House debates

Tuesday, 23 October 2018


Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018; Second Reading

12:01 pm

Photo of Chris BowenChris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | | Hansard source

Labor supports every state and territory getting their fair share of GST, and Labor supports this legislation, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. In fact, we're glad this legislation is being brought in, because we called for this legislation to be brought in. When we announced our position, of making the floor—which will apply to every state and territory, but of course is particularly relevant to the people of Western Australia—we called for this law to be introduced and, as the Leader of the Opposition put it, to make the floor the law.

The now Prime Minister, the then Treasurer, said that that was unnecessary. He said that this legislation wouldn't be needed. And then, a few weeks ago, he backflipped and changed position and announced that this legislation would indeed proceed.

So we very much welcome this legislation. We do think the people of Western Australia in particular—and the people of every state and territory, which I'll come to—deserve the certainty of having this legislation in place to ensure there is a floor in GST distributions.

In fact, we also will support this legislation because the government has backflipped again and accepted another Labor position, which is that the distribution to every state and territory should be guaranteed in this legislation and that no state and territory will be worse off—again, something I called for when the government announced that they would legislate. It was something the Treasurer said was unnecessary and something he said wouldn't happen. He said it would be complicated; he said it would be two systems running in parallel. But, about this time last week, he backflipped and accepted the Labor Party's position.

So of course, we welcome the legislation. We welcome the backflip to have the legislation. And we welcome the backflip to include the guarantee for every state and territory. Accordingly, we will be passing this legislation through this House and the other house without amendment.

I'm not going to detain the House with a long history of GST distributions, and particularly the saga of GST distributions to Western Australia, but I will say this. We have said consistently that the people of Western Australia have a right to be annoyed about the GST distribution. We have said consistently that the people of Western Australia should have a better deal from the GST than they've been getting. It was previously the case that no state or territory had fallen below 86c in terms of relativity—that happened to Victoria not long after the GST was introduced; they hit 86c in the dollar in terms of returns to them—until Western Australia, which got as low as 30c in the dollar in 2015-16 and 2016-17. It's fair to say: this is a matter which causes considerable anger to the people of Western Australia, and they have a right to be angry.

I want to pay tribute to all my West Australian colleagues, as the member for Brand joins us in the chamber, and the other colleagues in the federal parliamentary Labor Party, who have been assiduous in their lobbying of me, of the Leader of the Opposition and of the shadow cabinet, to see this matter fixed. I pay tribute to the Western Australian government, Premier McGowan and Treasurer Wyatt in particular, who have also been leaders on this matter. Of course, there will always be a distribution between states and territories, not a per capita system, and nor should it be and nor, in my view, will it ever be. We are a Commonwealth. We're federation where every citizen is entitled to a basic level of services, and that means distributing funds between states and territories. But it has to be done in a matter which is fair.

Mr Rick Wilson interjecting

This issue arose, in part—and the honourable member opposite, as he walks out, raises Premier Barnett and praises him. Well, Premier Barnett has a lot to answer for, and his succession of treasurers have a lot to answer for, but perhaps none more so than the current Attorney-General, who has two issues to deal with in relation to his role as Treasurer of Western Australia. In 2011, it was he who decided to raise royalties at the state level, not considering perhaps that that would be reflected in the GST distribution and would lead, at least in part, to this imbroglio that both sides of politics have been dealing with since. Perhaps even worse, the then state Treasurer thought he had a magic answer for the GST distribution problem—he thought of it. He assumed it would be fixed. He assumed it could be dealt with. But, worse than that, he built those assumptions into the Western Australian budget. He brought down a budget which was predicated on an assumption that the Commonwealth would improve the GST distribution for Western Australia and then was surprised when it didn't happen. As a result, the state budget of Western Australia was a complete and utter mess. I think that goes to show, perhaps, that the current Attorney-General should never come anywhere near the Commonwealth Treasury portfolio. If that ever happens, the country is going to be in a very big mess indeed. This is a man whose answer to GST distribution was simply to assume that the GST distribution could be fixed.

It has been a long process to get here. In Perth in August 2017, the Leader of the Opposition and I announced the Fair Share for WA Fund, which was to ensure that Western Australia got a fair share without making any state or territory worse off. Now, it's taken until today to get here, and it's through a slightly different mechanism. Of course, when we announced that fund, the then Treasurer—the now Prime Minister—said, 'Top-ups forever is a mug's game.' This legislation reflects top-ups. On this, as in so many matters, the current Prime Minister has adopted a multitude of positions. But, nevertheless, we are very glad we're here today and finally have seen this matter dealt with.

Of course, the government has now accepted a 70c floor and a 75c floor, which was reflected in Labor's policy position for some time. They've now accepted the guarantee for other states and territories, which every single state and territory Treasurer called for, including the Treasurer of Western Australia. When I called for it, the Treasurer and the Prime Minister said that this was an outrage. They said it was an anti-Western-Australian point of view. They said that it was reflective of a lack of commitment to Western Australia. The fact of the matter is: the Treasurer of Western Australia agreed with us that every state and territory should receive that guarantee. The Liberal Treasurer of New South Wales agreed with our position. The Liberal Treasurer of Tasmania agreed with our position. The Liberal Treasurer of South Australia agreed with our position, let alone, of course, the Labor treasurers of Victoria, Queensland, the ACT and the Northern Territory, who, of course, agreed with federal Labor's position. So it is good that the pressure became so much for the Treasurer that he had to agree with our position.

This is the virtue of the policy work that Labor has put into this matter—that we can say the same thing in Perth as we say in Hobart. We can say, as I've said many times at press conferences in Hobart: the people of Western Australia have a legitimate concern. The people of Western Australia have a right to be angry. But the people of Tasmania also have a right to be concerned. I want to spend a few moments on the people of Tasmania, because this is a matter of particular concern to Tasmania. It's a matter of particular concern because Tasmania is so reliant on GST revenue. It is estimated that Tasmania's largest source of revenue is in fact GST revenue. It is estimated to be $2.5 billion in 2018-19, or 40 per cent of that state's total revenue, which is a larger proportion than for any jurisdiction, apart from, obviously, the Northern Territory. Again, there are all sorts of reasons why this is the case, but I mentioned before that we're a Commonwealth. We're a federation where individuals have the right to a basic level of services, and the people of Tasmania are more reliant on GST for those services than any state and any other jurisdiction, apart from the Northern Territory.

To put this in perspective, the current distribution revenue represents 64 per cent of Tasmania's health expenditure or 71 per cent of their education expenditure, based on 2017-18 figures. Again I pay tribute to my Tasmanian colleagues, who have also been assiduous in talking to me about this matter. I completely understand the concerns of Tasmania to ensure that guarantee was written into legislation. The people of Tasmania were in many senses at the forefront of our thoughts as we insisted on that guarantee going into the bill. We absolutely insisted that this bill should include that guarantee. And that is right for the people of Tasmania.

I'm sure my Tasmanian colleagues, in their contributions, will rightly point out that there will be another review in 2026 and that this guarantee only applies for the transition period. They will lay down some long-term concerns for the people of Tasmania, and I share their concerns to ensure that the people of Tasmania have those services going forward. I want to see the Tasmanian economy growing, I want to see Tasmanian sources of revenue, but I also want to see Tasmania's access to those basic services through the GST guaranteed. Of course, we'll continue to work with our Tasmanian colleagues, and, indeed, the Tasmanian government, regardless of its political persuasion, to ensure that that can be the case.

Accordingly, the Labor Party will be happy to facilitate the legislation through both chambers. This debate has gone on for long enough. I've been involved in it; members on this side of the House have been involved it. It has meant that two successive Western Australian governments have had to struggle with it in their different ways. It's time for this debate to come to an end. It is time for this debate to be concluded in a way which is satisfactory to the people of Western Australia and the people of Tasmania. This would not have been expected when the GST was designed. I have no criticism or quarrel with the original system, which I know, Mr Speaker, you were involved in setting up with your then employer, the then Treasurer. You could not have been expected—the Treasurer could not have been expected—to see this situation emerge. This is one of the things about GST distribution which could not have been accurately predicted in 2000. The vagaries of the minerals cycle, the minerals boom, and the Western Australian government putting royalties up in the middle of that would mean that we reached the extreme position that the people of Western Australia received only 30c in the dollar—a position in extremis. But we know about it now and it's got to be fixed now.

Finally, if this legislation receives passage through both houses of parliament, we'll be able to deal with it, to put this issue to bed, and people of every jurisdiction, members of this great Commonwealth of ours, will know that they have a basic access to at least 70c in the first instance and then 75c for every dollar they spend on the GST. This bill does not undermine the principle of fiscal equalisation, but it does make it fairer. Accordingly, we will support its passage through each chamber.

12:13 pm

Photo of Ted O'BrienTed O'Brien (Fairfax, Liberal Party) Share this | | Hansard source

Australia is an exceptional country, a country founded on great and lasting liberal democratic principles. These principles include the rule of law, an open, free market and individual freedom. And they have helped to make Australia the prosperous, peaceful nation that it is today. That other great Western liberal democracy, the United States, in its Declaration of Independence, succinctly summarised these values as the right to life, liberty and the pursuit of happiness. In Australia, the pursuit of happiness is perhaps better described as a fair go. Both concepts essentially translate as equality of opportunity, where citizens have the right to freely leverage their ability, their resources and their effort to improve their material and social wellbeing.

The Australian principle of a fair go is key to the bill we are debating today. As the title of the bill suggests, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, it represents the latest refinement to the primary mechanism by which the Commonwealth hopes to achieve a fair and sustainable fiscal distribution across the states, across the cities, towns and regions of Australia, so all Australians can have access to essential government services, irrespective of their postcode.

One way to appreciate the significance of this bill and understand the issues it seeks to address is to consider the history of the fiscal relationship between the Commonwealth and the states. That history has been marked by two concurrent trends. One is an increasing centralisation of taxation powers by the Commonwealth, both in response to two world wars and in response to a case for broad based tax reform in the late 1990s. The second is a gradual refinement of the mechanism by which taxation revenue is distributed to the states. The introduction of a federal income tax in 1915 and the total assumption of that power by the Commonwealth in 1942 are well known, as is the introduction of the GST in 2000. However, it is the second trend, the evolution of a robust distribution methodology, that I wish to follow briefly and which will lead to the measures proposed by this bill.

From the earliest days of our Federation, successive Australian governments have sought to apply the principle of a fair go to help deliver equality of opportunity across our vast continent. One early mechanism to achieve this, within a federal context, was the provision of special financial support, direct from the Commonwealth, to fiscally weaker states, who it was hoped would, in turn, better dispense material happiness by way of government services across their jurisdictions. While achieving an effective fiscal equalisation across the states and later the territories was commendable enough as an aim, the underlying truth of Paul Keating's observation that one should never get between a premier and a bucket of money meant the process of deciding who and how much was often fraught and highly charged, relying as it did on a range of ad hoc advisory mechanisms.

By the early 1930s, with the economy in freefall and unemployment skyrocketing, courtesy of the Great Depression, the Australian government established the Commonwealth Grants Commission as an independent and ongoing commission to give impartial advice on the appropriate level of federal support provided annually to state budgets. While the Grants Commission certainly improved the process to ensure independent and transparent advice to the Commonwealth, the mechanism for delivering support continued to rely on applications from financially weaker states—initially, South Australia, Tasmania, Western Australia and, later, Queensland—for these special grants. The states were effectively coming to the Commonwealth each year, cap in hand.

By the late 1970s, all the states, plus the ACT and the Northern Territory, were demanding a piece of the action. So the commission's role was expanded to provide advice that all jurisdictions would receive a share of Commonwealth taxation revenue with the aim of achieving an effective equalisation of fiscal capabilities across the nation. While the introduction of the GST in July 2000 significantly altered the basis on which the pool of funds for distribution was determined, it did not change the fundamental task of the Grants Commission to give impartial advice on the allocation of general purpose funds among the states and territories based on that fair-go principle that was embedded in what we refer to as horizontal fiscal equalisation, or HFE.

Since its introduction, every dollar of GST revenue has been comprehensively distributed to the states and territories using a complex formula that assesses the fiscal capacity of each state and territory according their ability to raise revenue relative to their costs of delivering services and associated infrastructure. Those states and territories determined by the formula to have a high fiscal capability, due to higher revenues or lower costs, have, according to the HFE principle, received less GST revenue on a per capita basis than jurisdictions with lower fiscal capability.

The evidence of the last 18 years, including a recently concluded Productivity Commission inquiry report on HFE, suggests that the current GST distribution system has been functioning well and does deliver on its primary objective of achieving high levels of fiscal equality across the states and territories. However—and this is the trigger for the bill, of course—recent shocks to the economy, such as fiscal distortions caused by the mining boom, have resulted in perverse outcomes that threaten the integrity of the GST system. This situation is especially acute in Western Australia, where that state has experienced extraordinary volatility in its GST distribution and has stretched the HFE system to its limits, with Western Australia's share of the GST carve-up plummeting to just 30c in the dollar of GST revenue collected from that state. This situation is clearly unfair and it's not sustainable. If left unmanaged, it would threaten the very integrity of the GST system in Australia.

Despite clear evidence of some shortcomings, the Productivity Commission report also found that the principle of fiscal equality across the nation continues to enjoy broad support from all levels of government. Being careful not to toss the baby out with the bathwater, the Australian government's interim response to the findings of the report, in particular the situation in Western Australia, was to legislate to safeguard the integrity of the system by reforming the way GST is distributed, so that all states and territories are better off. This is the clear aim of the bill. The key recommendation from the Productivity Commission report, and consequently the key reform proposed by this bill, is transitioning away from the current system of full equalisation, where all jurisdictions are equalised to the fiscal capacity of the strongest state or territory, and instead moving towards an alternative benchmark of reasonable equalisation.

The government supports, via the context of this bill, an alternative benchmark that will ensure a more stable and predictable fiscal capacity for all states and territories after GST revenue has been fully distributed, and has determined that this benchmark should be set at equal to the higher of either New South Wales or Victoria, being traditionally the most stable economies within the Commonwealth. The government's plan is to slowly transition to this improved distribution system in three steps over eight years in a fair, reasonable and sustainable way that leaves no state or territory worse off. Step 1 provides short-term transitioning payments to ensure no jurisdiction receives less than 70c in the dollar of GST revenue collected from that state or territory. It is anticipated that Western Australia would be the only jurisdiction to require such payments, because of a relatively low, what they call, relativity factor—for them, below 0.7 per cent—which is expected during this period. The Northern Territory may also experience special challenges and some volatility in its GST distribution. For this reason, the Commonwealth will ensure that the Northern Territory maintains a minimum distribution equal to its 2017-18 share.

Step 2 will phase in the improved equalisation benchmark, tied to the stronger of New South Wales or Victoria, with all states and territories transitioning to this new standard over six years, from 2021-22 to 2026-27. To ensure a fair and stable transition to the new equalisation benchmark, a GST relativity floor will be introduced in 2022-23 so that no state or territory will receive less than 70c per person per dollar of GST revenue collected. This will increase to 75c per person per dollar of GST in 2024-25. It must be said that, on current projections, under the new equalisation benchmark no jurisdiction is expected to fall below either relativity floor.

From 2021-22 onwards, the federal government will permanently boost the GST revenue pool available for distribution to states and territories by committing direct cash injections sourced from other Commonwealth revenues. The bill permits an initial top-up of $600 million annually, and a further $250 million in 2024-25, indexed each year to grow in line with the GST.

Step 3 will finalise the transition to the new, more stable benchmark by 2026-27 and trigger an additional $1 billion annually, guaranteed over and above the GST revenue, in perpetuity. At the end of the transition, the Productivity Commission will conduct a further inquiry to assess the performance of the updated system and determine whether it is operating efficiently and, indeed, as intended.

These are substantial structural reforms. They will not only guarantee that every state and territory is better off, with the Commonwealth injecting an additional $9 billion over 10 years, to 2028-29, and providing more than $1 billion extra each year from 2026-27 in perpetuity, but also ensure a fairer and more sustainable system for distributing GST revenue. It is revenue which has more than doubled in the 18 years since its introduction and is expected to grow by a further 65 per cent over the next decade. The GST revenue pool will be further boosted courtesy of an additional $6½ billion in GST receipts that the states and territories will receive over the forward estimates as a direct result of legislation enacted by this government, including extending the GST to online purchases.

The measures outlined in this bill will ensure that all states and territories are better off and that all Australians get a fair go irrespective of where they choose to live. The bill delivers on a fairer and more sustainable GST distribution system, which is part of this government's plan for a stronger economy that guarantees the essential services that Australians rely on. I commend the bill to the House.

12:28 pm

Photo of Jim ChalmersJim Chalmers (Rankin, Australian Labor Party, Shadow Special Minister of State (House)) Share this | | Hansard source

It's a pleasure to support the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, which has come about as a consequence of a lot of work and a lot of negotiation. I think it's fair to say there's been a lot of effort put in by colleagues on this side of the House in particular. I want to pay tribute to the member for McMahon, but also to colleagues from Western Australia, from Tassie—from right around the country—who have put a lot of thought and a lot of work into the outcome that we reach today. It is an outcome that Labor are very proud to support, largely because, in many important respects, what's proposed today replicates—it mirrors; it reflects—the proposals that we on this side of the House have been making for some time.

Horizontal fiscal equalisation is one of those torturously strangled pieces of economic jargon that wouldn't get much attention in the living rooms of this country—that is, until it becomes clear to people that what we're really talking about is the level of service that people in every corner of the country need and deserve. When you explain to people that what we are doing here is carving up some of the tax base in this country to make sure that people can experience and rely on—at times lean on—the services that they need, whether they are in the Northern Territory or in other corners of the country, it becomes a really crucial part of the economic policy that comes out of this building.

The member for Fairfax did an excellent job of running through the history of HFE. There have been a number of important changes made over time as the country grapples with how to get this into the best shape so that we can deliver those services and the states can deliver many of those services and give people that reasonable level of service delivery no matter where they live. He quoted the Declaration of Independence, which made me think of another saying that has come out of the United States which has been attributed to a number of different authors. When he was speaking about the Americans I remembered the quote: 'Americans can always be relied on to do the right thing but only after they've exhausted all of the alternatives.' The reason I thought about that was that I think the government has landed on a good outcome here but first they've exhausted all of the other alternatives. It's been an unnecessarily difficult process for those opposite

And we have seen that in other areas of public policy too. Unfortunately if it is somebody else's idea—it is principally the Labor Party's idea in this case—then their instinct is always to attack it. On three different occasions we have had that dangerous instinct play out. Where Labor has proposed something, the government has said it's ridiculous. They have attacked it, they've worked themselves into a lather criticising it and opposing it. They've predicted all kinds of ruinous consequences. Finally, after all of that, and having thought about it after they've spoken about it, they've ended up adopting the course we have proposed. We propose something; they attack it and then adopt it. They did it in relation to the royal commission on the banks and on other measures including the tobacco excise, reforms to high-income super and cracking down on VET FEE-HELP rorts.

That process has happened not once, not twice but three times by those opposite when it comes to the GST distribution to the states. If we want to talk about the history of this issue, first Labor announced its Fair Share for WA Fund. The now Prime Minister and then Treasurer attacked top-up payments and then he agreed to them. When Labor announced it would make the GST floor the law, those opposite ignored the proposal, rubbished it and then ultimately adopted it. When we said the commitment to ensure that no state would be worse off should be enshrined in law, the new Treasurer rubbished that proposal earlier this month, not that long ago, and now is agreeing to do that in this legislation.

The point about that is that Labor has led the way when it comes to ensuring that every state and territory receives its fair share of GST. We have said for some time now that Western Australia has gotten the rough of the pineapple and that should be fixed without coming at the expense of the rest of the country. We are glad that the government has followed our lead on this. That's why we'll be supporting the bill that is before us at the moment. It is a bill that has come about despite the best efforts of those opposite not because of them. It is a bill which is a consequence of landing in the right place eventually but only after first having exhausted all the other alternatives.

The member for McMahon has gone through the contents of the bill pretty comprehensively, so I'll just touch briefly on some of the key components. The bill is legislating the government's response to the Productivity Commission's report into HFE. That means changing the model of equalisation. It means legislating a 'no state would be worse off' guarantee during the transition period. It also means legislating that PC inquiry at the end of the transition period to make sure it's all working as intended. It is worth noting that the legislation doesn't include provisions for that additional top-up funding for Western Australia and the Northern Territory which was announced by the government as well. Those top-up payments are important and we support them as well, in the same way that we won't be standing in the way of this bill that we, in many respects, have authored.

I think it's fair to say objectively that when you look at the way this has played out over the last couple of years we have had the member for Maribyrnong, the member for McMahon and a number of colleagues largely but not exclusively out of WA coming up with constructive proposals, and the government has been playing catch-up. As I mentioned, the Fair Share for WA Fund came about in August 2017, over a year ago. That was proposed by us, attacked by those opposite and eventually largely adopted by those opposite. When the member for Maribyrnong said, 'Make the floor the law,' that was in July, some months ago. He said, 'Enshrine it in legislation.' The Prime Minister's response at the time was to declare that there was nothing in particular that suggested it required legislation. Today, ironically, we are debating the same legislation that those opposite said was completely unnecessary.

One of the reasons we're doing that is that, at the most recent meeting of state, territory and Commonwealth treasurers, there was a unity ticket. The current Prime Minister said that there would be a unity ticket at this meeting. He was right in one important respect but wrong in another. Yes, there was a unity ticket; it just didn't include the Commonwealth. All of the states, whether Labor or Liberal, banded together—even, to their eternal credit, the government of Western Australia. They have a fine Treasurer in Ben Wyatt. The government over there are doing a terrific job. To their credit, they said it was important to them not just that they got the floor that they'd been calling for—the fair go for Western Australia—but also to make sure that the other states and territories got a fair go as well.

The Liberal treasurer in Tasmania said, 'We believe it's very important that a guarantee be put in place and legislated to ensure that, under any circumstance, the state would be no worse off.' Another Liberal treasurer, the one in New South Wales, said, 'Every treasurer from every state and territory across the country is united in our view that, if this legislation is to be passed, there needs to be an amendment to ensure in law that no state or territory will be worse off as a result of this change.' Another Liberal treasurer, the one in South Australia, said, 'We will not support the Commonwealth's legislation unless there is an amendment to put the guarantee in place.' So you can see how the government, having said that it wouldn't be possible to legislate the guarantee, under enormous pressure from state and territory treasurers of both political persuasions has now been dragged to this outcome today.

You can see why the state treasurers and the territory treasurers were so concerned about what was originally being proposed by the government. It was partly because state budgets are notoriously sensitive to GST distribution. We understand that. But it was also because they were sitting across the table from a government now led by someone who was arguably the most enthusiastic cutter of services in the budgets that he handed down and the budgets that he supported as a cabinet minister when it comes to what's happened to health and education services in this country. So even the Liberal treasurers sitting across the table from a new Morrison government which had form when it came to diminishing services in this country and not investing in them rightly and understandably sought a guarantee, a guarantee that those opposite said would be impossible, a guarantee that we are now legislating today in this bill that Labor supports.

I remember only a couple of Sundays ago, on 7 October, on the Insiders program saying to Barrie Cassidy that, given that the government had had strong views before and always folded in the face of a dedicated Labor campaign and in the face of the weight of the arguments and the pressure from the states and territories, we predicted confidently that the government would come to our position again because they had done so on this issue so many times before. That turned out to be exactly right. But, at the same time—and this was only a couple of Sundays ago—the Treasurer said that legislating the guarantee would be to walk 'both sides of the street'. He said:

What some of the states are wanting us to do is to run two parallel systems. They are wanting us to run an old set of books based on the current system and a new set of books based on the new system with the floor and the additional $9 billion.

He said:

The Labor Party can't walk both sides of the street here. They either support a fairer deal, or they can shout from the sidelines trying to make a political story.

Well, we weren't shouting from the sidelines; we weren't making a political story; we were writing the government's policy. What we predicted a couple of Sundays ago is exactly—embarrassingly, for those opposite—what is being legislated today. It's the right outcome—arrived at, by those opposite, in a typically tortured way, with another couple of episodes of the muppet show that we have come to expect from those opposite.

So the main reason we support what's being proposed is: we wrote most of it. More than a year ago, when we first announced, via the member for Maribyrnong, our Fair Share for WA Fund, he said that there was a problem with the share that WA was receiving; it wasn't fair for WA to be getting only 34c in the dollar. We said that we would fix that imbalance. We've been working diligently since then to fix that imbalance, and we think that what's being proposed here will be a crucially important step in that effort.

We've always led on this conversation about GST distribution. We care deeply about the services that people rely on. And we want to make sure that it's fair—that, if you live in one state or territory or another, you're not disadvantaged just because of the state or territory that you live in. Every Australian has a right to expect a basic level of services. Overwhelmingly, that's our priority on the Labor side of the House. That's why we go through all of this effort to make room in the budget. It's not just to make the tax system fairer or to pay down debt—which has doubled under those opposite—but also to make room for the things that we, as a society, truly value. Key among those are good services—health and education and other services—so that Australians have every opportunity to rise to their potential in this country.

12:42 pm

Photo of Rick WilsonRick Wilson (O'Connor, Liberal Party) Share this | | Hansard source

It's great to follow the member for Rankin. I was going to ask him later on if I could borrow his copy of Kevin Rudd's new book when he's finished with it; I'm sure it will be very interesting reading!

The member for Rankin spent a lot of time during the debate claiming credit for the GST fix, which I'm very much aware started late in 2016, when we, the Western Australian members, met with the Prime Minister and the Treasurer in the then Prime Minister's office, and we spoke about a way forward and the process to get some political agreement. That set off the Productivity Commission inquiry process, which, ultimately, led to the outstanding result today. The member for Rankin claimed that this was all the Labor Party's work. But the member for Burt—and I'm a very good friend of the member for Burt, and we worked together just last week, putting on a wonderful Showcase WA event—back in February of this year, speaking to The West Australian on The Whip podcast, said that fixing the GST system was 'almost politically impossible'. Obviously, the member for Burt wasn't on the same page as the member for Rankin as to how easy it was going to be to fix the GST.

But Australia is a federation of states. I am a proud Western Australian. We accept our responsibility to make our contribution to the federation, and most Western Australians would recognise that, for many, many years, Western Australia was a net beneficiary of the horizontal fiscal equalisation scheme, and we were quite prepared to make our contribution when the time came.

However, there was a unique set of circumstances, starting post global financial crisis, where we saw iron ore prices double, from around US$60 a tonne to around US$120 a tonne; a massive construction boom in Western Australia, with the opening of many new mines; and the north-west shelf gas project, which saw Western Australia's revenue rise almost exponentially. That was good for Western Australia. It was great that the Western Australian government at the time, the Barnett government, had resources and money to spend. However, it also came with costs.

We had a huge influx of people into Western Australia. We had to build new schools; we had to replace hospitals and build new hospitals. I think the Fiona Stanley Hospital was around several billion dollars. We also needed community amenities as well, like the new Optus Stadium, which was over a billion dollars and was criticised by many people at the time. But, like the Sydney Opera House, I think in 40, 50 or 60 years, people will come to appreciate what a magnificent community asset that is. Elizabeth Quay and many large road projects were all funded through that period. Then, of course, we saw the end to the mining and construction boom. We saw iron ore prices come back to their long-term average of around US$60 a tonne. The Western Australian government's revenue collapsed, and that led to some serious problems for our state and the then Barnett government. Those problems were inherited by the new Western Australian government, led by Mark McGowan.

So obviously Western Australians were very aware of the fact that our GST share, through the horizontal fiscal equalisation system, had fallen progressively and in 2015-16 reached 30c in the dollar. Prior to that, as the member for McMahon pointed out in his contribution, the previous low had been around 86c in the dollar. Western Australians obviously felt that we weren't getting a fair go out of the GST deal. We accepted that we needed to make a contribution, but 30c in the dollar put our state budget into serious deficit of I think up to $4 billion at its worst, and the brunt of that was being borne by everyday people in Western Australia. So there was a great deal of anger across the Western Australian community. The government has responded, and in some respects I agree with the member for Burt: this was a politically diabolical problem to fix. How do you make sure that WA gets its fair share of the GST distribution without disadvantaging the other states? Obviously, no state is going to stand by and watch the system change and reform if it's going to mean that their people and their governments have less money to distribute. The then Treasurer, Mr Morrison, now Prime Minister, I think has come up with a very neat solution which has kept everybody happy, and I know that Western Australians are particularly happy.

Under the new arrangements, every state and territory will be better off. There'll be an extra $9 billion in untied funding over the next 10 years, which will go into schools, hospitals, roads, police—all of those services that the state provides which are so important to our communities. By the time the system is implemented, there'll be more than $1 billion extra each year in perpetuity. The government can only do this because the economy is growing strongly. We have economic growth running at 3.4 per cent. Unemployment is down to five per cent, and since the government came to power in 2013 over 1.15 million jobs have been created. So we can afford to do this because we've run a good economy—we've run a very strong economy—and we've been able to find that extra $9 billion to make this happen.

Under this bill, the amendments to the Commonwealth Grants Commission Act 1973 and the Federal Financial Relations Act 2009 will create a new equalisation benchmark of the stronger of New South Wales or Victoria, whichever is higher. All states will transition to this new equalisation standard over the six years from 2021-22 to 2026-27. The benchmarking states' GST distributions to the economies of the two largest states remove the effect of the extreme volatility that we saw when Western Australia had a mining boom. The second part is to introduce a permanent in-system relativity floor of 0.7 from 2022-23, increasing to 0.75 from 2024-25. In the interim, the Commonwealth will separately provide short-term top-ups to Western Australia and the Northern Territory—and, in Western Australia's case, to keep our relativity above 0.7 per cent. So, in 2019-20, Western Australia on the current projections will receive $814 million. In 2020-21, we'll receive $585 million, and in 2021-22 we'll receive $305 million. So the WA government will receive considerable additional money there. It's around $1½ billion over the next three years with which to repair their budget.

When the Western Australian government came to power, they were faced with a difficult financial situation, and they made cuts. I've been in that situation. In 2013 we came into government and were left with a very difficult situation, and you do have to make cuts. You do have to look for savings. But unfortunately the Western Australian government only looked outside the metropolitan area, and they really did go after the little fish—like the School of the Air. Two hundred and fifty kids access the School of the Air in Western Australia that is based out of Kalgoorlie, in my electorate. They went after the School of the Air.

The Moora Residential College has 30 kids in a boarding college a couple of hours out of Perth, and they said they couldn't find the money to do some refurbishment and keep that college open. I mean—really. These are country kids. They obviously, apparently, don't count as much as city kids.

They went after camp schools. There's a camp school in Kalgoorlie and a camp school in Bridgetown, both in my electorate. When I go to school graduations at the end of the year, what those kids say to me, when I ask, 'What was the highlight of the year?' is, 'Going on the school camp.' But they closed down the camp schools. Yes, they managed to palm it off to a third party, but they closed down those camp schools for a period.

We've also seen money pulled out of regional development in the little town of Tambellup and the small communities across the Great Southern. They were successful in accessing $10 million through the Building Better Regions Fund to complement the $11 million that they'd been promised by the previous state government to build not only some decent housing for their own employees but age-appropriate housing for older people in the community. The new Minister for Regional Development in Western Australia pulled that $11 million back out, so that project's now on hold. Hopefully we can get it back up and running again.

Now that more money is available for the Western Australian government, I've got some things that I want to see happen in my electorate of O'Connor. At the state election, the member for Albany and the WA government promised a new ring road for Albany. It's a $175 million project. They've only put $35 million on the table. This is a great opportunity for them to find that extra $140 million to complete that ring road, which they promised at the election.

Also in the town of Albany, the Commonwealth government have promised $6.6 million to fund the purchase of a radiation oncology machine. For the people in the Great Southern, if they can't access cancer treatment in Albany, it's a 400-kilometre trip to Perth. Sometimes that treatment runs for up to six weeks. That's six weeks away from home, family and loved ones, and of course there is the cost of being away from home.

Also, in Kalgoorlie, we've issued a licence for an MRI machine, and the people at Kalgoorlie are now waiting for the state government to install the machine in the hospital there so that they can access MRI scans instead of having to travel 600 kilometres to Perth. These are some of the opportunities that are opened up by the increased money that Western Australia will receive out of our GST fix.

I just want to close by congratulating the Prime Minister and the work that he did as Treasurer for bringing about what has been a very, very comprehensive overhaul of the GST system, which protects all states, not just Western Australia. Of course, we are the primary beneficiaries in the first instance, but who knows what will happen in the medium to distant future?

Other states may well see the sort of windfall revenue gains that we saw in Western Australia with the mining boom. It may be other types of booms that see other states receive those sorts of windfalls, and this system protects them from the sort of damage that was done to the Western Australian economy by the previous system. I endorse this bill to the House and, once again, congratulate the Prime Minister and the Treasurer on the work that they've done. Thank you very much.

12:55 pm

Photo of Patrick GormanPatrick Gorman (Perth, Australian Labor Party) Share this | | Hansard source

To stand in this place and provide a fair go for Western Australia is an honour. Too often, Western Australians feel like they are the forgotten state of the Commonwealth. When it came to the distribution of the goods and services tax that Western Australians pay, that was definitely true. Today, the parliament is recognising Western Australia. The parliament is recognising the tax that Western Australians pay and the principle that they should get a fair share of that tax back in their state.

It would be remiss of me not to start by congratulating some of the campaigners who have led to this reform. And it has been a campaign; it's been a campaign that's taken many years. I congratulate my fellow Labor colleagues, the WA Labor members of this place and the WA Labor senators. I also congratulate the Leader of the Opposition, the shadow Treasurer and the shadow minister for finance. They've all listened carefully to Western Australia. They listened to what it is that Western Australians say they need and they listened when Western Australians elected the Mark McGowan Labor government in 2015, saying, 'The current team were unable to deliver a fair share for WA.' I also congratulate the now Treasurer of Western Australia, Ben Wyatt.

It's not just been a campaign that has involved members of state and federal parliaments; it's involved The West Australian and, once a week, The Sunday Times also campaigns for a fair share of the GST for Western Australia. I also acknowledge a range of trade unions have campaigned to ensure that Western Australia gets its fair share so that we can fund the vital services that Western Australians rely on. Equally, the Western Australia Chamber of Commerce and Industry has been a loud and clear voice for change in the distribution of the GST.

The goods and services tax was introduced on 1 July 2000. Back then, I was in year 10. My friends and I thought that, despite not being super keen on the introduction of the GST—effectively a regressive tax—we thought it would be nice to be some of the first Western Australians to pay the GST. So we hatched a plan that we'd go to the local Macca's, we would wait until the clock struck midnight and we would buy ourselves some McDonald's and pay the GST, being some of the first Western Australians to do so. My parents did not think this was as good an idea, and I did not do that. I raise the importance of visiting McDonald's because, when we look at the share of the GST that Western Australia received, it got down to basically 30c in the dollar. Thirty cents doesn't buy you much, but, back in 2000, 30c would buy you a McDonald's ice cream. Thirty cents no longer even buys you a McDonald's ice cream. In fact, in preparing for this speech, I struggled to find much that you can buy for 30c these days, so I had to do some maths instead. Thirty cents will buy you three kilograms of iron ore; 30c will buy you, roughly, 612 staples; and it will buy you less than 500 millilitres of Coca-Cola. So it's no surprise that Western Australians thought that 30c in the dollar was completely unfair. It was a pittance and it was unacceptable.

The need to provide Western Australia with a fair share of the GST is also a need for us, at the federal level, to make sure that we are providing what that state needs to run a state economy. When it comes to the suffering that Western Australia experienced during this time, we cannot understate that suffering. The anger is well highlighted by the fact that I've been able to count—and I'm sure this is an inaccurate number; it probably vastly understates the number of editorials—78 editorials in the past six years in The Western Australian alone calling for the reform of the GST. In fact, one report in The West Australian revealed that Western Australia had lost almost a third of the GST collected since the inception of the GST in 2000. In other words, one-third, or $30 billion, was taken out of Western Australia and redistributed to other states as we saw that share of the GST decline below 70c, decline below 50c and go down to that embarrassing figure of just over 30c.

Thirty billion dollars taken out of Western Australia is a huge sum. With $30 billion, Western Australia could have purchased the entirety of Caltex Australia, Seek Limited and Coca-Cola Amatil and still have had change to buy Domino's Pizza, although I don't think there's much of an argument that I can make in this place to have any government, state or federal, in the pizza-delivery business. But, nonetheless, there is no doubt there is a need to redistribute some money to other states to accommodate for the different challenges that different states face at different points in the economic cycle.

However, no-one ever expected that we would get to this point of unfairness. Indeed, former Prime Minister and the architect of the goods and services tax—he proudly says it's one of his greatest achievements—John Howard, said that top-up payments of the GST were never going to be necessary. In fact, when he announced the goods and services tax, Mr Howard said:

For as long as any of you can remember one of the least ignobling characteristics of government in this country has been the annual begging-bowl pilgrimage to Canberra by the States.

Well, the system that was created by the introduction of the goods and services tax led to exactly that on a grand scale. It led to my state of Western Australia having to beg for top-up payments just to make sure they could keep the essential services of the state running. It's not good enough. It has not been good for any part of our Commonwealth to see that be part of our distribution of funds across our states and territories.

I'm going to follow on from the member for O'Connor and commend former Prime Minister Turnbull for his work on this package. Mr Turnbull had a cooperative approach. He recognised that, when Western Australians voted for the Mark McGowan Labor government, they were sending a message all the way to Canberra. They were sending a message that we needed to address this problem. It was the No. 1 issue on the minds of many Western Australians when they thought about what fairness from a federal government means to them. Prime Minister Turnbull was listening to Premier McGowan, and I'm pleased that, with the passage of this legislation, we'll see Premier McGowan and Treasurer Ben Wyatt begin to return the state's budget to a surplus position and begin to repay debt.

You can't spend all of these funds on just repaying debt. You have to build for the future. You have to invest in the future. There are many projects in Western Australia that may be able to get off the ground because Western Australia now have a stronger budget position and can think about what else might be needed to grow the Western Australian economy. One would be the investing in a light-rail system across our city and through my electorate of Perth, connecting places like Curtin University, the Burswood peninsula and Elizabeth Quay, and going all the way up to Kings Park, a beautiful tourist attraction, and onto the medical precinct and the University of Western Australia. This may also allow the state government and their body, the Metropolitan Redevelopment Authority, to finally fix the eyesore and the disgrace that is the rotting of the East Perth Power Station and turn it into a national tourist icon, possibly full of art, culture and music, or a museum of national significance.

We could also invest and reinvest in our community at a local level. I know that other members will be speaking on a range of things that we could invest in, including community sport and community infrastructure. Whatever the case, when we get to the point of looking at how the nation has got to this point of debating this legislation, you have to accept that it's only because Labor has led this debate time and time again that we've got the legislation that we have in front of us today. Indeed, it was the Leader of the Opposition and Labor who first proposed significant and serious top-up payments to lift Western Australia's share of the distribution of the goods and services tax. It was on Saturday, 26 August 2017 that the Leader of the Opposition, Bill Shorten, announced that a Shorten Labor government would invest $1.6 billion in a Fair Share for WA Fund. That was carefully considered policy aimed at making sure we delivered a fair share for WA without making any state worse off. It was the first time we'd seen a concrete proposal to deliver an effective floor of GST for Western Australia, delivering a 70c floor.

It was then at my campaign launch in July this year that the opposition leader said we should 'make the floor the law'. It was a great initiative to say: if you're going to have a floor on the GST, you have to legislate it. It's the only way that you can give certainty to the state that, in fairness, had some pretty good reasons for not trusting that they were going to get a fair share from Canberra. The opposition leader said:

… we also have … a plan for the GST. We have a plan which Labor has led, working with the McGowan Government and Labor nationally, to establish a floor. And what we say today is that not only do we support there being a 75 cent floor, we want to turn the floor into law.

It was a promise that was eventually adopted by the government, and it was good that the government listened to the opposition leader and agreed to legislate. It was also the opposition leader, and the shadow Treasurer, who said that we must legislate to make sure that no state is worse off. I'm joined in the chamber by a number of colleagues from Tasmania, who saw what happened to Western Australia. They saw the state have its budget smashed by an unfair distribution of the GST and they said: 'What happened in Western Australia is pretty bad. It would be terrible if, in fixing one state's problem, we were to start smashing another state's budget.' One of the things I commend my Tasmanian colleagues for is looking to the future. What former Prime Minister Howard and Colin Barnett, the then Treasurer in Western Australia and later the Premier, failed to do was look to the long-term effect. They could see that there was a huge mining boom on the way. The distribution formula was already on paper, but no-one thought: what will happen in different economic circumstances? I commend my Tasmanian colleagues for actually thinking through the implications of what we do and, again, I commend the shadow Treasurer for making sure we looked at the legislation and called for a no-state-worse-off guarantee. And I give credit to the current Prime Minister and the current Treasurer: they have listened and enacted that in the legislation before us today.

There are, of course, other tax policies that the Prime Minister and Treasurer may wish to look at in developing a fair economy for all Australians. One is Labor's tax refund for working Australians. Labor's policy would deliver a bigger, fairer tax cut for 10 million working Australians. Labor have proposed reforms to dividend imputation, ensuring that we deliver billions of dollars back to the bottom line of the budget and remove excess cash refunds from dividend imputation credits. We have proposed reforms to capital gains tax and negative gearing, limiting where you can claim those negative gearing amounts and reducing the discounts to ensure our tax system is fair and equitable. Probably most importantly when it comes to making sure we collect a fair share of tax here in Australia for all Australians, we have proposed a comprehensive package on multinational tax avoidance, which would improve the budget bottom line by $3 billion over the decade. In addition, Labor will restore integrity to Australia's tax system and stop Australian profits being stashed away in tax havens. Labor will cap the deductions for managing tax affairs at $3,000 and introduce discretionary trust reforms.

I mentioned earlier the need to look to the future and look to the long term to make sure that errors don't happen again. But I've also got to mention that the member for Pearce, the Attorney-General, must take some responsibility for his role in failing to act and failing to campaign hard enough for a fair share of the GST when this problem emerged in 2011-12. The Attorney-General, when he was Treasurer of Western Australia, said:

What we reasonably anticipate is that in 2013-14 the CGC will have brought in a new GST system.

That did not happen. It took many years. It took strong advocacy from my colleagues in the Labor Party, strong advocacy from the shadow Treasurer, strong advocacy from Premier Mark McGowan, strong advocacy from Treasurer Ben Wyatt and creative policy to ensure WA gets a fair share of the goods and services tax.

1:10 pm

Photo of Nola MarinoNola Marino (Forrest, Liberal Party) Share this | | Hansard source

It's been interesting listening to some of the members opposite, particularly when we recall that it was only on 26 February, in a West Australian podcast, that the member for Burt said 'fixing the GST system is almost politically impossible'. Well, we have proven that it is not. I'm very proud of that on this side of the House, as a very proud and active Western Australian member of this parliament. This bill is a testament to the work of all of the Western Australian Liberal members of parliament and senators, and I want to thank them for their long-term commitment to this and their work behind the scenes as well.

All of us on this side and all of us in this chamber—and I see the member for O'Connor is sitting in the chamber—are very, very committed and active in this space. All of the WA members and senators in the government are absolutely determined and committed, and we see the results of that through this legislation. And we all knew very directly in Western Australia how serious it was for our state that we were only receiving 30c in the dollar. There was, without any question, white hot anger in Western Australia. And we felt it in the same way. We saw the work that WA had put into its economy at the time. Part of the anger was centred around the fact that Western Australians believed they were doing more than their fair share in providing for the rest of Australia. They were happy to do their fair share—and they saw the investment that had gone into developing our amazing resources and into exports and the work that was being done on the ground. We saw a state that was committed to developing its natural resources. But other states locked theirs up and then expected Western Australia to support them.

I look at some of the work that's been done and I want to congratulate and thank all of my WA colleagues. We have worked consistently with the now Prime Minister, formerly the Treasurer, who understood, when we sat down with him on a regular basis and talked through this, why we needed to resolve the GST situation for Western Australia. The genesis of that has been several years in the making. It wasn't a simple process but, by gee, this government has got there, thanks to the work of the Liberal members in WA and, of course, the senators as well and the Prime Minister and Treasurer. The Productivity Commission work evolved out of those earlier efforts, and the solution is a very sound one.

The only reason that we can actually provide these sorts of results for Western Australia and every other state is the fact that we're running such a sound economic set of policies—very strong. We are seeing over one million jobs created by great businesses who have had the confidence to invest and employ people. We see unemployment at five per cent. We have seen the small business tax cuts and tax relief for Australians. That's because we're running very sound economic policies. As the Prime Minister has always said, the basis for everything the government does is founded on a strong economy. All the essential services that Australians expect of government stem from sound economic management.

Back in those years we saw the iron ore prices doubling in Western Australia, the construction boom of new mining projects and the infrastructure costs that went with that sudden expansion. At one point we had 1,000 people a week coming into Western Australia to fill those jobs and they expected everything from roads to transport, housing and accommodation. There was even massive pressure on our local major businesses, particularly on those in the earthmoving, transport and logistics sector, who saw much of their workforce move north, and extra costs that applied to businesses and industry, particularly in the South West of Western Australia.

We know that the three-year time lag that's part of the Commonwealth Grants Commission formula had a real impact in Western Australia. Even though the CGC's formula has impacted on other states, it has never fallen to a floor of 30c in the dollar. None has been affected like Western Australia was. The whole principle of horizontal fiscal equalisation is the fair go. A fair go really is for those having a go, and that's what Western Australia was doing—having a go—and much of the benefit of that was shared across Australia.

The coalition Liberal-National government reforms will deliver a fairer and far more sustainable GST deal for all Australians. Again, I want to thank the Prime Minister and the Treasurer. It is not easy to manage the complexities of the GST formula, but they've done a very sound job in what they've proposed through this legislation—that no state will be worse off. But no state has previously, as we know, fallen below 86c, and Western Australia went to 30c. I don't want to see any other state anywhere in Australia go through what Western Australia went through, and the measures that the Prime Minister and the Treasurer, and our government, are putting in place are to ensure that doesn't happen. There could well be a boom ahead. It could come in South Australia. It could come in Queensland. It could come in the Northern Territory. Under the previous arrangements, that state could have found themselves in the same situation as Western Australia, hitting a brick wall.

We know all Australians must have access to vital government services, no matter where they live across our diverse nation. The investment by the Commonwealth will guarantee an extra $9 billion to the states and territories over the next decade. This funding is untied. The states can invest in schools, roads, hospitals or whatever is needed and whatever that state decides. The states make the decisions about where they apply this funding, as they see fit, to their priorities—to what is needed on a state-by-state and territory-by-territory basis. There will be transition arrangements in place to move gradually to the new formula, and that's to make sure that no state is left behind. The benchmarks set in the legislation are Victoria and New South Wales. They have been historically strong states from an economic point of view, and benchmarking against them means that all states will have a secure revenue stream, going forward.

This decision, as I said, is very important to Western Australia. I know from moving around my electorate that people felt very, very strongly about this. As I said, it was a white-hot issue. It basically stopped barbecues. It was what was discussed at footy games. I can remember going to the Tracmach Lights on the Hill event, a vintage tractor machinery show, in Brunswick. I got only 50 metres up the hill that day because everyone wanted to talk about the problems that Western Australia had, or where they felt Western Australia was, to their mind, being ripped off and where we weren't getting a fair go. Well, this federal government has changed that.

As I said, the new equalisation benchmark is the stronger of New South Wales or Victoria, whichever is higher. As I've also said previously, not all Labor members from Western Australia were supportive and, at times, certainly didn't support the efforts of our Western Australian colleagues in this space. I've mentioned the comments of the member for Burt, for instance. Speeches in this House that were simply empty rhetoric didn't do Western Australia any good. However, I see the legislation before us as an important starting point. This is a government that has delivered and will deliver for the people of Western Australia. We see it in this bill before the House today.

Again, in recognising so much of the work that's gone into this issue, I want to really recognise the persistence of the WA members and senators, and I want to thank them. I want to acknowledge the work of the Prime Minister, his work both as the Treasurer and in carrying that through as the Prime Minister of this nation. It was a difficult process. Yes, the Productivity Commission work was very, very important in this process, but having the courage to make very strong decisions is what our government can and does do, and we see it within the legislation before the House.

The measures are, as I say, a new equalisation benchmark, the stronger of New South Wales or Victoria, whichever is highest, and all states will transition to this new equalisation standard over six years; the introduction of a permanent in-system relativity floor, which is particularly important; boosting the GST pool of funds; and increasing the funding available during the transition period and guaranteeing the states and territories the better of the old or the new system so that each state will have the better of the cumulative total. I think it is equally important that the Productivity Commission itself will conduct an inquiry to assess whether the new system is working efficiently and effectively and operating as intended—the check and balance in this one. The short-term top-ups to Western Australia and the Northern Territory to keep their relativities above 0.7 and 4.66 respectively from 2019-20 to 2021-22 are a great improvement.

I'll go back to where I started. I want to acknowledge all the work of the Western Australian members and senators, their persistence, their passion and their commitment to Western Australia, but equally the Treasurer and the Prime Minister in coming up with a solution so that every Australian will be better off. I endorse the bill.

1:22 pm

Photo of Ross HartRoss Hart (Bass, Australian Labor Party) Share this | | Hansard source

I would like to make some observations with respect to the member for Forrest's contribution that's just been delivered. Of course, the elephant in the room that she hasn't mentioned is the fact that she's been part of a government that's been in power for over five years. It's taken it over five years to address what's certainly been an urgent issue as far as the Western Australian voting public is concerned. I think it's disingenuous and it's not appropriate for this government to ignore the efforts that have been made on a bipartisan basis to deliver GST equity for WA. It is vitally important for the government to take a moment to reflect, in a positive manner, upon the fact that this has been achieved by co-operation at both a state and a Commonwealth level, and indeed finally to reflect the concerns expressed by all state premiers and all state treasurers with respect to the legislating of a guarantee that no state will be worse off.

With that introduction, I'm pleased to be able to speak in support of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. I'm particularly pleased to rise to support the comments and observations of the shadow Treasurer, the member for McMahon. The history of Commonwealth-state relations, particularly Commonwealth-state financial relations, is long and complex. Sometimes that relationship can be encompassed in throwaway lines. I can't go past, for example, the observation attributed to Paul Keating: 'Never get between a Premier and a bucket of money.'

This legislation is required to address shortcomings in the system of horizontal fiscal equalisation, a system which has evolved since the 1930s and was most recently overhauled with the introduction of the GST in the year 2000. But, in practical terms, the effect of horizontal fiscal equalisation, the distribution of GST and the allocation of grants to states can materially affect the ability of states within our federation to address the provision of services, construction of vital infrastructure and, of course, planning for a secure future for that state.

Western Australia has prosecuted a case—particularly with the sound advocacy of my caucus colleagues from that state—for the present arrangements to be amended to reflect the shortfall in GST derived from economic activity within that state but lost to the state under the current system of horizontal fiscal equalisation. In very real and practical terms, Western Australians have felt that they have not received a fair share of the GST revenue which has been generated within their state.

But it's important to acknowledge that, as a federation, each of the states will, from time to time, as will the territories, prosecute a case for particular recognition as to challenges facing that state or territory. In the case of Western Australia, the simple fact of the matter was that GST revenue generated by the resources boom over an extended period depressed the amount returned to the state to a historic low.

It can also be fairly said that the former Western Australian Liberal state government and its then Treasurer squandered the proceeds of the mining boom with an almost contumacious disregard for the likely effect of the GST distribution formula on future state finances. I say this not to justify the lack of action with respect to addressing the cause of Western Australia receiving a fair share of GST, but rather to emphasise that the present Attorney-General, in his then role as state Treasurer, proceeded on the basis that the GST distribution formula would be adjusted, without in fact prosecuting that case with any particular vigour. That was either, in my submission, recklessness or blind disregard for the financial stability of his state.

My home state of Tasmania is disproportionately reliant on GST revenue. In 2018-19, Tasmania's total general government revenue is expected to be approximately $6.2 billion. Tasmania's largest source of revenue is GST revenue, estimated to be almost $2.5 billion in 2018-19, or approximately 40 per cent of our state's total revenue. This is a larger proportion than for any other jurisdiction except the Northern Territory. Tasmania will receive $1.1 billion more in GST revenue than its population share of $1.4 billion in 2018-19 because of the current distribution under horizontal fiscal equalisation. The current distribution of revenue represents 64 per cent of Tasmania's health expenditure, or 71 per cent of education expenditure, based on 2017-18 figures. These figures demonstrate the seriousness of protecting Tasmania's fair share of the GST.

The backdrop to this threat is the legacy of the Abbott government's cuts to health and education in the 2014 budget, estimated to be $2.1 billion for Tasmania, over 10 years, at the time. Tasmania's health and education systems are already behind the rest of the nation. Saul Eslake's Tasmania report presented data from the ABS National Health Survey conducted in 2014-15, which showed that a lower proportion of Tasmanians assessed their health status as 'excellent' or 'very good', and a higher proportion as 'fair' or 'poor', than of the general population of any other state or territory. Tasmanians are notably more intensive in their use of hospital facilities than people living in other states and territories. Conversely, Tasmanians are, in general, less well educated than people living in other parts of Australia or, indeed, other regional parts of Australia.

Tasmanians' reliance on GST revenue is not the product of fiscal recklessness or incompetence. It is the inevitable consequence of a small state, a federation state, that has been constrained—in some cases, by decisions imposed upon the state by the operation of federal law, in order to constrain particular decisions, including the development and exploitation of resources of the state. Tasmania has a significant proportion of its land mass in reserves. That should ensure that the beauty, heritage value and unique aspects of Tasmania are preserved for future generations. That is a good thing. It is something for all Tasmanians and, indeed, all Australians to be rightly proud of and to celebrate. But this inevitably means that some development, whether appropriate or not, may not proceed and, indeed, should not proceed if there are adverse consequences to the natural heritage of Tasmania.

There are also other factors like the age profile of Tasmanians, their health profile and their lack of educational attainment, which I have referred to previously, which is reflected in significant social disadvantage and which in turn means there are additional demands upon services.

Photo of Rob MitchellRob Mitchell (McEwen, Australian Labor Party) Share this | | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.