Old habits die hard | Between the Lines
The Wrap with Matt Grudnoff
This week, we published important research that looked at terrible flaws in the GST that are costing Australians billions of dollars in important government services, like health, education, housing, and infrastructure.
When the GST was introduced, it was promised to be a growth tax that would help make the states and territories financially independent. But growth in the GST has not kept up with the rest of the economy. The slow growing GST means less revenue flowing to the states and territories, forcing cost cutting to essential public services.
This slow growth is expected to continue, costing the states and territories $26 billion this financial year and a staggering $122 billion over the next four years.
Short-changing the states and territories is having real impacts on the vital government services they provide. Shortfalls in funding of health, education, and other vital public services are commonplace across Australia.
The slow growth in the GST is caused by rising inequality, which is driving less spending on things that are subject to the GST. For example, the housing affordability crisis means people are spending more on rent and mortgage repayments, which means they have less money to spend on things that are subject to the GST.
The solution is not a bigger GST, that will only make inequality worse. Instead, we need new taxes to be added to the pool of money going to the states and territories. We could introduce a tax on gas exports. This would supplement the GST revenue and allow states to properly fund vital public services.
Albanese finally scored his Trump face-to-face next month
The fascination the political class has with the Prime Minister securing a face-to-face meeting is truly bizarre. Australia has the lowest baseline tariff rate of 10%. All countries that have secured a trade deal with the US have a higher tariff rate, apart from the UK, which also has the same baseline rate as Australia.
It is fanciful to think that Australia could negotiate a lower rate, and there is a real risk that the unpredictable Trump might impose a higher rate after any meeting.
It has been good to see Albanese pursuing Australia’s independence from the US, including recognising Palestine over objections from the Trump administration. Now seems to be the perfect time for Australia to make it’s own way on the world stage, free from the chaos in the US.
Palestine recognition important, but insufficient
The United Nations annual gathering of world leaders has dominated the news this week. Australia was part of 10 nations to formally recognise Palestine, including Canada and the United Kingdom. This has been largely driven by Israel’s war in Gaza.
Israel’s Prime Minister Benjamin Netanyahu reacted angrily to the recognition claiming that it was rewarding terrorism and saying there would be no Palestinian state. He promised to continue building settlements in the West Bank.
Though it is significant, recognition is for the moment largely symbolic. While the Netanyahu government has the support of the Trump administration it is not likely to be overly concerned. As Emma Shortis, Allan Behm and Bob Bowker wrote in The Australia Institute report “Beyond the Two State Solution,” what is needed is a vision for lasting peace in the region. Australia can, and should, play a role in supporting such long-term, genuine peacebuilding.
— Matt Grudnoff is Senior Economist at the Australia Institute
The Big Stories
Testing times for Australian diplomacy
It’s been a rocky couple of weeks for Australian diplomacy. At the Pacific Leaders Forum, the Prime Minister showed up for not one but two signing ceremonies that didn’t eventuate, as security agreements with both Vanuatu and Papua New Guinea fell over at the last minute. As Allan Behm wrote in Guardian Australia, this dramatic “failure” of Australian diplomacy was “a function of two factors: dependence on America and fear of China.”
That dependence was on full view this week, as the Prime Minister travelled on to New York and managed to score a grinning selfie with the President. The PM has also secured a one-on-one at the White House, scheduled for the 20th of October.
While the pressure to get that meeting was immense, it’s not exactly clear why anyone thinks it’s a good idea. As Emma Shortis and Allan Behm discussed on the After America this week, when the best possible outcome of such a meeting is that the PM is only a little bit humiliated, is it really worth the risk?
Coal habits die hard
The Government’s new 2025 emissions reduction target is significantly below what is required to keep global warming at 1.5°C, and it’s a missed opportunity for the government to show it is serious about climate change.
Credit where credit’s due though. Ross Gittins wrote that it was a “masterclass” of political centrism.
“They made it through without anyone noticing what a weak job they’re doing of protecting our children and grandchildren’s future.”
Last week, Richard Denniss was invited to speak to the Senate Environment Committee to provide some much needed context.
“We’re not trying to get off fossil fuels. We’re still getting into them.”
“All this talk of transition is fraud. We are still opening new coal projects, we are still opening new gas projects, while talking about decarbonising.”
“The government can’t have it all ways, and if it is serious about meeting climate targets, it will stop approving coal and gas.”
Investing in joy: How to save our declining arts sector
Hundreds of live music venues have closed. A string of once-popular festivals have been cancelled. Australia’s artists continue to be desperately underpaid.
Our artists and arts sector are in desperate need of support.
Our research identified three key ideas to save our arts industry:
- Culture passes
- Book bounty
- Remove tax on art prizes & grants
We’ve got five ideas for how to pay for it too.
The Win
The beginning of the end for destructive fossil fuels
This week at the UN, the governments of Colombia and Vanuatu publicly announced a plan to host the First International Conference for the Phase-Out of Fossil Fuels in April, 2026.
Australia Institute research has, for many years, proved that the best way to limit the devastating impact of climate change is to phase out the burning of fossil fuels. This news is very welcome and very overdue.
The Bin
No, Premier, we don’t need more gas
South Australian Premier Peter Malinauskas has told an event sponsored by the gas lobby that a new gas project in Narrabri, NSW, is needed to firm up his state’s electricity supply.
Australia Institute research, using the government’s and the gas companies’ own data, proves this is simply not true.
Australia has so much gas that it exports most of it, royalty-free, overseas. Even then, there is enough uncontracted gas to comfortably supply all of Australia’s domestic and manufacturing needs.
The analysis shows that so-called shortages are the result of too much gas being exported, not a shortage of gas coming from underground.
The Quote
These submarines will lock us into the warlike activities of nuclear weapon states,
– The Hon. Doug Cameron, former Senator for NSW, delivering the 2025 Laurie Carmichael Lecture
Podcasts
Government still ignoring climate reality | Follow the Money
Richard Denniss joins Ebony Bennett to discuss the National Climate Risk Assessment, the Government’s new emissions reduction targets, and its disastrous decision to approve the North West Shelf gas expansion.
Listen now:
MAGA deifies Kirk as Australia recognises Palestine | After America
Allan Behm and Emma Shortis discuss the MAGA movement’s weaponisation of Charlie Kirk’s murder, Australia’s formal recognition of Palestine, and the Government’s disastrous fortnight of Pacific diplomacy.
Listen now:
How ScoMo stuffed the GST | Dollars & Sense
Scott Morrison’s GST deal with Western Australia stuffed the system, but there are plenty of ways the Government could make it better, Greg Jericho argues on this episode of Dollars & Sense.
Listen now:
What’s On
Barrie, Bowers & Friends
Monday 17 October | Sydney
The Australia Institute presents Barrie, Bowers and Friends for an evening of political insight, laughs, and a bit of sass. From the election, to what the Albanese government is doing and what is the point of the Coalition – it will all be covered by some of the smartest minds in Australian politics, led by two of Australia’s best political aficionados, Barrie Cassidy and Mike Bowers.
Big Brave Ideas
Free webinar, registration essential
Following the cancellation of the Byron Writers’ Festival due to extreme weather, join some of the nation’s leading thinkers and festival favourites as they share a big idea for a better Australia.
Bernie Fraser Oration
Tuesday, 28 October | Canberra
Join us at the inaugural Bernie Fraser Oration, delivered by its namesake, Bernie Fraser, who lays claim to being the only person to have led the two main pillars of economic policy management in Australia, the RBA and Treasury.
As a prelude to The Australia Institute’s 2025 Revenue Summit, Bernie Fraser will lay out his ‘big picture’ view of global trends and how they relate to Australian financial markets and the economy in general. While financial leaders typically favour conservatism, Bernie Fraser doesn’t hold back and will present his ideas for raising revenue and detail Australia’s desperate need for a new wave of brave leaders.
Revenue Summit 2025
Wednesday 29 October | Australian Parliament House
Australians need a tax system that fits the needs of our community for a more equitable society. After this year’s historic election win, the ALP government has a unique opportunity to reform the taxation system and set a bold agenda, or as Anthony Albanese himself calls it – show some “progressive patriotism”.
This year the Australia Institute’s Revenue Summit brings together economists and leading experts to discuss revenue options to meet Australia’s spending needs. The 2025 Revenue Summit is an opportunity to contextualise debt, explore potential new means of revenue, challenge paradigms and reassess public spending priorities.
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