Most debate about tax reform fixates on the what: the rates, the base, and who ends up paying. Far less attention goes to the how: the process by which a policy is designed, tested and brought to the public. Yet the process is not a procedural nicety. It is a substantive economic factor, and when it fails, the costs are real.
This is the theme of a recent episode of the Economics Explored podcast that I hosted. You can listen to the audio or watch it on YouTube (link below). This article draws out the policymaking issues at its core.
The benchmark remains the introduction of the Goods and Services Tax (GST) in the late 1990s. The Howard government came to office in 1996, promising not to introduce a GST. But in its first term, it decided a GST was essential to replace existing inefficient sales taxes. Recognising that this was a major change requiring a fresh mandate, it published a detailed white paper in August 1998 and took the policy to an election that October.
What mattered was not only the politics but the analysis. The white paper set out modelling of how the change would affect households across different types and industries, using the Treasury’s detailed economic simulation model, PRISMOD (the Price-Revenue Incidence Simulation Model). That transparency allowed the proposal to be stress-tested in public before it was locked in.
The broader archetype is familiar to anyone who has worked in policy:
A good process does four things that matter economically.
The proposed changes to capital gains tax and negative gearing, replacing the 50 per cent CGT discount and quarantining negative gearing on existing dwellings, were announced on budget night, without a white paper or meaningful consultation, and after the federal government had indicated before the 2025 election that it would not proceed.
The consequences look like the predictable output of a missing error-correction step. Design issues were identified almost immediately by outside analysts, and carve-outs and clarifications have followed. The point is diagnostic, not partisan: a sound reform direction can still be undermined by poor execution.
And the direction has some support. A number of independent economists, although not me, support replacing the discount with indexation and a minimum rate, and tightening negative gearing. That is precisely why process matters. A bad process does not always imply bad policy, but it can sink good policy and forfeit the chance to get the design right. Even the supporters of the government’s changes would have wished for a better process.
There is a genuine case for moving quickly. There are diminishing returns to economic modelling; budget confidentiality is a real convention; and open consultation can be captured by those who benefit most from the status quo. Any honest account has to weigh these considerations.
But they do not dispose of the deeper cost. When a process is seen as illegitimate, the public’s willingness to accept future reform declines. Reform capacity is itself an economic asset, built up over decades and quickly depleted. The most expensive consequence of poor process may not be this policy’s flaws, but the harder reforms it makes politically impossible.
For major changes, the remedy is not exotic:
It is slower, but it is also far cheaper than the policy backflips and kludges, the investment uncertainty and the lost trust that follow when good process is not followed.
Gene Tunny, Director, Adept Economics
Published on 29 June 2026. For further information, please contact us at contact@adepteconomics.com.au or call us on 1300 169 870.