It is unfortunate that John Howard felt it necessary before the election to promise not to put up present taxes nor introduce any new ones. That promise combined with his determination to get rid of the structural deficit in the federal budget has, after the election, locked the government into a strategy of cutting government spending.
On Friday, the Governor of the Reserve Bank, Bernie Fraser, gave strong support to one leg of the Government’s fiscal strategy … that of reducing the deficit … but rejected the idea that it could only be achieved through cuts in spending. He urged that the Government also consider raising some taxes. There is merit to the argument. For a start the Howard Government has broken, or at least severely bent, several promises already, on things like immigration, and has threatened to bend or break promises in other areas, so a slight bending of the no-new-taxes promises will not make that much difference, provided voters can see good reason behind it. And in this case there is, just as there was with immigration. The changes to immigration have not met with sustained or widespread criticism; though those expected to oppose have done so.
However, tax is not like immigration. It is highly visible and measurable. None the less, some of the spending cuts are going too far, both in terms of the electoral pain and, more importantly, long-term national interest in doing some things that only government can do. Avoiding some of those cuts with a little more activity on the revenue side would not go amiss.