Federal Treasurer Ralph Willis has described the Australian Democrats’ decision to block the Budget’s building hardware tax as “populist and opportunist”. There is some truth in that; the Senate minor parties do not have to concern themselves with the overall fiscal picture. There is also some truth in the statement by Democrats leader Cheryl Kernot that the tax is unfair. It is also inefficient and hypocritical. Of itself, it is not large _ raising between $200 and $250 million a year. However, it exemplifies several major defects in the political landscape. The first is that the Budget process is not an especially good one for dealing with changes of policy, even the detail of fiscal policy. The secrecy that surrounds it may have been acceptable and workable 20 or 30 years ago. However, as government and society get more complex, more consultation is required to make better policy.
Secondly, the question of the Senate’s power over money Bills, not just Supply, is still not satisfactory. Raising taxes and spending money are the fundamentals of government. If the Senate flexes itself in the fiscal field, Australia will go down the American road of Budgets by compromise. The Senate is a fine general checking chamber (it has long lost its role of protecting states’ rights), but this should not run to major items of raising and spending money.
Thirdly, the piecemeal approach of this tax shows a paralysis in the field of major tax reform. When the Coalition lost the 1993 election after proposing a large shift in tax from direct to uniform indirect taxes, major tax reform has been driven from the national agenda through political fear. Both Government and Opposition have failed to address the way present wholesale taxes are biased against exports and in favour imports at a time the tax regime should be working the other way. The policy paralysis has meant that tax policy has comprised of fiddling at the edges _ like this tax, which is little more than a hypocritical GST on building hardware.