Harvey Norman and leading economist agree: GST cut would be good

By Patrick Avenell

SYDNEY: Following the decision to reduce the United Kingdom’s goods and services tax (known there as VAT, or Value Added Tax) by 2.5 per cent from 1 December 2008, there has been speculation in Australia that such a move should be forthcoming here.

Talking to Current.com.au this morning, Harvey Norman executive director David Ackery said that such a move would be good for the economy, and for retailers.

“It would have to be [a good thing]. Anything that would be stimulating to the economy would be good,” said Ackery.

This view is in line with Australian National University economics professor Steve Dowrick, whose expert opinion was also sought on the matter.

“It’s an interesting idea,” said Dowrick. “If you cut taxes, income or GST, it’s going to mean more money. If you cut the GST, as long as retailers pass it on, you should get an increase in consumer spending.

“The Government seem more for cash injections – [if] they cut the GST, that will have an effect on the budget.”

When Dowrick was asked for his views on the economy in general, he veered away from labeling the current climate as one of recession.

“We are in a slowdown – a recession is when the economy contracts,” he said.

Whether or not a cut to the GST will be forthcoming, Dowrick believes that governments around the world have been right to act promptly with stimulus packages.

“Governments have a responsibility to react. If governments just sit back, there could be something similar to the Great Depression. As long as you leave it, the longer the slide. Taking action is the right course.”

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