It seems Tony Abbott’s repeated declarations that “the GST won’t change – full stop, end of story” were not, in fact, the end of the story. The full stop was more of a semi-colon.



The prime minister emerged from his two-day heart-to-heart with state and territory leaders with a newfound appreciation for his fellow “patriots” for being serious about improving the federation and eschewing needless political bickering.



In doing so, the Liberal leader who rose to power campaigning mercilessly against Labor’s “great big new tax on everything” called for “a conversation rather than a scare campaign” and gave the strongest sign yet he wants to press ahead with a tax increase he had previously ruled out.

“I’m not ruling things in, I’m not ruling things out, but my preference would be to consider GST issues rather than Medicare levy issues,” Abbott said after the Council of Australian Governments (Coag) meeting in Sydney on Thursday.



Abbott’s GST epiphany has been a long time in the works.



Before the 2013 election, Abbott promised to rethink the nation’s revenue sources and the carve-up of government responsibilities. A Coalition government would develop tax and federation white papers in a first term. He indicated the GST would be included in those talks – and he sometimes left himself room to seek a mandate for change in a second term – but his public pronouncements became more definitive as the election approached.

On 8 August 2013, the then opposition leader insisted the GST was “not going to change” and any suggestions to the contrary were “more Labor lies”.

A few days later, Abbott’s senior colleague Christopher Pyne – exercising his freedom to go on the ABC’s Q&A program prior to the ban on Coalition frontbenchers – was categorical: “There will be no change to the GST in an Abbott government.”

And on 14 August 2013, Abbott brushed off a question about the option of a second-term GST hike by declaring: “Look, you know, we can go around and around the mulberry bush on these issues, but I want to make it absolutely crystal clear. There will be no change to the GST - full stop, end of story.”

But it became clear something would have to give when the Abbott government, in its first budget, cut long-term projected funding for health and education. The 2014 budget overview document said the savings would mostly kick in at the end of the four-year budget cycle, but would be worth a cumulative $80bn by 2024-25.

The states and territories responsible for frontline service delivery were horrified. They complained it was not so much a saving as unilateral cost-shifting to the states. Hospital costs were already rising fast, partly due to the ageing of the population, but the federal cuts exacerbated the pressure. Premiers from all political persuasions warned the decision left their state finances in an “unsustainable” position – and they said so at recent Coag meetings.

Their protestations led Abbott to convene Wednesday’s “leaders’ retreat” to try to find common ground on the shape of the federation. The leaders met again on Thursday for another Coag session. And while everyone was talking up the need for constructive cooperation, there remains no clear consensus on the best revenue option to deal with a potential funding shortfall of $45bn by 2030.

Abbott, however, made it perfectly clear he favoured finding more revenue from the GST than pursuing an increase in the Medicare levy – the latter option being suggested by the Victorian and Queensland Labor governments.

The GST was, he argued, a relatively efficient tax. Unlike the Medicare levy, the consumption tax was “a joint exercise by the commonwealth and the states” because it was collected by the federal government and then the revenue was distributed to the states. While he reaffirmed his overall aim of lower, simpler and fairer taxes, he said that would not prevent “changes in the tax mix which overall improve the efficiency of our economy and help our systems to work better”.

Abbott indicated a green paper would be released in the next month or so, paving the way for a white paper early next year and then “an honest and upfront” conversation with the public. He laid down a key criterion for championing a shift in the tax mix: the government would need “something approaching a consensus because change ought to be durable”.



“If we can have a conversation rather than a scare campaign, our country will be so much better off,” the prime minister said, in a comment that exposed him to claims of hypocrisy.

“This process is going to take some time ... because we do need to engage the public, we do need to keep faith with the public, and springing tax changes on an unsuspecting public, however arguable they might be, is not a way to build the kind of trust and confidence that we need to see more of in our democracy.”

Abbott’s plea for political and community consensus seems too optimistic – partly due to his own previous words and actions.

The Victorian premier, Daniel Andrews; the Queensland premier, Annastacia Palaszczuk; and the federal opposition have already cited Abbott’s own pre-election promises on the GST as one of the reasons to oppose major changes. And Abbott’s anti-carbon-tax scare campaign showed the political potency of tapping into people’s cost-of-living fears, even if the government designs a compensation package for low-income households.