respected. It may
not be your personal view, but it needs to be respected.
And I just when these global organizations just come and say, hey,
you guys should do this, as you can see, it
irks me, Michael. It irks me.

Speaker 1 (06:41):
And that is why I enjoy discussing it with you
so much, because I love hearing that fire and passion.

Speaker 2 (06:48):
Thank you very much, Sean, thank you, Michael.

Speaker 1 (06:50):
If you've got a question that you would like us
to tackle, or if you've got something that you think
might just get undershoring skin a little bit, then please,
absolutely I beg you send it through on LinkedIn, Instagram, Facebook,
or at Fearangreed dot com dot au. Let's see if
we can rile him up together. I'm Michael Thompson at
this Fear and Greed Q and A