CHAPTER ONE
“Never Ever”: The Promise That Lasted Three Years
—
1.1 May 1995: The Interview
The journalist asked the question that would haunt Australian politics for a generation.
It was May 1995. John Howard, Leader of the Opposition, was positioning his Coalition for an election expected within the year. The journalist wanted clarity on a policy that had already destroyed one Liberal leader—John Hewson, whose “Fightback!” package with its 15% GST had cost him the “unloseable” election of 1993.
“Mr Howard,” the journalist asked, “have you left the door open for a GST?”
Howard’s reply was unequivocal. “There’s no way that a GST will ever be part of our policy.”
The journalist pressed. “Never ever?”
Howard understood the weight of those words. “Never ever,” he confirmed. “It’s dead. It was killed by the voters at the last election.”
For emphasis, he continued: “Any suggestion that I left the door open is absolute nonsense. I didn’t. I never will. The last election killed the GST. It’s not part of our policy and it won’t be part of our policy at any time in the future.”
Three years later, he would introduce it at 10%. The gap between those two positions—the “never ever” of 1995 and the “only 10%” of 1998—is where this story begins.
—
1.2 The Context: A Tax Twice Rejected
To understand what Howard was promising, we must understand what the GST had already become in the Australian imagination.
The idea of a broad-based consumption tax was not new. The Asprey Tax Review had recommended it to Prime Minister Gough Whitlam in 1975, after being commissioned by William McMahon in 1972 . Labor had come close to introducing something similar in 1985, retreating in the face of union opposition. The Coalition had taken it to the 1993 election as the centrepiece of Hewson’s “Fightback!” package and lost—badly.
By 1995, the GST was a political corpse. Two parties had attempted it. Voters had rejected it twice. When Howard declared it “dead”, he was not making a controversial claim; he was stating the consensus view of the Australian political class. The tax had been tried, tested, and buried.
The journalist’s question—”Never ever?”—sought to extract a commitment that would bind Howard beyond the usual political hedging. Howard gave it. He understood what he was doing. “Never ever” was not a slip of the tongue. It was a promise designed to close the door forever.
—
1.3 March 1996: The Election Victory
Howard won the 1996 election in a landslide. The GST was not part of his policy. The promise stood.
The new government moved quickly on industrial relations. Peter Costello, the new Treasurer, brought down his first budget in August 1996. The Workplace Relations Act 1996 began the process of decentralising wage-fixing, shifting power from industrial tribunals to individual employers and employees. The architecture that would later enable wage suppression was being assembled.
But in 1996, the minimum wage itself remained untouched. The Australian Industrial Relations Commission still conducted its annual reviews. The safety net, though fraying, still held.
—
1.4 1997: The First Fracture – Minimum Wage and the Reserve Bank
In 1997, something shifted.
The ACTU had applied for a “living wage” increase—a $20 per week rise for award-reliant workers. The case was heard before the Australian Industrial Relations Commission. But this time, an uninvited participant intervened.
The Governor of the Reserve Bank of Australia, Bernie Fraser, made submissions to the Commission. He threatened a monetary policy response—higher interest rates—if the ACTU’s claim was granted . The Reserve Bank, Fraser argued, would act as “wages police” in the post-Accord environment.
Jennie George, ACTU President, described the intervention in June 1997:
“The AIRC was unduly influenced by RBA threats of a monetary policy reaction if the ACTU claim was granted. Unfortunately the RBA sees itself as the ‘wages police’ in the post Accord world and uses monetary policy threats whenever there is an opportunity for workers to get wage increases.”
The Commission granted only $10 per week—half the claim . It was the first significant defeat for low-paid workers in the post-1996 era.
The significance was not yet apparent. A single $10 decision could be dismissed as a compromise, a balancing of interests. But the precedent was set: the independent tribunal could be influenced, and the Reserve Bank would act to suppress wages in the name of inflation control.
The mechanism that would later be used to justify 26 years of suppression was being tested.
—
1.5 August 1997: The Taskforce
In August 1997, Howard established a tax taskforce . Publicly, it was a policy review. Privately, it was the beginning of the end for “never ever”.
The taskforce was asked to develop a plan that would:
· Cut income tax
· Introduce a broad-based indirect tax
· Reconfigure Commonwealth-state financial relations
Howard had spent eighteen months as Prime Minister. He had governed competently. The economy was growing. The “never ever” promise was still on the public record, but the political landscape had shifted. The states were agitating for tax reform. In October 1997, state and territory leaders—including Liberal Chief Minister Kate Carnell of the ACT—signed a communique calling for access to “broad-based growth taxes” . The pressure was building.
Howard later justified the broken promise by saying he would take the policy to the 1998 election . The argument was: I made a promise in 1995, but circumstances have changed, and I will seek a fresh mandate. It was a reasonable argument, politically—if one accepts that election mandates override prior commitments.
But the promise had been “never ever”. Not “never unless circumstances change”. Not “never unless the states ask nicely”. Never ever.
—
1.6 1997–1998: The Hidden Work
Through late 1997 and early 1998, the taskforce worked in secret. The cabinet papers from this period, released by the National Archives in 2019, show a government committed to a course from which it would not be deterred.
Peter Costello later recalled the process:
“Were there doubters in the cabinet? Of course there were. But by that stage we had said several times we were doing it, there was no point in saying let’s not do it.”
Costello made history by presenting to cabinet using PowerPoint slides—a novelty in 1998. He displayed computer modelling showing the effect of every proposed variation on every income group and family type . The cabinet met for seven hours. The decision was made: they would proceed.
One minister, emerging from the marathon meeting, was asked how he thought it would go. “I don’t know,” he replied, “but I like the colours.”
The colours were attractive. The substance was about to break a promise.
—
1.7 August 1998: The Announcement
On 13 August 1998, Howard announced the GST. The policy was a 10% tax on most goods and services, with compensation for pensioners and low-income households. The promise shifted from “never ever” to “it’s only 10%”.
Two weeks later, Howard called an election .
The campaign was fought almost entirely on tax reform. Labor campaigned against “the great big new tax”. The Coalition campaigned on the promise that the GST would be accompanied by income tax cuts and compensation that would leave no Australian worse off.
Howard narrowly won. The Coalition lost a swag of seats , but it retained government. The mandate, such as it was, had been secured.
—
1.8 1999: The Democrats and the Exclusions
To get the GST legislation through the Senate, Howard needed the support of the Australian Democrats. Negotiations produced a key concession: fresh food would be excluded from the tax . The exclusion was politically necessary but economically distorting. It meant the GST would fall unevenly across household budgets, with the proportion of income spent on the tax highest for those who spent the largest share of their income on essentials—the poor.
The Democrats also secured a commitment to “overcompensate” pensioners and low-income households. Pensions were increased by 4% . Income tax cuts were legislated. Family payments increased.
Wages were excluded.
This is the detail that matters. The compensation package—the 4% pension increase, the tax cuts, the family payment increases—was carefully calibrated. But wages were left to the industrial relations system. The minimum wage would continue to be determined by annual reviews, using the same methodologies that had produced the pre-GST wage. The permanent increase in the cost of living—the 10% embedded in every transaction, every supply chain, every essential service—would not be matched by a permanent increase in the wage base.
The architects of the GST knew what they were doing. The pension increase was automatic and ongoing. The wage adjustment was not. The structural gap that would open on 1 July 2000 was not an accident. It was a design choice.
—
1.9 The Compensation That Wasn’t
The compensation package was sold as generous. Pensioners would receive a 4% increase. Families would receive increased payments. Income taxes would be cut.
But the fine print mattered.
In July 2000, as the GST came into effect, thousands of older Australians received letters from the government advising them of their “bonus payments”. Many opened the envelopes expecting the promised $1,000. Some found cheques for $1 .
Wayne Swan, then Shadow Minister for Family and Community Services, documented the debacle:
“The Government’s own figures obtained by the Opposition through Senate Estimates has shown over 300,000 elderly Australians will receive a one off bonus payment between $1 and $50. But these people may consider themselves lucky, with the government’s information also revealing 43% of Australians over 60 will receive no payment at all!”
The “compensation” was means-tested into meaninglessness for many. The promise that “no Australian will be worse off” was true only in the aggregate, only on average, only if one ignored the thousands who received $1.
Swan’s statement concluded:
“It is a disgrace that this Government has treated elderly Australians with such contempt. While it is bad enough imposing double taxation on Australians who have paid taxes all their life, the Government has added insult to injury by putting forward token offerings as compensation.”
—
1.10 The Regressive Tax
The GST is a regressive tax. This is not a political opinion; it is a mathematical fact.
A regressive tax takes a larger percentage of income from low-income earners than from high-income earners. The reasons are straightforward:
1. Low-income households spend a higher proportion of their income on consumption. They cannot save; they must spend.
2. Essential items—rent, utilities, food—cannot be avoided. Even with fresh food excluded, the GST applies to everything else: clothing, transport, household goods, communications.
3. The exclusion of fresh food helps, but it does not transform the tax’s fundamental character. A household that spends 90% of its income on consumption pays 9% of its income in GST (assuming a 10% rate on most purchases). A household that spends 50% of its income on consumption and saves the rest pays 5% of its income in GST. The poor pay more, proportionally.
The ANU’s Ben Phillips has modelled the distributional impact. His analysis shows the bottom fifth of income earners pay 5.4% of their income in consumption taxes—more than twice the 2.6% paid by the top 20% . If the GST were broadened to include fresh food and education, the figures worsen: 7.9% for the lowest incomes, 3.5% for the highest .
Phillips is unequivocal: “I think equity concerns are spot on.”
The GST was always, by design, a tax that would fall hardest on those with the least. The compensation package was supposed to offset this. It did not.
—
1.11 The Wages Left Behind
While pensioners received their 4% increase—inadequate for many, insulting for the thousands who received $1—wage-earners received nothing.
The minimum wage in 2000 was $400.40 per week [citation:my own dataset]. The Chart C adequacy benchmark, the government’s own standard of what a single person needed to live without income support, was approximately $576 per week. The gap was $176 per week.
That gap opened on 1 July 2000. It has never closed.
The pension benchmark would be indexed twice yearly, moving with inflation. The minimum wage would be reviewed annually, but always with reference to the same economic indicators, always with the same resistance from employer groups, always with the same Reserve Bank warnings about inflation. The structural lag was built into the system from the start.
The GST reform was finished in one sense: the tax was implemented, the revenue flowed to the states, and the political pain subsided. But in the sense that mattered to low-paid workers—the sense of being “no worse off”—the reform was left permanently unfinished.
—
1.12 The Promise and Its Consequences
John Howard made a promise in May 1995. “Never ever,” he said. “It’s dead.”
He broke that promise in August 1998. “It’s only 10%,” he said. “You will be compensated.”
The compensation came, but it was incomplete. Pensioners received 4%, but many received $1. Families received increased payments, but those payments would be indexed to the same inadequate measures. Workers received nothing.
On 29 January 2002, I fell from a horse. I was working as a track rider, earning approximately $280 per week—below the minimum wage, below the award, below any standard of adequacy. The GST had increased the cost of everything I bought. My wages had not increased to match it. When I was injured, WorkCover paid me $100 per week.
That $100 is the human measure of the unfinished reform. It is the gap between the promise of 1998—”no Australian will be worse off”—and the reality of 2002: an injured worker, inadequately compensated, forced onto welfare, and then accused of wanting to be there.
The GST reform was not finished in 2000. It remains unfinished today. The evidence is in the nine Centrelink documents collected over two decades, in the 104-quarter dataset proving 26 years of 36% calibration, in the $880 billion em2 deficit, and in the body of a man who fell from a horse and found no system to catch him.
Leave a Reply