Ages ago I suggested we think about a temporary cut in the GST to provide an economic stimulus. The UK did a similar thing but I was still called crazy for suggesting it here. And so I was delighted to read the front page of The Age today:
In the latest proposal to revive the economy, Reserve Bank board member and Australian National University economist Warwick McKibbin has suggested slashing the GST from 10 to 5 per cent until February next year.
“The December stimulus payments didn’t have much impact,” Professor McKibbin said. “The spending wasn’t directed at the right things.
“We know that when the GST was introduced, people increased their spending ahead of time and then cut it afterwards. The trick would be to get people to bring their spending forward again but to get income tax cuts coming in the future so that they don’t cut their spending too much when the GST goes up.”
Unlike myself, Warwick really knows about such things. As the days go by, it starts to look better and better.