Australia Markets open in 9 hrs 9 mins

Let’s repair the budget once and for all

Stephen Koukoulas

Let’s once and for all repair the budget and start on a path of lowering government debt by hiking taxes on luxury cars, wine, petrol, diesel, beer, spirits and so-called ‘other’ alcoholic beverages.

Not only will a decent lift in tax in these areas fix the budget, it will be good for the general health of the population (less alcohol consumed), it will help the environment (less driving and a switch to other means of transport) and in the case of luxury cars, it will be fair (taxing expensive cars).

Also read: BUDGET 2017 – WHAT YOU NEED TO KNOW

It can work.

As the dust from the 2017 budget slowly settles, it is apparent that there is a moral and political advantage from selectively hiking taxes. There is strong support for the 20 per cent lift in the Medicare levy from 2.5 to 3 per cent; the bank tax is seen to be a claw-back of some of the support that government has previously given to the big four banks; while the tobacco excise tax impost (admittedly delivered over many years) is set to deliver nearly 3 per cent of all revenue to the government and people should stop smoking in any event.


As things stand, there is a problem in that even with this brazen tax grab from the Turnbull government, the budget deficit is still substantial and gross government debt is on track to exceed $600 billion within three years and then it will hit a stonking $725 billion (which will be around $55,000 per household) by 2026-27.

Let’s start from a budget fact that in the financial year 2020-21, the government will raise $15.2 billion from the tobacco excise tax. That is a lot of money from the 13 per cent of the population that smoke.

Also read: Morrison has donned rose tinted glasses

The luxury car tax in that year, will by way of comparison raise a puny $720 million even though sales of luxury car are already at a record and are set to growth further over the next few years.

So $15 billion from smokers and $0.7 billion from luxury cars? Come on!

Let’s ratchet up the luxury car tax so that an extra $1.5 billion per annum (or more) is raised by 2020-21. Who could argue against a bit more tax on those horrid Porsche Cayenne’s? The money could be hypothecated against road funding and public transport infrastructure in the big cities even though it would simply flow through to the budget bottom line.


The wine equalisation tax will raise $1.02 billion in 2020-21. Wine is so cheap now that the cleanskins and goons are often cheaper than bottled water. Let’s address the health and other issues that alcohol consumption brings and ramp this up by $2 billion a year. No nickel and diming here. The case to ramp it even higher is strong.

The petrol, diesel and other fuel taxes will raise $21.5 billion in 2020-21. With global oil prices and therefore retail petrol prices so low, in fact lower than a decade ago, a hike in the excise rate that delivers and extra annual return of $3.5 billion by 2020-21 would add only a few cents a litre yet give a lot of extra money to be hypothecated against roads and road safety of some other existing cost. Easy.

Bundling the excise on beer, spirits and other alcoholic beverage together yields a tax take of $6.1 billion in 2020-21. How about doubling the various excise rates to yield an extra $6 billion and all of a sudden, the budget numbers are looking rosy, the population will wear it because the revenue is hypothecated against roads and health spending and the political cover is that there are good policies.

These items together, proposed this way, would raise a hefty $13 billion per annum to the budget bottom line. This would go a long way to locking in the surpluses which in turn would feed into a lowering in the level of government debt.

The revenue could also cover spending on education, universities, roads, hospitals and age care, all big ticket items that are growing at a rapid rate.

All of this is, of course, a bit tongue in cheek but it shows how the current budget has been framed and seemingly received. Either tax hikes on ‘bad things’ are good or if they are hypothecated against an item – disability insurance – no one will dare complain. Let’s do more of it while the mood is thus.

With neo-liberal economics all but dead, who’s to say a further round in tax hikes like the ones suggested are unlikely or undesirable? After all, who would have thought that the Liberal Party would be imposing a bank tax and further hike in the income taxes via the Medicare levy in the current budget when, just a few months ago, such things were all but impossible?

  • Finance
    Australian Associated Press

    Energy leads widespread declines on ASX

    Energy and materials stocks have dragged the ASX back toward last week's six-month low.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Tuesday, October 23.

  • Finance
    Australian Associated Press

    Property settlement firm PEXA launches IPO

    Online property settlements company Property Exchange Australia is seeking to raise up to $862 million in an IPO.

  • Australia set for worst harvest in 10 yrs
    Finance
    Australian Associated Press

    Australia set for worst harvest in 10 yrs

    Rural analysts are predicting Australia's worst winter harvest in 10 years, with drought and overnight frosts ravaging eastern grain crops.

  • Finance
    Australian Associated Press

    Healthscope again targeted with $4.1bn bid

    BGH Capital and AustralianSuper have returned with another bid for Healthscope, five months after the private hospital operator rejected their takeover attempt.

  • Finance
    Australian Associated Press

    CBA $426m Indonesian insurance stake sale

    Commonwealth Bank is selling its 80 per cent stake in an Indonesian life insurance business and will boost its capital reserves with the profits.

  • Finance
    Australian Associated Press

    AAP Markets Report October 23

    Movements on overseas markets.

  • Turbulence ahead from elections: Deloitte
    Finance
    Australian Associated Press

    Turbulence ahead from elections: Deloitte

    Deloitte economist Chris Richardson says progress toward surplus could be unsettled as politicians try to woo voters in federal, NSW and Victorian elections.

  • Finance
    Australian Associated Press

    Australian share market closes lower again

    The Australian share market has closed lower, largely a result of international worries.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Monday, October 22.

  • Telstra outage hit 1,433 Triple Zero calls
    Finance
    Australian Associated Press

    Telstra outage hit 1,433 Triple Zero calls

    Telstra has to improve its network after an ACMA investigation found more than 1,400 Triple Zero calls went unconnected during an outage.

  • Finance
    Australian Associated Press

    WorleyParsons grows with $4.6b acquisition

    WorleyParsons is set to almost double in size after agreeing to acquire Jacobs Engineering's energy, chemicals and resources division in a $A4.6 billion deal.

  • Flight Centre shares fall on guidance
    Finance
    Australian Associated Press

    Flight Centre shares fall on guidance

    Flight Centre shares have fallen as much as 12 per cent with investors unimpressed by the travel provider's updated guidance.

  • Clearances lag heading into auction season
    Finance
    Australian Associated Press

    Clearances lag heading into auction season

    National capital city auction clearances have lagged below 50 per cent for the fourth straight week amid a widespread market downturn

  • Virgin Australia flags H1 profit rise
    Finance
    Australian Associated Press

    Virgin Australia flags H1 profit rise

    Virgin Australia expects to lift first-half underlying profit at least 22 per cent to $100 million after seeing its first-quarter revenue jump 9.7 per cent.

  • Finance
    Australian Associated Press

    AAP Markets Report October 22

    Movements on overseas markets.

  • Finance
    Australian Associated Press

    By-election shock to affect Aust markets

    The Australian share market is tipped to open lower again this week following the shock result in the Wentworth by-election.

  • Finance
    Australian Associated Press

    US S&P 500 slips on rates concerns

    Wall Street has finished the session flat to lower as worries about international trade tensions and rising interest rates weigh on market confidence.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Friday, October 19.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Friday, October 19.

  • Banks, energy lift but ASX in the red
    Finance
    Australian Associated Press

    Banks, energy lift but ASX in the red

    Australian shares are down but the market regained ground as the banks turned around a poor morning.

  • Finance
    Australian Associated Press

    High Court refuses $46m cartel fine appeal

    A Japanese car parts company ordered to pay a record $46 million fine for colluding with a competitor has been denied leave to appeal by the High Court.

  • Finance
    Australian Associated Press

    Wall St slides as Saudi, Italy add to woes

    US stocks have slid as the EU warning on Italy's budget and possibility of strained relations between US and Saudi Arabia added to investor woes.

  • Finance
    Australian Associated Press

    AAP Markets Report October 19

    Movements on overseas markets.

  • Finance
    Australian Associated Press

    Stocks to watch

    Stocks of interest at the close of trade on the ASX on Thursday, October 18.