Has the Rudd Government fumbled by largely rejecting the Henry Review?

By holding the Henry Review into Taxation and then rejecting most of its findings, the Government has broken the golden rule of politics, writes Mike Taylor.

There is a golden rule in politics: never ask a question to which you don’t already know the answer.

The Rudd Government, no doubt congratulating itself on its political perspicacity, has been guilty of breaking that golden rule on multiple occasions.

Those who break golden rules deserve to be punished. In the case of the Rudd Government that punishment came in the form of the broad-ranging and sometimes unpalatable findings of the Henry Review into Taxation — something which explains the Government’s less than convincing attempt to provide its own answers.

It would have been churlish for the Australian financial services industry not to have welcomed the superannuation and ancillary measures announced in the Government’s response to the Henry Review but, in truth, those efforts could best be described as ‘limp wristed’ — amounting to a nine-year phasing-in of a lifting in the superannuation guarantee and the partial undoing of the contribution cap changes contained in last year’s Budget.

And there can be little doubt that many of the spokesmen who welcomed the super changes were, at the same time, calculating the potential damage to retirement income streams likely to flow from the Government’s introduction of a mining super profits tax — not least on those self-managed super funds holding high exposures to stocks such as BHP Billiton and Rio Tinto.

But the Government’s response to the Henry Review represented just an entrée to the main meal, which was this week’s Budget — the document that will form the basis of the Rudd administration’s bid for re-election.

And it is already quite clear that, except for the undue influence of industry superannuation funds, financial services will not represent a front-rank issue as the major political parties jockey to win electoral hearts.

The problem for the financial services industry, and financial planners in particular, is that the Government has posed more questions in the past four weeks than it has answered in the past two and a half years.