Peter Costello warns against GST rise

Former treasurer Peter Costello has warned the federal government to steer clear of taking an increased GST to the next election just two days before the Commonwealth and states meet for two days to try to reach agreement on tax reform.

Mr Costello, who introduced the 10 per cent GST in 2000, said an increase in the rate to 15 per cent would swamp every other election issue and blunt any cost-of-living campaign the Coalition might mount over the impact of Labor's ambitious greenhouse gas reduction targets.

Mr Costello, a frequent source of advice for Treasurer Scott Morrison, said those in the Coalition calling for a "50 per cent increase in the GST" were "hotheads" who "have no experience of what it is like to campaign for such a policy".

His warning comes before state and federal treasurers meet in Sydney on Thursday, followed by a Council of Australian Governments meeting on Friday, both of which will be dominated by tax reforms.

At COAG, the premiers are scheduled to be shown modelling they agreed to in July, when Tony Abbott was prime minster, on the effect of broadening and/or increasing the GST. As well, there will be a presentation on increasing the Medicare levy, an alternative proposed by Victoria and Queensland.

The Medicare option would raise about one-third of the extra $27 billion or so that a 15 per cent GST would raise and Mr Morrison has all but ruled it out because it would render Australia's income tax rates even more uncompetitive.

South Australia is pushing for a 15 per cent GST but the Commonwealth would keep the extra money. The states would be given a 17.5 per cent share of the income tax take to spend as they wish on hospitals and education.

Ostensibly, the treasurers will discuss modelling by federal Treasury showing the effect of increasing or broadening existing state taxes as alternatives to the GST.

Treasury secretary John Fraser, along with his state counterparts, have modelled the impact, for example, of broadening or introducing land taxes, ending payroll tax exemptions and adjusting stamp duties.

In his periodical column for the News Corp tabloids, Mr Costello said if the Coalition agreed to a 15 per cent GST, "you can put down the glasses and stop worrying about other policies".

"It will swamp everything. It won't matter what happens on defence or security or industrial relations or anything else."

Labor leader Bill Shorten concurred on Tuesday as he defended yet again his poor personal ratings in the latest Newspoll.

"There was a race on between Labor and the Liberals to see who could get rid of Tony Abbott. The Liberals got there first so, of course, they've got the bonus of the post-Abbott honeymoon," Mr Shorten said.

"Malcolm Turnbull hasn't yet faced any serious economic tests. What exactly are his plans for a GST? What exactly are his plans for the next budget? Until those questions are answered, he hasn't really been tested," he said.