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Without the rich miners to foot the bill, who will?
What a week we’ve had! Since last Friday, we have had a series of unexpected losses. Two top CEOs resigned unexpectedly, the entire board of a major mining company was lost in a plane crash in Africa, and as if that was not enough shock, we lost Kevin Rudd as our Prime Minister yesterday!
Yesterday was a day of mixed emotions for me as I watched Julia Gillard get sworn in as Australia’s first female Prime Minister. As a woman, part of me felt happy to see a woman being entrusted with the top job in the country but I also realise that she was part of the team that came up with a lot of the government policies that I don’t agree with. Like Tony Abbott said – different salesperson, same product.
Without a doubt, the change in party leadership was due to the controversy over the resource tax and there is no shortage of commentary about what is going to happen to the RSPT now that Kevin Rudd is out of the picture. I think as a minimum, everyone expects it to be watered down in some way and many people are rejoicing over this. Most of the market commentators seem to see this as a positive but I would like to share some of our thoughts as average middle class taxpayers.
The RSPT was the government’s planned method for paying back all the money that they borrowed to provide the stimulus spending in the past two years. When the government freely gave money away to everyone in 2008, we knew that higher taxes would be the result in the years to come. The typical Labour government mentality would be to tax “the rich”, except we did not know who would be considered part of “the rich”. We soon found out that middle class families like ourselves were considered one of “the rich”. The policy changes to super contribution caps and family tax benefits announced in the May 2009 budget cost our family over $13,000 this financial year (for detail, see my blog post How much are the new super rules costing you?). As the government budget was still in deficit in 2010, we were bracing ourselves for more taxes to hit us in this year’s budget. However, this year the miners were the unfortunate ones to get hit. They were deemed “the rich” who would pay for the government’s previous reckless spending and all the future “goodies” promised for 2012 and beyond, provided we vote for them in this year’s elections. We were relieved when the RSPT was first announced as we felt as if we had dodged the bullet this year but unfortunately, the RSPT totally backfired on the government. They had underestimated the might of the mining industry, and now have to back down on it. Poor Kevin Rudd had to be the fall guy to take the blame for the RSPT and it has been made to look like this was all his bad idea. Let’s not forget it was proposed by Ken Henry and approved by Wayne Swan, who are still very much part of the new leadership team.
I think taxpayers should not be too happy that the RSPT may now be abolished or at least reduced. Unless the government also plans to reduce spending, someone else will have to come up with the money to fund it. Unlike the mining industry, the middle class taxpayer cannot afford to take out a $30 million advertising campaign to fight back. If you are one them, I would be afraid, very afraid of what might be proposed to make up the shortfall of a reduced RSPT.
Kevin Rudd spent too much of his time in the US and got the idea that you can spend your way out of a recession. I would like to suggest sending Julia Gillard for a trip to Europe – perhaps she could pick up a few ideas from European leaders like Angela Merkel about adopting “austerity measures” to reduce government spending. Saving is the new spending in Europe, perhaps its time Australia does the same.
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