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Economists discuss implications of Opposition promise to roll back GST; Shadow Minister defends trade policy described by AMWU as a 'disgrace'

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PETER CAVE: Kim Beazley’s pledge to roll back the GST has turned the political spotlight on to Labor policy, and some insiders fear the party has been left exposed to attack. As Fiona Reynolds reports, the opposition leader has refused to rule out an income tax hike to pay for more GST exemptions.


FIONA REYNOLDS: Kim Beazley’s commitment to roll back the GST on health, education and charities panders to interest groups that have been critical of the Howard government’s package, but Labor insiders concede it’s also a gift to Treasurer Peter Costello. Attention has now been drawn away from his GST nasties and on to Labor policy with Mr Beazley facing questions he simply can’t answer 18 months out from an election - questions like: what will he exempt from the GST and how will he pay for the roll-back given that he’s guaranteed the states won’t lose revenue?


Chris Richardson from Access Economics says Labor’s approach is populace politics fraught with dangers, including where to draw the line.


CHRIS RICHARDSON: If Labor starts exempting too much it will be too expensive, and the government will be right with its counterclaim that either the surplus will disappear pretty fast or that personal income taxes would have to go back up again.


FIONA REYNOLDS: So there are economic problems?


CHRIS RICHARDSON: There are economic problems - not necessarily disastrous ones. For example, if Labor confines themselves to a handful of relatively minor exemptions to the GST, but politically popular ones - tampons would be the classic example - then it wouldn’t cost them that much, and it would be more, I guess, a political rather than an economic stance.


FIONA REYNOLDS: Economic modeller, Professor Neil Warren, agrees Labor is likely to opt for small changes if it wins government, and he warns it still won’t satisfy everyone with business facing another administrative burden.


NEIL WARREN: As soon as you start to have lines of demarcation of this is in and that’s out and so on, then quite clearly you’re going to have compliance costs that come along with that. Businesses, by the time this is being considered, are probably just starting to get comfortable with and have bedded it down, and to have a whole raft of new specifications of how this tax is administered, it will cause them some concern.


FIONA REYNOLDS: There’s widespread support within Labor to roll back the GST, but some members fear leaving open the option of higher income tax will be damaging. A bitter internal tussle is already breaking out on another front - trade. The left faction claims the new draft policy signals a conservative direction, indistinguishable from the coalition.


Doug Cameron, National Secretary of the Manufacturing Workers Union, fired the warning shot.


DOUG CAMERON: Their trade policy developed by Peter Cook is an absolute disgrace and it does not accept that there are downsides to the trade regime that’s in there at the moment, and that there is no free trade, that we really need fair trade.


FIONA REYNOLDS: What if Labor doesn’t change this policy?


DOUG CAMERON: Well, if Labor doesn’t change the policy they will not be elected to government - it’s as simple as that.


FIONA REYNOLDS: Shadow trade minister, Peter Cook, says it is a genuine alternative policy.


PETER COOK:   I am not going to debate Doug Cameron. Our trade policy is about lifting living standards in Australia by removing obstacles to Australian exporters in foreign markets. Of course it’s not a ‘disgrace’.


PETER CAVE: Shadow trade minister, Peter Cook, ending that report from Fiona Reynolds.