As we know, the people of Japan and their economy have been languishing ever since their massive real estate bubble burst in 1989. That’s now twenty-five years.
The Japanese Reserve Bank has been calling the wrong tune for far too long, and a succession of prime ministers since that time have obviously been under its spell, the latest Shinzo Abe having done a complete turnabout presumably at the Bank’s behest.
Even before Australia’s subsequent (but equally massive) land price bubble has burst, our economy appears to be in deep do-dos, the Abbott-Hockey government proving itself to be every bit as clueless at effective policymaking as the Rudd-Swan-Gillard-Swan-Rudd-Bowen governments.
It’s looking remarkably likely that we’re going to prove as inept as Japan. We’re already witnessing a weirdly mainstream belief emerge that Australia needs to extend its GST, as did Prime Minister Abe in Japan (and John Key in New Zealand). Have we learnt nothing at all from the Japanese experience?
Europe remains at the very least in a fiscal torpor, whilst the Americans have the luxury of printing the world’s reserve currency like there’s no tomorrow to effect their self-styled “recovery” that appears to be nothing of the sort.
What hasn’t been tried that ought to be tried?
- Slashing, really slashing, indirect taxes, NOT extending them! While we’re at it, slash direct taxes, too, because how can reducing people’s purchasing power bring about economic recovery?
- Bail out people, not the banks (as in the US and Europe) because there’s too much private debt and taxes dampening demand.
- Look to economic rents, not taxes, for the necessary revenue.
“Australia’s Future Tax System” (The Henry Tax Review) recommended points 1 and 3 above, but as this did not square with the nonsense that Japan, Europe and the US have undertaken, Australian policymakers have been crass enough to totally ignore it.
How absolutely perverse of us that we prefer to follow proven failed measures taken by Japan, Europe and the US instead of Australia’s own thoroughgoing inquiry into reforming an anti-productive tax regime!