This tax hasn't changed in 26 years. Some say Australia can no longer afford that

The GST is a 10 per cent tax added to most goods and services sold or consumed in Australia. It is collected through prices, so shoppers usually pay it when they buy taxable products. Raising it to 15 per cent would increase the tax rate by five percentage points. Expanding it to all food would also tax groceries that are currently outside the GST base.

The change would affect household budgets in different ways. A family would pay more GST when buying taxable items and newly covered food. The Grattan Institute proposes using much of the extra revenue to reduce income taxes and increase welfare payments. This would change the overall effect, rather than leaving the GST increase on its own.

The proposal estimates that most households would pay slightly more tax. Wealthier and older households would face larger increases. Some low-income households could still gain overall: a low-income, single-parent family renting was estimated to be about $150 a week better off. The plan remains politically difficult because it could raise living costs.

The proposed GST increase and expansion could raise about $76 billion a year, according to the Grattan Institute. This is a major increase in government revenue. It would give governments more money to manage rising costs, including stronger demand for social services and higher borrowing costs.

The estimate covers two linked changes. First, the GST rate would rise from 10 per cent to 15 per cent. Second, GST would expand to include all food. Together, these measures would broaden the tax base and increase the amount collected through everyday spending. The revenue would not simply disappear into general finances under the proposal.

The Grattan Institute suggests using $58 billion to cut income taxes for low- and middle-income earners and increase welfare payments. The remaining revenue would go to state governments. They could strengthen their budgets and reduce inefficient taxes such as stamp duty. The proposal aims to improve budget resilience while reshaping who pays and who receives support.

The proposal would use most of the extra GST revenue to protect or improve household incomes. The Grattan Institute recommends spending $58 billion on income-tax cuts for low- and middle-income earners and higher welfare payments. The remaining money would go to state governments, helping them strengthen budgets and cut inefficient taxes such as stamp duty.

The welfare changes are substantial. JobSeeker and Youth Allowance would rise by 20 per cent. Parenting Payment would increase by 20 per cent, Commonwealth Rent Assistance by 50 per cent, and pensions by about 8 per cent. These payments would help offset higher consumption taxes for people who receive support.

The effects would vary by household. A low-income, single-parent family renting was estimated to be about $150 a week better off. A higher-income working family would pay about $162 more in tax each week. Most households would pay slightly more overall, with larger increases for wealthier and older households.

The GST is often called regressive because its burden can consume a larger share of a lower-income household’s income. Everyone pays the same rate on taxable purchases, but households do not spend the same proportion of their earnings. Lower-income households generally need to spend more of what they earn on everyday needs.

For example, a household using nearly all its income for goods and services exposes most of that income to GST. A wealthier household may save part of its income, so a smaller share of its total earnings is spent on taxable purchases. The tax rate at the checkout is the same, but the burden compared with income can differ.

This concern has shaped opposition to GST increases. The Australian Council of Social Service argued in July 2025 that using a higher GST to fund income-tax cuts could shift resources from people with the least to those with the most. However, e61–UNSW research found GST may be less regressive when spending patterns are assessed differently.

Measuring spending in only one year can give an incomplete picture of a household’s financial position. A household may have unusually low income or unusually high expenses during that year. It might use savings, borrow, or receive temporary assistance. Its spending could therefore look high compared with current income, even if that year is not typical.

Looking across several years can better reflect longer-term resources and living patterns. Households may save during some periods and spend those savings later. They may also experience changing jobs, family circumstances, or income. Comparing GST with spending over a longer period can show whether the tax consistently takes a larger share of a household’s resources.

The article reports that e61–UNSW examined household spending because a single year does not provide the full picture. It says households that spend more and those that spend less paid roughly the same share of spending in GST, about 7.3 per cent. The provided excerpt does not explain the partnership’s full multi-year method.

The GST was introduced by former prime minister John Howard and came into effect in July 2000. It has never increased since then. That long pause makes any proposed change especially significant. The current proposal would raise the rate from 10 per cent to 15 per cent and extend it to all food.

The political difficulty comes from the tax’s visible effect on prices and household budgets. A higher GST could increase the cost of everyday purchases, creating concern about living costs. The debate is also about distribution. Governments and states would need to agree on how the extra revenue should be divided and used.

The Grattan Institute calls the GST a political no-go zone partly because of these disagreements and concerns. A similar five-per-cent increase was proposed by economist Richard Holden and Independent MP Kate Chaney in 2025. The Greens called that plan lazy, while the Opposition called it increasingly brave. Anthony Albanese said Labor had not considered an increase.

Government debt is the accumulated amount a government owes after borrowing to pay for spending when revenue is not enough. Debt can help fund services or respond to emergencies, but it also creates interest costs. Rising debt matters because future budgets must cover those costs alongside ongoing public needs.

An ageing population can increase spending on services and pensions while changing the size of the workforce and tax base. Higher interest rates make existing borrowing more expensive. Growing demand for social services also puts pressure on annual budgets. If these costs rise faster than revenue, governments may need to borrow more or reduce other spending.

The article identifies cost-of-living pressures, social-service demand, and higher borrowing costs as current drivers of mounting Australian government debt. It says ageing, climate change, and high interest rates could worsen the pressure. The Grattan Institute proposes a broader GST and spending changes to create a more resilient budget, but the plan remains politically controversial.