It is, or should be, the solemn duty of a first-term government to take a program of reform to its first election as incumbent.

The only time an Australian government has lost after one term was Jim Scullin in 1931 and he moved into the newly-built Lodge two days before the Wall Street crash of 1929, so he was doomed from the start.

Aside from governing during a Depression, it’s very hard for a government to lose after one term, so it is the best, and possibly only, time to seek a mandate for difficult, unpopular reforms.

It’s certainly true that the only ones you can do from opposition are easy ones, namely tax cuts.

Promises, promises

John Hewson promised a GST in 1993 and lost; John Howard promised “never ever” to do a GST in 1996 and won, and then turned around and promised a GST at the next election in 1998 and won again.

More recently, Bill Shorten promised difficult tax reforms in 2016 and 2019 and failed; Scott Morrison promised to do nothing, delivered on that in government, and then lost (although to be fair, he was mugged by the pandemic).

So the proper conduct of politics is to gain office by being soothing and promising happiness, and then seek a mandate for reform at the following election.

Time for reforms

As it often is, Australia is now in need of some difficult reforms, but the trouble is that the current first-term government is groggy from punching itself in the face, to quote Wayne Swan’s memorably stupid description of the Reserve Bank last week.

They just don’t seem to be very good at politics.

You know … that thing that politicians say they do for a living, following the crass business of campaigning and getting elected: That is, making a difference to the country through persuasion and leadership and then getting elected again for having been courageously visionary.

Howard’s way

Not that there’s anything new about ineptitude, it’s been a feature of Australian politics since John Howard. Say what you like about him, he was pretty good at politics.

After getting re-elected in 1998 while promising a big new tax, he did it twice more, surfing a wave of commodities boom cash and xenophobia.

But Anthony Albanese seems a chance to lose his first election as PM against a far less appealing character than Kim Beazley without having done anything much at all apart from make mistakes.

He did the first part right – promising nothing but happiness to win in 2022 – and is now doing a Morrison by stoutly maintaining that policy.

That seems to be due to two things: The ALP’s stomach for reform was surgically bypassed after the 2019 election defeat and since 2022 its confidence has been shredded by a succession of missteps in government, such as the Voice referendum and the more minor recent debacle about a sexual preference question in the Census, because, as discussed, they don’t seem to be very good at politics.

Unfair comparisons

Mind you unflattering comparisons between this government and that of Bob Hawke and Paul Keating are a bit unfair.

Hawke and Keating were able to govern in partnership with a powerful trade union movement led by a genius – Bill Kelty – as well as a mostly supportive opposition.

This time around the union movement is not powerful and is devoid of geniuses and the Leader of the Opposition Peter Dutton would oppose the Lord’s Prayer if it came out of the Prime Minister’s mouth.

And if any government policy involved the hint of a tax increase, the Four Horsemen of the Apocalypse and Dante’s Inferno would be invoked.

Taxing issue

But unfortunately for the Prime Minister and Treasurer Jim Chalmers, the No.1 reform requirement for Australia is comprehensive tax reform that raises more money.

Business groups sometimes honk across the swamp for more industrial relations reform to lift productivity, but they’re either kidding or bellowing from an old song sheet. It’s still more or less impossible to go on strike and the Labor government is trying to destroy one of the largest unions.

No, the clear need is for a more efficient tax system that both promotes productivity and raises more money; the Coalition’s arbitrary 23.9 per cent limit on tax to GDP must go.

Apart from dusting off the May 2010 Henry Tax Review – completely mangled by the first-term Labor government of Kevin Rudd, who didn’t even make it to the election three months later – there are three things a courageous, politically skilled government might do.

Widen the net

First, widen income taxation.

Economist Saul Eslake says that while those in the top marginal income tax bracket pay 30 per cent of tax revenue, 47 per cent of their income comes from sources other than wages and salaries, such as capital gains, rents, dividends and super – all of which are taxed at a lower rate than 45 per cent.

Eslake says the threshold for the top marginal rate ($190,000) is far too low and should be raised to, say, $350,000, but it should apply to all income, not just wages and salaries. And yes, that means dealing with the capital gains tax discount and negative gearing.

Second, a federal land tax should be reintroduced, possibly including the primary residence above a high value. Federal land tax was introduced in 1910 as a form of wealth tax and abolished in 1952 … and/or:

Third, inheritance tax. There were state and federal inheritance taxes from 1915 but were all abolished in the 1970s in a paroxysm of fiscal folly, leaving Australia as one of the few countries in the world without any taxation of wealth, living or dead.

No-go area

The thing most often trotted out when the subject of tax reform comes up is the need to raise the GST rate and broaden its base.

But this is a regressive tax that is the exact opposite of a wealth tax, affecting the non-wealthy the most, and should be left as it is.

In any case, why would any federal government wear the political pain of increasing the GST when the states get to spend the money – after WA has robbed the train and made off with the lion’s share first, of course.

The next election could be the last chance for decades to get a mandate for tax reform to improve economic efficiency and productivity, and to fund the NDIS, aged care and health care, the energy transition, a Future Made in Australia, submarines to keep America happy, and the universities that will be teaching fewer foreign students.

Alan Kohler writes weekly for The New Daily. He is finance presenter on the ABC News and also writes for Intelligent Investor