Palaszczuk and Baird need to stop wishing for miracles

This is a very bad idea.

That is not to say that, in theory, the GST is a 'super-duper' tax because, applied broadly and evenly, it raises revenue without significantly distorting consumers decisions or lowering growth.

If you could guarantee that, in return for a higher GST, politicians would lower less efficient income and company tax as well as inefficient state taxes like stamp duty so that the overall tax-take would be the same or lower, then Australia would indeed be better off.

However, Baird's proposal is a lazy $30 billion tax grab to solve an, albeit, very real problem – the projected growth in health spending.

Palaszczuk has rejected the Baird proposal and latched onto the harebrained idea of Victorian Premier Daniel Andrews to raise the Medicare Levy to 4 per cent, which would push the top marginal tax rate more than 50 cents in the dollar and act as a significant disincentive to work.

Baird and Palaszczuk need to stop wishing for miracles and start focussing on restraining spending. Keating in the late 1980s, Costello in the late 1990s and Nicholls in his two budgets showed that stopping unsustainable spending growth is possible while maintaining or even improving service delivery.

But that necessary process of returning to a sustainable fiscal position has been thrown out the back door with the Palaszczuk Government re-starting the spending by hiring 3,000 new public servants (at an ongoing cost to the budget of $300 million per year).

Of course, under the current system the Commonwealth is always there to be blamed so there is little incentive for the states to restrain spending.

That's why the most important long-term reform must be aligning the spending and revenue raising responsibilities of the Commonwealth and the states. And the most important short-term reform is fixing the broken GST distribution system that punishes the growth states.

But these reforms will take years to eventuate.

In the meantime, if Abbott's "current generation of leaders" can simply manage their spending, perhaps the next generation can undertake comprehensive tax reform, and the generation after that can increase the GST.