Australian Financial Review Wednesday February 9, 2000 http://www.afr.com.au/content/000209/news/news3.html Evans warns on GST pay claims By Paul Cleary One of the Federal Government's most senior officials, Treasury Secretary Mr Ted Evans, yesterday delivered a blunt warning to unions not to pursue GST-related wage increases. Appearing before a Senate committee hearing, Mr Evans also firmly rejected claims that the Federal Government's planned $12 billion in income tax cuts had been devalued by inflation. Mr Evans is a key member of the board of the Reserve Bank and his comments suggest the central bank could respond aggressively to moves by wage bargainers to pass on the inflationary impact of the GST in pay rises. In yesterday's committee hearing, Mr Evans and other Treasury officials fielded a raft of questions on the GST issues and revealed that: * The price of beer and other alcoholic beverages sold "over the counter" would rise by 7 per cent, contrary to the Government's claim that prices would rise by just 1.9 per cent (which is the price rise for takeaway alcohol). * The cost of housing construction had moved ahead of the GST's introduction, while the fall in car prices had also been brought forward. The Government would get a revenue windfall from higher oil prices, allowing it to increase the 7c a litre rebate to prevent petrol prices from rising, particularly in regional areas. * The Tax Office had already issued 7,300 private rulings on GST issues and this was the "tip of the iceberg". Mr Evans told the committee there was no case for workers to seek higher wage increases to compensate for the GST, even though about $5 billion of the tax cuts is needed to simply restore the lost value of tax cuts because of inflation over the past seven years. Known as "bracket creep", this refers to the effect of wage earners being push into higher tax brackets by inflation. Mr Evans said there was "no defensible argument for wages to be adjusted in response to the tax package. "There is no argument for compensation through wages for the GST," he said. He was equally firm on bracket creep, despite claims by unions that this makes the tax cuts inadequate to compensate for GST price rises. When told by Labor Senator George Campbell, a former unionist, that some people would believe the tax cuts were inadequate, Mr Evans said: "I am not taking into account bracket creep because I believe it is irrelevant." He also flatly dismissed the notion that interest rates were rising because of the GST or income tax cuts, even though he said the tax package would have a stimulatory effect on the economy. Access Economics director Mr Chris Richardson said that while trade unions had a point about bracket creep, it was "guilding the lily" to use the last tax cut in November 1993 as a yardstick. This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited. ************************************************************************* This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." -- Leftlink - Australia's Broad Left Mailing List mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink
