Dutton’s GST idea a ‘budget blower’, say Morrison and Turnbull

Malcolm Turnbull and Scott Morrison slammed Peter Dutton’s proposal to exempt electricity from the GST yesterday.

Peter Dutton in Question Time in the House of Representatives Chamber at Parliament House in Canberra. Picture Kym Smith

Malcolm Turnbull and Scott Morrison slammed Peter Dutton’s proposal to exempt electricity from the GST yesterday, stressing the significant hit to state revenues it would cause and the need to increase other taxes to compensate.

Economists and state politicians rounded on Mr Dutton’s controversial suggestion yesterday, which the Parliamentary Budget Office has estimated would cost the states more than $31 billion in revenue over a decade.

“If one were to remove a big item like that from the GST pool, obviously it would have to — the states would expect to be reimbursed and that would have to come from other federal taxes,” Mr Turnbull said.

Mr Morrison, putting the cost over four years at $7.5bn, said the policy would be a “budget blower, an absolute budget blower” and would “scuttle the WA GST package”.

Economist Saul Eslake said it wasn’t an encouraging sign for any Dutton government.

“It looks like a poll-driven, unprincipled response to a short-term political issue and reflects the ongoing failure of both sides of politics to come up with a coherent, sensible and saleable energy policy,” he said.

“It would yet again undermine the breadth of Australia’s GST, which is already pretty narrow.”

The GST is applied to less than half of consumption expenditure.

“And remember in at least two states, Tasmania and Western Australia, the energy retailer is owned by the state government. Those states’ retailers could simply put their prices up to make up for it,” Mr Eslake said.

Queensland Treasurer Jackie Trad told The Australian the idea would “slash billions from GST revenue and the commonwealth would very clearly have to compensate states”.

West Australian Treasurer Ben Wyatt said he was “deeply alarmed by this thought bubble which others have rightly said doesn’t appear have been thought through”.

According to an analysis by the PBO, Mr Dutton’s proposal to cut the GST on electricity prices would cost the states about $31.2bn in lost revenue over a decade.

Labor Treasury spokesman Chris Bowen said the idea, born of frustration over double-digit electricity price increases over successive years, was a “crazy thought bubble”. “Mr Dutton needs to explain the costs involved with putting in place a bureaucratic infrastructure to work out who is and isn’t exempt from the GST and how it would be implemented,” Mr Bowen said. “It reminds me of the old Brendan Nelson ‘take petrol tax off’ announcement, that didn’t go too well either,” he added.

Attorney-General Christian Porter, separately in Perth, told radio 6PR modern politics was a “very challenging environment”.

“I’m not going to get into the merit of debating a very novel policy proposal from what is now a backbencher which is totally un-costed and probably at this point rather speculatively thought through,” he said.

Electricity prices have become a lighting rod of political discontent as prices soar; average weekly expenditure on utilities has increased almost 31 per cent from $49.45 to $64.66 since 2010 in real terms.

Constitutional law professor Anne Twomey said the federal government could legislate to change the rate and base of the GST without the states’ permission in theory “because it cannot bind itself by its own legislation or ‘abdicate’ its power to the States”.