Australia's Goods and Services Tax has sat at 10 per cent since it was introduced by the Howard government in July 2000, and a leading policy think tank now argues the country can no longer afford to leave it there. The Grattan Institute has released a major report calling for the GST rate to be lifted to 15 per cent and extended to cover all food, a move it says would generate around $76 billion a year and help arrest a serious deterioration in the federal budget.
The report, titled Budget reboot: How to fund Australia's future, warns that government debt is approaching levels not seen outside of wartime or the COVID-19 pandemic, and that the structural pressures driving that debt are only set to grow.
Why the Grattan Institute Says the GST Must Rise
According to the report, the immediate drivers of Australia's mounting debt include cost-of-living pressures, growing demand for social services, and higher borrowing costs. Looking further ahead, the think tank identifies an ageing population, the costs of responding to climate change, and persistently high interest rates as forces that will push government spending even higher.
Grattan Institute chief executive and lead author of the report, Aruna Sathanapally, acknowledged the political difficulty of the proposal but argued the stakes were too high to ignore.
"There are no easy paths back to budget sustainability," she said. "But with smarter spending decisions and a tax system that raises sufficient revenue to care for our ageing population, both current and future generations can be better off."
"Reform on this game-changing scale is challenging, but the prize is worth it: a more secure future for Australia's finances, and for all Australians," she added.
The report is not the first time such a proposal has surfaced. In August 2025, Independent MP Kate Chaney put forward a similar plan developed by economist Richard Holden, which also proposed a 5 per cent increase to the GST rate. At that time, Holden noted that compared to other advanced economies, Australia collects roughly twice as much of its revenue from income taxes and about half as much from the GST. The Greens dismissed that earlier proposal as "lazy," the then-Opposition called it "increasingly brave," and Prime Minister Anthony Albanese said Labor had not considered a GST increase.
Where Would the $76 Billion Go?
The Grattan Institute is explicit that a GST increase should not simply flow into consolidated revenue without corresponding relief for households. The report proposes using $58 billion of the annual revenue gain to cut income taxes for low- and middle-income earners and significantly increase welfare payments, which it says could deliver the largest personal income tax cuts in almost 20 years.
Specific increases to social support payments recommended in the report include:
- A 20 per cent rise in JobSeeker and Youth Allowance
- A 50 per cent rise in Commonwealth Rent Assistance
- A 20 per cent rise in the Parenting Payment
- An 8 per cent rise in pension payments
The remaining revenue would be directed to state governments, helping them balance their own budgets and phase out inefficient taxes such as stamp duty.
The report predicts that most households would pay slightly more in net taxes overall, with the largest increases falling on wealthier and older households. Importantly, the think tank also points to recent research suggesting a GST increase may hurt lower-income households less than is commonly assumed, particularly if welfare payments are lifted at the same time. This directly challenges one of the most persistent political objections to raising the GST, the concern that it is a regressive tax that hits the poorest hardest.
A Political No-Go Zone With Real Consequences
Despite the economic case, the Grattan Institute openly acknowledges the political minefield surrounding this debate. "Boosting the GST has become a political no-go zone, in part due to disagreements about how to divvy up the revenue, and concerns it would increase the cost of living," the report states.
Those concerns are real, particularly at a time when many Australian households are already stretched. Research into how rising household debt and house prices are reshaping Australian politics underscores why voters are sensitive to any proposal that could push living costs higher, even if the long-term arithmetic favours reform.
Globally, debates about poverty and its relationship to tax and welfare design have consistently shown that how revenue is recycled matters as much as how it is collected. The Grattan Institute's proposal rests on that same principle: that a well-designed GST increase, paired with meaningful income and welfare relief, can be progressive in effect even if the tax itself is flat in structure.
What Happens Next
There is no indication the federal government is preparing to move on GST reform. The Albanese government's position, as stated as recently as 2025, is that a GST increase is not on the agenda. Any change to the GST rate would also require the agreement of all states and territories, adding a further layer of political complexity.
Nevertheless, with the budget outlook continuing to darken and structural spending pressures building, the Grattan Institute's report is likely to keep the conversation alive, regardless of whether any government is willing to act on it in the near term.
