Debt-king Josh Frydenberg was a terrible treasurer — but he’s right on GST

A couple of things in Josh Frydenberg’s defence before we go any further:

Criticising him for the timing of his current bout of self-promotion is a bit rich — it’s driven by his (ghostwritten) book, and 18 months or more ago it would have taken remarkable foresight to factor the current smoking-ruin status of the Liberal Party into publication plans. Yes, Frydenberg loves to parade himself as the panacea for Australia’s problems, but he also has a book to flog; whatever PR he can get will be welcomed by his publisher HarperCollins (the Murdochs, natch).

Second, the Liberals aren’t exactly over-endowed with experienced moderates offering ideas at the moment. When Andrew Bragg and the Wilson kid are what passes for your small-l liberal brains trust, you’re not in a good position. And any party led by Angus Taylor is definitionally in need of potential leaders.

But Frydenberg’s “things have to change”, back-to-Liberal-values stuff comes with a rather large asterisk: his own record as treasurer between 2018 and 2022, as a senior member of the worst government in Australian history. Under Frydenberg, net debt rose from 18.5% of GDP in 2018 to 22% of GDP by the time the Morrison government was kicked out and Frydenberg lost his seat. Spending went from 24.5% of GDP to over 26% via a brief detour to over 31%. In those numbers is the normalisation of a seemingly permanent higher level of government spending and relentless accumulation of debt and the interest that goes with it.

His defenders will point, not unfairly, to the pandemic (although, you never heard Tony Abbott and Joe Hockey give Labor a break for their much-smaller GFC spending). Except, there’s the small matter of the tens of billions wasted on the poorly designed Jobkeeper program — a program that had no capacity to retrieve the vast sums handed to ineligible companies.

And there’s Frydenberg’s forecast spending at the time he lost his job. With the pandemic substantially over in April 2022, Frydenberg was still, according to the pre-election fiscal statement, planning deficit spending of $80 billion, or over 3% of GDP, in 2022-23 — and another $146.5 billion in deficits across the forwards, pushing net debt to one-third of GDP and sending gross debt over $1 trillion. Even as the pandemic was ending, Frydenberg was making Labor look like scowling advocates of austerity.

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Nor has Frydenberg’s enthusiasm for spending abated. Having masterminded the single most wasteful spending program in Commonwealth history, Frydenberg now says he wants to see higher defence spending — the portfolio with by far the worst record of blowouts, incompetence and profligacy. And like any good armchair general, he refused to say how that extra spending should be paid for — a basic test of seriousness for anyone demanding more spending. Perhaps Josh is still living in the pandemic/global savings glut era when Aussie bonds yields were below 1%.

The idea that has gotten his colleagues into trouble, however, is on the tax front: Frydenberg wants a rise in the GST. Taylor and co had to rush out to insist they had no plans to bump up the GST. That Frydenberg isn’t even in parliament, let alone part of the Coalition frontbench, didn’t prevent Labor MPs and ministers from immediately launching a scare campaign about a higher GST, including plucking lines from articles more than a decade old to try to force some credibility into it.

That response, complete with confected outrage, is exactly why Labor deserves zero sympathy for its own modest efforts at tax reform. We’re so mired in tit-for-tat scare campaigns on tax that the merits of any idea are subsumed in scare quotes from what a nonentity like Dan Tehan might have said in 2015.

As it turns out, Frydenberg is right: we should be lifting the GST — and getting rid of many of the dumb exemptions Meg “Australia’s School Ma’am” Lees imposed on the tax back in the twentieth century. West Australian independent Kate Chaney modelled a 15% GST with fewer or no exemptions in 2025; the option of a 15% GST with no food exemption, for example, would raise around $780 billion over a decade, leaving ample room for (over)compensation for welfare recipients and significant income tax cuts — the Stage 3 tax cuts, for example, cost $360 billion.

A GST/income tax swap would transfer more of the tax burden away from (younger) income earners and onto (older) asset owners, as long as low-income earners, who spend more of their income than higher-income earners, were amply compensated for the shift. It would also shift more of the tax burden onto a more efficient tax (of course, you can’t beat a petroleum resource rent tax for efficiency, but that’s another tax reform Labor is resistant to).

Still, explaining the merits of a higher GST over the shrilly performative high dudgeon of Labor MPs is a tough ask. And if he does finally end his will-he-won’t-he act and commit to standing at the next election, Frydenberg’s likely to spend an awful lot of time explaining it. Not, perhaps, the best framing for a messianic return to whatever is left of the Liberal partyroom in July 2028.