Australia's new government should understand the following.

• Author: Stone, John
• Position: Essay
• Pages: 9(12)

As this article is being filed, (1) the federal election campaign is in full swing. Before it is published we shall know whether, over the next three years, we shall be governed by the Coalition parties, again, or by a Labor government led by Mr Kevin Rudd. This timing means that most major topical issues are, effectively, off-limits.

On immigration policy, for example, a Rudd Government will produce an even worse outcome than the Howard Government. The failed ideology of multiculturalism, which Mr Howard has lacked the ticker to confront, but from which he has glacially backed away over the years, would be fully restored. The relatively minor moves by the current Minister for Immigration and Citizenship, Mr Kevin Andrews, to clean up the mess inherited from the ineffable Senator Amanda Vanstone, (2) would be put on hold or reversed, and so on.

As we know from the intense preelection debate about it, the same is true of industrial relations policy: a Rudd Government (3) will set back the course of economic progress there for years. Similarly for so-called "global warming": under a Rudd Government, we can expect an even more costly avalanche of United Nations-inspired nonsense than we have had over the past 18 months or so from the Howard Government (in particular, from its Minister for the Environment and Water Resources, Mr Malcolm Turnbull).

While such topics will again come to the fore after the election, there is little point in writing about them now. There is however one topic about which, whatever the outcome on 24 November, it seems worthwhile to write in advance. I refer to personal income tax reform.

THE POST-ELECTION TAX REFORM OPPORTUNITY

Whichever side wins on 24 November, it will inherit essentially the same federal budgetary prospect. True, the respective election campaign promises will imply a somewhat different list of future obligations. But Mr Rudd's "me too" approach has meant that even these differences, within a $250 billion budget, will be negligible. (4)

Because the Coalition and Labor will both inherit, on 25 November, virtually the same federal budgetary prospect, both will have essentially the same opportunity to undertake major change in our system of personal income taxation (and prospectively, corporate taxation also).

I have written previously on this topic, most recently in the preceding issue of this journal. (5) Since that article was written, a series of dramatic events has highlighted the truth of certain observations in it. More importantly, however, those events have revealed the sheer magnitude of the opportunity available to what, by the time this article is published, will have become our new government.

In what follows, therefore, I shall briefly recapitulate the key points made in that preceding article and recount the aforementioned series of dramatic events since it was written. I then note the policy reactions to those events, first by the Howard Government in its opening electoral campaign shot on 15 October, and then by Labor in its response on 19 October. I shall then reflect on where all this will leave us post-24 November, and challenge the winners, whoever they may be, to avail themselves of the unprecedented opportunity open to them.

A PRELIMINARY DISCLOSURE

Readers of my articles here and elsewhere will know that, while I have many criticisms of the Howard Government, I have consistently supported its return to office in every fed- eral election from 1996 onwards. (6) During the past three years my criticisms have not lessened, and in some respects (including the one to which this article is directed) they have intensified. Nevertheless, despite the many claims that a Rudd Government will constitute "an equally safe pair of hands" as the Coalition, I do not accept that complacent view. So, having in mind that elections are never about obtaining a really good government, but merely about choosing the lesser of two evils, I shall again, on 24 November, vote for Mr Howard.

Should they regard that fact as relevant, readers of this article (postelection) will give it such "weight" as they think appropriate. The fact is that the views I now express apply equally to the Coalition parties and to Labor.

A BRIEF RECAPITULATION

The key points in my last article were as follows:

* After a broadly commendable start over the years 1996-97 through 1999-2000, the annual Budgets produced by the Treasurer, Mr Peter Costello, began to fall into error.

* The years 2000-01 through 2002-03 encompassed the introduction of the Goods and Services Tax (GST). They saw the deceitful presentation of the Commonwealth's budgetary accounts, with the GST falsely described as a tax "collected on behalf of the states and territories" by the Commonwealth acting as their agent, and Mr Costello's associated perennial--and perennially false--claims to have cut our taxes.

* Commencing in 2003-04, the Budget papers began to be marked by serious errors in forecasting the outlook for non-rural commodity prices. This in turn produced seriously understated forecasts for profits, and corporation tax payments, not only by Australia's mining companies, but by all the other corporate and individual taxpayers whose prosperity has been (directly and indirectly) enhanced by the "stronger for longer" commodities boom.

* A striking feature of these forecasting errors has been that, with the minor exception of 2005-06, they have been consistently one way in understating the revenue outlook.

* As a result, year after year the Commonwealth's accounts have recorded large surpluses, far exceeding those initially forecast--despite, every year, further large spending decisions after the Budget has been brought down.

* Last May, the 2007-08 Budget forecast a decline of 1.5 per cent in our terms of trade this year. "Despite some softness in some non-rural commodity prices in the past few months, (7) this forecast could once again be exceeded". (8)

* With the Commonwealth's net debt totally repaid during 2005-06, and with "surpluses to burn", (9) Mr Costello first devised, in that year, the unnecessary Future Fund. This was little more than a device for shoveling surpluses "off-Budget"--thereby further debauching the integrity of the Commonwealth's accounts.

* Beginning in a small way in 2003-04, Mr Costello at last began to grant some tax reductions in his successive Budgets. However, with the modest exception of the 2007-08 Budget, none of those moves has addressed the real problems of the personal income tax structure. The "once in a generation" opportunities for genuine tax reform have simply...