A GST will make a massive difference to money in the economy
By Rebecca WilsonIn MoneyOn Saturday 18th Apr, 2015

A GST will make a massive difference to money in the economy

It’s time to raise the GST say many of the experts and economists throughout Australia and today, the media is pointing to the New Zealand economy as a shining example of what happens when the GST is raised.  Dr John Hewson was on the TV this morning discussing the incredible benefit that the GST brought our nation, and the success New Zealand are seeing, but raised an eyebrow at the question of whether he thought it would fly in Australia in the next political term.  But we missing the power of the multiplier effect of money staying in and sloshing around in our country by being scared of using the word “tax” right now for fear of losing votes?  Does Australia NEED a rise int he GST more urgently than even we are willing to believe?

When you sit back and really listen to the difference between Australia and New Zealand, what could  be perceived as a simple rise in tax rates is actually a massive cash injection into the economy that has a multiplier effect on the dollars themselves.  Do you think we should expedite the rise in the GST on these grounds?

In an article, HSBC’s chief economist and former Reserve Bank economist, Paul Bloxham said “We can learn a lot from the Kiwis.  They have done exactly what we need to strive to achieve. We need to shift the tax base away from being focused on household and corporate income toward more efficient taxes like the GST.”

The difference between Australia and New Zealand’s economies is palpable at the moment, with our “lucky country” feeling the pain of very high tax rates of 45 percent in the top tax brackets, high by world standards, discouraging workforce participation; additional levy payments on highly earning people; relatively high corporate taxes being allegedly avoided by many international corporations trading here, and a budget deficit that is growing not shrinking despite considerable lip service by the government about needing to cut costs.  Many of our core national industries are in decline, and some are just up and leaving our country.  Unemployment appears to be fairly stable, with March seeing some improvement on recent months, but it is far from the buoyant economy we lived in six years ago.

In contrast to this, New Zealand has a top tax rate of 33 percent, making earning money more attractive.  This in turn allows every person in the economy to have more money int heir pocket to spend on consumption, property and entertainment, meaning the wheels of the economy turn better.  This consumption is then taxed by a 15% GST, which allows all that money to slosh through the economy and into small business pockets to create opportunity on its way to generating tax income for the government.  As you can see, the power of a dollar that stays in the economy sloshing around is much greater than than the value of a dollar earned and paid to the government.

When you think about it this way, if the government was to drop the income tax levels to levels similar to New Zealand would a rise in the GST be just what our economy needs? Share your thoughts today!  

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