Features Australia

Thanks for nothing, Mathias

OECD goes full green/left

25 September 2021

9:00 AM

25 September 2021

9:00 AM

It is estimated that Australian taxpayers chipped in at least a million bucks to support the bid of former Liberal finance minister, Mathias Cormann, to become Secretary-General of the Paris-based Organisation for Economic Cooperation and Development.

Of course, no one actually asked us whether we wanted to spend this money but, hey, the Prime Minister declared that ‘Mathias would be an outstanding Secretary-General of the OECD’. Because of this, we stumped up for multiple flights on Australian Air Force jets, including trips to Turkey, Denmark, Germany, Switzerland, Luxembourg, Belgium and Spain. It sounds a bit like a Contiki tour without the young fun-crowd.

Evidently, it would have been too much to expect Mathias to travel commercial – the health risks, my dear.

The prize was well worth the effort, at least for Mathias. For starters, there is a tax-free salary of nearly $400,000. There are also plenty of perks, including the fact that OECD headquarters are housed in a large chateau in one of the most salubrious parts of Paris, well away from the ghastly banlieues. As long as he doesn’t blot his copybook – that is, he goes along with the left/green bunkum pushed by the organisation – Mathias is all but guaranteed ten years in the job.

Don’t get me wrong, Mathias’s predecessor, Angel Gurria, from Mexico, was a shocker. He managed to stay in the job for 15 years, with Australia supporting his last term in office (go figure). He pushed the organisation further to the left, promoting inclusive growth, higher taxes, minimum global tax rates and aggressive climate change action by the member countries. If it wasn’t ‘progressive’ and green, it wasn’t in an OECD publication.

There was a faint hope that Cormann might inject an element of rational economic thinking into the organisation. But judging by one of its early publications under his watch, this hope was a serious miscalculation. In its country review of Australia released this month, the OECD has served up the usual green/left pap with a long list of ridiculous and unsupported recommendations.

If Cormann were doing his job properly, he would have intervened to stop this publication going out in its current form. It simply contains multiple, predictable demands involving high tax/high spend and extreme green measures. It supports continuing expansionary monetary policy even though close-to-zero interest rates have driven higher asset prices and led to greater wealth inequality, the antithesis of inclusive growth. It’s the old OECD, through and through.

Let me run through some of the stupid and impractical recommendations of this country review. According to the very well-paid bureaucrats in Paris, ‘tax reform is needed’. ‘Fortunately (I’m not sure why, but what the heck), there is a clear path that will provide a more sustainable tax base, enhance economic growth and promote other government priorities like improving housing affordability and reversing the trend to toward rising income and intergenerational inequality common to many countries’. It’s surprising they didn’t throw in world peace.

And top of the list is the suggestion that the rate of the GST be increased or the base broadened. Now clearly those bureaucrats didn’t bother to actually look into the institutional arrangements that underpin the GST. Had they realised that all GST revenue is returned to the states, they would have immediately concluded that raising the GST is not a good idea.

Without a doubt, a higher GST rate would lead to noisy claims for compensation for lower income earners who would be hit by higher prices. But the federal government would have no additional means to achieve this because all extra revenue heads off to the states. It also means that there is no fiscal scope to adjust the personal income tax scales which the OECD regards as important.

And the fact that there is still no consensus about the way the GST is distributed across the states – Western Australia now has an egregiously generous deal (actually thanks to Mathias) – means that there would inevitably be more quarrelling were the GST rate to be increased. Can you also imagine the ballyhoo were the GST to apply to fresh food (which is currently exempt); the Greens would be on the case within nanoseconds?

By the way, we should be eternally grateful to former treasurer, Peter Costello, who achieved the seemingly unachievable – a tax that is incapable of upward adjustment. Some of his conservative critics at the time didn’t believe this was possible but they were wrong. The experience of other countries, particularly in Europe, is that both consumption and income tax have risen together, leading to extremely high tax takes overall.

Then there is the OECD’s wacko idea that the ‘government’s fiscal strategy should be regularly evaluated and monitored by an independent fiscal institution’. Who knows what purpose such an institution would serve? After all, fiscal policy is legitimately based on decisions made by elected governments. Why should the opinions of some wet-behind-the-ears public servants be regarded as ‘the truth’ any more than other opinions?

Unsurprisingly, the OECD review is big on climate change policy and the message that our policy needs ‘strengthening’. We’re told that ‘faster progress in reducing carbon emissions is needed’. In order to do so, ‘a more coordinated, ambitious and stable climate change policy’ is essential.

The OECD thinks Australia should implement a national carbon price – actually, we had one of them, but it was ditched. But it’s OK because it is recommended that we penalise large emitters through the equivalent of a tax (the so-called Safeguard Mechanism). In this case, these large emitters may simply shift offshore and do their emitting in other countries.

What is most concerning about this country review is the fact that the ideas contained therein are likely a partial reflection of the wish-list of the Treasury. (This is how these reports are put together, with information and ideas sought from the key bureaucrats in the country.)

It’s easy to see this influence in some of the weirdly specific recommendations such as the overhauling of the Personal Property Securities Register (what the…?) and legislating automatic mutual recognition of occupational licences.

In this sense, the predictable green/left bilge that is contained in the review is not entirely the fault of Mathias. (I’m told the first drafts were even worse, but I simply don’t believe it.) But, hey, he is the boss.

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