Tanya Plibersek (Sydney, Australian Labor Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. Prime Minister, if the GST was jacked up to 15 per cent and extended to fresh food, what would the price impact be on the average grocery bill?

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

The honourable member has asked me to do a calculation. If the honourable member has a view on what the average grocery bill is, presumably under the component of fresh food, that is a point that she can make. She can release her modelling.

I would say this to the honourable member: all of us understand both the benefits and the advantages and disadvantages of—

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Chifley is warned.

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

a consumption tax. The honourable member's great hero, Paul Keating, advocated one as long ago as 1985. The advantage of a consumption tax is that it does not distort economic activity, because it applies across the board. Of course that is why the argument always is: to broaden the base and, when you can do so, lower the rate. The honourable member understands that.

The problem with a consumption tax is that it applies to everybody, regardless of income: so if the person on a very modest income goes to buy a bag of groceries, they pay the same amount as a wealthy person in GST who buys the same bag. So that is the point.

Ms Plibersek interjecting—

The honourable member says she knows that. If knows that, why does she ask these questions that can only lend themselves to such an obvious answer?

So that is why—given that taxes of this kind, while very efficient, are not progressive in the way income tax is and therefore can be called regressive—there always have to be levels of compensation, adjusting tax, pensions and other transfer payments. And of course this was what was done by the Howard government in 2001.

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Chifley is warned.

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

It is what the Labor government did in respect of the carbon tax, which was also a very broad tax, because it applied to a kilowatt hour of electricity, regardless of whether the purchaser was rich or poor. Obviously, it had an impact on lower-income families relative to higher-income ones. That is why there was compensation.

The critical thing for our government, and I can assure honourable members, is that any changes to tax, however it is done and whatever measures—and we have got a very interesting and well-informed debate going on but, sadly, the opposition is not in it—are undertaken, they must be fair. That is to say that the burden of taxation has to be borne—

Tony Smith (Speaker) Share this | Link to this | Hansard source

The member for Hotham is warned.

Malcolm Turnbull (Wentworth, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

as it always has been, by those—or the majority of it—best able to pay for it. So fairness is key. It is an absolutely essential design element.