If there is one thing to be salvaged from the talk of a tough budget, it is that tax is finally being elevated above politics to be restored as an instrument of economic policy, writes Ian Verrender.

There's an old political maxim in this country that no one ever won an election by proposing a new tax.

And recent experience tends to bear that out. Paul Keating had his planned Goods and Services Tax rolled even before he took it to the polls. John Hewson snatched defeat from the jaws of victory in the 1993 election with his GST plank. John Howard, meanwhile, is credited with gaining a mandate to introduce the GST in 1998 but, in truth, barely scraped back to power after losing the primary vote.

So it is fair to assume the new Treasurer, Joe Hockey, would be painfully aware of the political perils of tinkering with tax.

And so if there is one point to be salvaged from last week's salvo in the softening up of the national psyche about the pain in the upcoming budget, it is that tax at last is being elevated above politics to be restored as an instrument of economic policy.

Given its electoral potency, tax usually is employed as a large and bottomless barrel of pork to be distributed with abandon in the run-up to the polls. Decades of irresponsible election promises has left us with a ridiculously complex system that has skewed the investment environment, restricted economic growth and directed vast amounts of welfare to those who least need it.

It would be easy for a new treasurer to blame everything on his predecessors. And Hockey is no slouch when it comes to the blame game. But mixed in with his expected rants about the perceived profligacy of the Rudd and Gillard years is his unexpected admission that the tax system itself is no longer adequate to serve the nation into the future.

The real threat is structural rather than cyclical and comes from a lack of future tax revenue, not from past spending. Within the next 40 years, our ageing population will create an unsustainable situation where the number of Australians on welfare will dwarf those creating the wealth.

If the tax system is not overhauled, we face a brutal choice: ever greater deficits that will need to be funded by a blowout in the national debt; or payments will need to be slashed.

For the new Treasurer, everything is on the table. So far, he has hinted at GST and openly warned about pensions. But welfare cuts, land tax, means testing, superannuation and perhaps even resources taxes are likely to be in the spotlight.

Hockey is not alone in this thinking. Treasury Secretary Martin Parkinson knows the score. Reserve Bank governor Glenn Stevens is equally aware. Even Kevin Rudd understood, which is why he and then treasurer Wayne Swan commissioned then Treasury secretary Ken Henry to conduct a "root and branch" review of the tax system.

But again, politics overruled economics. Henry wasn't allowed to even think about lifting the GST, changing taxes to superannuation for anyone over 60 or, more ludicrously, to alter the pork barrelling changes instituted by both Howard and Rudd in their previous election campaigns.

Those failings, however, paled into insignificance when it came to the farce that was supposed to be the implementation of Henry's blueprint for the future.

Of the 138 specific recommendations, only one major one was ever implemented: the Resources Rent Tax - a central plank from the Henry review that recognised Australia's position as a leading resource exporter and the painful readjustment that would inevitably result.

Swan should have done exactly what Hockey is now engaging in. The Henry review findings should have been subject to years of debate and discussion along with the harsh consequences of inaction.

Instead, the mining tax was rushed through, portrayed as a tax on the rich and greedy rather than as a crucial foundation for a complete overhaul of the system, and all to distract attention from Rudd's failure to implement an emissions trading scheme.

The mining lobby retaliated with deadly accuracy, spending less than a day's income on an advertising campaign that won public opinion and led to Labor deposing a sitting prime minister, thus reinforcing the danger of meddling with taxes.

As Opposition leader Tony Abbott jumped aboard, committing his government to ridding the nation of even Julia Gillard's neutered version of the mining tax, legislation that essentially was written by the world's three biggest mining companies.

It is worth noting that the Coalition holds no ideological objections to mining taxes. Each state imposes their own mining taxes, known as royalties. And in the past four years, three Coalition led states - Western Australia, Queensland and New South Wales - have increased their royalty charges, all the while opposing the federal mining tax.

It is also worth noting that Hockey has extended the federal resources rent tax - introduced by Paul Keating 30 years go on petroleum development in Australian waters - to oil and gas developments on land.

As a nation, we've signed up to the mining boom. It has delivered the country fabulous wealth during the development phase. But it also has forced many traditional industries to the wall as a result of the appreciating Australian dollar.

But the production and export phase of the boom, which we are now entering, will not be quite so generous. The mining industry is largely foreign owned and most of the earnings from our exports will flow back to investors on foreign shores in the form of dividends.

If Australia is to become nothing more than a quarry, it needs to be understood that at some stage, the quarry will run dry, that there will be nothing left to extract. Crops can be grown every year, services can be repeated endlessly. But you get just one chance to maximise the earnings from minerals and energy.

A slice of the earnings from the resources boom needs to be set aside and invested for future generations, to help pay for the services required by an ageing population.

Norway has done just that, investing the proceeds of its oil and gas resources into a separate fund that now owns property and assets from Beijing to Boston. In January this year, every Norwegian theoretically became a millionaire. The proceeds now contribute to an annual budget surplus of about 15 per cent of GDP, higher than any developed country.

Hockey has wisely opened the debate on taxation and the grim future we face if we don't accept the inevitability of our future. His biggest challenge may be convincing his leader, a man who knows that taxes and politics can make uncomfortable bedfellows.

Ian Verrender is the ABC's business editor. View his full profile here.