Tuesday, 23 October 2018
Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018; Second Reading
As I said before the interruption, there are also factors, such as the age profile of Tasmanians, their health profile and their lack of educational attainment, which is reflected in significant social disadvantage, which in turn mean that there are additional demands upon services, particularly health services, in our public hospitals, which impose additional financial burdens upon the state budget. On a number of occasions, I've risen in this place to offer my contribution about what can be done to improve the economic performance of Tasmania, improving health outcomes and education outcomes with long-term investment in education, health literacy and sustainable economic growth. But the fact remains that there are vital services—particularly our presently ailing, stressed health system—which are sustained to a large part by Tasmania's share of GST revenue.
There's recently been public discussion about whether the present Tasmanian Liberal government has been devoting a sufficient share of GST revenue towards health funding. I agree with the general proposition that health is being underfunded from Tasmania's GST revenue. Nevertheless, future state governments need flexibility as to how GST revenue is expended, given that it is untied revenue and can be spent in the best interests of a state. It's up to the present state Liberal government—indeed, any future government of any persuasion—to justify how it spends GST revenue, particularly if economic analysis suggests that there may be an underspend with respect to a vital service such as health.
Given the size of the Tasmanian budget and the disproportionate role that GST revenue plays in the provision of services in Tasmania, the provision of a legislated guarantee such as is incorporated in this bill is vitally important. Having regard to the statistics—indeed, the furious agreement by all state premiers and treasurers that a legislated guarantee was necessary—what was this government's response, at least initially? For weeks, the government, led by this Prime Minister as Treasurer, denied that such a guarantee was necessary. Even as the premiers and treasurers called for a guarantee that no state was left worse off under the changes to the GST, including Premier Will Hodgman and his Treasurer, Peter Gutwein, the Prime Minister ignored those calls. Indeed, he waited until the last possible moment to give a guarantee that no state or territory would be worse off under changes to the GST. If the Prime Minister really cared about Tasmania and the share of GST that funds Tasmanian hospitals and schools, he would have committed to a guarantee immediately.
Labor recognised that a legislated guarantee was necessary, and I'm very pleased that the government finally realised that a legislated guarantee was appropriate. I would like, nevertheless, to place on record my concern and the concern of my Tasmanian Labor colleagues as to what might happen at the end of the period under which the guarantee is legislated. Given the reliance that the Tasmanian state budget places upon Commonwealth payments as a proportion of total income and, indeed, the fact that services like health and education take the lion's share of budget expenditure, there will need to be very careful consideration of the long-term sustainability of Commonwealth payments to the Tasmanian budget. There is to be a Productivity Commission review at that time to consider the effectiveness of the transitional arrangements.
I would not want—nor would any Tasmanian want—to be accused of being a beggar or a mendicant for seeking what is necessary to place the funding of essential services on an equally reasonable footing with other jurisdictions under any system which is to replace the current system of horizontal fiscal equalisation. Tasmanians—and, for that matter, the residents of any other state—need to understand that, at the end of the transition period, there may be a requirement for further adjustment and further support and/or grants through other means to support essential services within a state jurisdiction. Likewise, it would not be reasonable to have the Productivity Commission insist that, for example, any particular jurisdiction would be required to sell state owned assets as a condition of enjoying further Commonwealth support. I sincerely hope that, at the end of the transitional period, there will be a federal Labor government that will be in a position to act upon these concerns and, in particular, the concerns expressed by the shadow Treasurer for the future finances of Tasmania.
The present Prime Minister is no friend to Tasmania. My good friend the member for Franklin has written an opinion piece on this very issue. It's useful to recount what she's said as to the Prime Minister's record in his dealings with Tasmania, particularly in the recent past. I must refer to the recent past because the simple fact is that, as Treasurer in this term, he spent more time in Germany than in Tasmania. He does not understand the limitations imposed upon the Tasmanian budget, which are, in the main, unrelated to decisions which might be made by either a state Liberal or a state Labor government. When he finally visited as Prime Minister this month, he came with no new ideas and no new plans for our state. Indeed, his visit to our state just highlighted how Tasmania had been forgotten by him and successive Liberal governments since 2013. In Queenstown, for example, he re-announced the government's NBN solution for the west coast of our state with great fanfare but overlooked some important facts. Only after a community campaign and Labor's promise to deliver fibre-to-the-premises NBN did his government finally commit to second-rate fibre to the node. When he visited Lake Plimsoll to highlight the Battery of the Nation projects, he offered no firm commitment to fund the pumped hydro projects and he forgot to mention that he has no energy policy whatsoever.
Under the Liberals' watch, we've also seen a significant decrease in the number of public sector jobs—jobs that would help support the Tasmanian budget. Since 2013, the Abbott-Turnbull-Morrison government has slashed almost 500 Australian Public Service jobs from Tasmania. I again express my thanks to the shadow Treasurer, the member for McMahon, for his advocacy on behalf of Tasmania and in ensuring that all states receive some measure of protection with respect to their fair share of GST in this legislation.
I rise to support the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. Australia is a great Federation and we have much to be proud of. But, as we all know, Federation is not without its challenges. The issue of rail gauges is a great example of that. One of the biggest challenges in recent times has been the fair and equitable distribution of GST revenue. This bill reforms GST payments to the states and territories by providing a fairer and more sustainable way of distributing GST that leaves all states and territories better off.
The GST distribution system is based on the fair-go principle of horizontal fiscal equalisation. It's designed to give every Australian a fair go and a fair share, whether they're in the cities or whether they're in country Australia. This bill aims at ensuring that that fair go continues. The states rely very heavily on GST revenue. In terms of a percentage of total revenue, in New South Wales, it accounts for a 23 per cent share. In Victoria, it's 25 per cent. In Queensland, it's 26 per cent. In Western Australia, it's 11 per cent. In South Australia, it's 36 per cent. In Tasmania, it's 40 per cent. In the ACT, it's 23 per cent. In the Northern Territory, it's 50 per cent. So the issue as to how the GST pie is divided is of vital importance.
Since the GST was introduced by then Prime Minister John Howard and then Treasurer Peter Costello in 2000-01, the revenue pool has more than doubled. The funding pool was $24.2 billion then and has now grown to $67.3 billion in 2018-19. This is expected to grow another 65 per cent over the next decade. As I've said, however, the distribution system needs to be fair, and, in recent times, it hasn't been working for everyone. In 2015-16, three years after the mining boom, Western Australia received less than 30c in the dollar per person of GST, while other states and territories with far smaller populations, such as the Northern Territory, received more. Not only was this unfair but it was also unsustainable. It called into question the integrity of the whole GST system.
Additionally, the way that the GST is distributed in Australia has not been updated since it was introduced, despite the economic shocks over the past decade. So in 2017 the government tasked the Productivity Commission to undertake an inquiry into the GST system, and the report released on 5 July 2018 found that, although the current distribution system functions well and does achieve high levels of fiscal equity, it can deliver perverse outcomes when there is a significant shock to the economy, including mining booms. The people of Western Australia know all too well about the perverse outcomes that it delivers, because it hasn't been fair for them, it hasn't been equitable and it hasn't given all Australians a fair share of this vitally important revenue.
The government's response, therefore, proposed reforms to the way the GST is distributed. That will not only ensure that all states are better off but also protect the integrity of the system. Under the revised system, GST will continue to be distributed using the principle of horizontal fiscal equalisation, and the plan will create a new equalisation benchmark—the stronger of New South Wales or Victoria, whichever is higher—with all states to transition to this new equalisation standard over six years from 2021-22 to 2026-27. It will introduce a permanent in-system relativity floor of 0.7 from 2022-23, increasing to 0.75 from 2024-25. It will permanently boost the GST pool of funds available for distribution to the states and territories by providing direct cash injections of $600 million in 2021-22 and $250 million in 2024-25, indexed each year to grow in line with the GST. These top-ups are in addition to GST collections. That's the equivalent to more than $1 billion annually from 2026-27.
This new system will provide short-term top-ups to Western Australia and the Northern Territory to keep their relativities at or above 0.7 and 4.66 respectively from 2019-20 to 2021-22. During the transition period between 2021-22 and 2026-27, states and territories will get the better of the old or new system over the period, with the Productivity Commission to conduct an inquiry at the end of this transition period. This will determine whether the updated system is working efficiently and operating as intended. So, in terms of the protection of the states' interests, I think they're well and truly covered by those provisions, and all states will be better off with the Australian government providing an additional $9 billion from 2019-20 to 2028-29. Now, compared to what would have occurred without these reforms, the GST pool from 2026-27 will grow by more than $1 billion each and every year. The result is that the pie is getting bigger and every state and territory is getting a bigger slice of that pie. Most importantly, the additional funding from the Commonwealth will not come at the expense of existing payments. This delivers certainty to states and it delivers fairness to all Australians, and that's why it should be supported.
Indeed, it is being supported by most of the states and territories. In New South Wales, with a population of 7.7 million people, the New South Wales Treasurer, Dominic Perrottet, said:
This is a great day for the people of NSW …
He added that the reform:
… provides certainty allowing us to plan for the future, to build the hospitals, schools, roads and rail lines to make NSW a better place to live, work and raise a family.
Going to South Australia, they have a population of 1.7 million people. The South Australian Treasurer, Rob Lucas, welcomed the reforms, saying:
This is a win for South Australia, and indeed the other states and territories, and will ensure we have funding certainty in the years to come.
In Tasmania, the Tasmanian Treasurer had this to say:
The Tasmanian Government welcomes the Commonwealth Government's announcement that there will be a legislated 'no worse off' guarantee …
… … …
The new distribution model put forward by the Commonwealth … would leave Tasmania $112 million better off through to 2026-27.
That's the story across the country, in terms of who will be better off over that period, through to 2026-27. You can take any state or territory in the nation and they will be better off through that period: New South Wales, $351 million; Victoria, $425 million; Queensland, $518 million; Western Australia, $3.3 billion; South Australia, $257 million; Tasmania, $112 million; the ACT, $46 million; and the Northern Territory, $189 million. All states benefit and all states are better off.
Western Australia has 2.4 million people. The Western Australian Treasurer has also welcomed the reforms, declaring that:
This is great news for WA.
He added that, through the addition of the transition period reforms:
… there are no excuses for any member of Federal Parliament not to support the legislation.
I would encourage all other states to get behind this key reform. If there is a thought about playing politics with it, they should refrain from doing that in the national interest. They all need to be supporting it because, at the end of the day, we are a Commonwealth. That means something. We are a federation, and we have to build our country for all Australians.
This legislation is a good outcome and a fair outcome for all of the states and territories, and it's a good outcome for the nation because it ensures that every Australian in every state and territory is better off no matter what their postcode is. It's delivering a fairer and more sustainable GST distribution system. It's all part of the Australian government's plan for a stronger economy, helping to deliver the essential services that Australians rely on.
I commend the Treasurer for his work. I commend the Prime Minister for his work on this when he was the Treasurer. This has been something that has troubled this nation for a long time. I believe that, with this reform, it has finally being put to rest. I know that the Treasurer is particularly proud of the way that he has been able to work with most of his state and territory colleagues to get a great outcome for Australia. They call the member for Kooyong 'the new colt from Kooyong'. I think if he continues with game-changing legislation like this, they'll be calling him 'Winx' before too long. I commend the Treasurer for his work on this, and I commend this bill to the House.
I'm very pleased to rise today to speak on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, which has quite a natty title for a very important situation. This bill has been a long time coming, there is no doubt about it. Western Australians, myself included, have long been calling for a change to the GST distribution system. While Western Australians wholeheartedly welcome this legislation, we haven't forgotten how we ended up here and who has been standing in their corner in the years leading up to this change.
If we revisit the recent history of GST distribution and the events leading to Western Australia's dire financial situation at the end of the mining and construction boom, we see that the Labor Party has always been on the side of Western Australians, while successive Liberal governments have clearly left them in the lurch. It should be noted I think that the GST has not always been a point of contention in WA. It became an issue for two main reasons. The first was that WA began facing the lowest GST relativities in the GST's 20-year history at a time when our economic fortunes were reversing due to the three-year assessment period in the GST, the two-year lag in the system and the incredible and somewhat regrettable, but inevitable, volatility of Western Australia's main sources of revenue—minerals and resources royalties. This legislation will go a significant way towards addressing this issue. Labor supports the legislation, but only because of the recent backflips of this government.
Secondly, and more notably, GST distribution became a very serious problem for my state when the people of Western Australia were subjected to the irresponsible economic policies and actions of the Barnett Liberal state government in WA. Make no mistake, it is the Liberal Party in WA that has a track record of uncontrolled spending and budget mismanagement. According to the International Monetary Fund, the Howard-Costello government was the most profligate federal government in Australia in the last 50 years. As the mining boom was gathering pace they cut taxes so far and so fast they forced the Reserve Bank of Australia to rapidly increase interest rates. Then, walking in the footsteps of their predecessors, were the Barnett Liberal-National government in WA with treasurers Troy Buswell and Christian Porter, who managed to completely waste the biggest construction and mining boom in Australia's history. Under the Barnett Liberal-National government, WA finances crumbled, and there is absolutely no doubt that for his actions one former Western Australian Treasurer in particular, the current Attorney-General and current member for Pearce, Mr Porter, has to shoulder a great deal of the blame for the fiscal mess Western Australia found itself in. Over the first term of the Barnett-Porter government expenses grew 33.2 per cent, with no care for how the expected and utterly predictable changes in GST distribution would impact the budget bottom line in WA.
During the height of the mining construction boom WA was receiving very high GST payments. At the same time, we were in the great position of being able to reap billions of dollars in mining royalties. This was because of the lag in the GST system. The Productivity Commission found that during this period WA raked in $7 billion more in GST payments than it would have if GST calculations had been made on a same-year basis. Even though the state government was warned by the WA Treasury that its fortunes would quickly reverse and WA's GST relativities would inevitably fall, Premier Barnett and Treasurer Porter decided to behave like that friend who's a little bit bad with his cash, and instead of acting like a Premier and a Treasurer they kept spending, plunging the state into fiscal disrepair. The former Treasurer of Western Australia and now Attorney-General of this country is not an idiot, that is for sure and for certain. He and former Premier Barnett knew how the GST system worked. They should have and could have planned for it. The Attorney-General is not an idiot, but he is irresponsible. This situation was utterly predictable, because we all knew how the GST system worked. I wouldn't say it is a great system, and I'm glad we're fixing it. The lag was there. Increasing mining royalties increased our GST take, which then inevitably brought our GST down to bring us into a relativity with the other states and to ensure the operation of horizontal fiscal equalisation.
Instead of using discipline and foresight to manage the budget, the now Attorney-General, then Treasurer of WA, was hedging bets on there being a change in GST legislation and policy. Those bets were used to bankroll some pretty crazy Liberal spending habits. In his 2011-12 budget speech, the WA Treasurer and now Attorney-General made this reckless prediction:
What we reasonably anticipate is that in 2013–14 the CGC will have brought in a new GST system. We expect it will produce a floor of about 75 per cent of our population share of the GST. Therefore we expect extra revenue of $1.8billion in 2013–14 and $2.5billion in 2014–15.
The government of WA banked this money, which was in no way confirmed or even hinted at, and they kept spending with the idea: 'We expect some money to arrive in future, which will be able to go to reducing existing debt.' As we all know—and now are living with—those changes to the GST distribution system did not happen and the fiscal decisions of the Attorney-General, then state Treasurer of Western Australia, Christian Porter, left the Western Australian state budget in utter disarray.
In 2007-08, Western Australia had an operating surplus of $2.6 billion and a total public sector net debt of just $3.6 billion. Nine years later, after two terms of a Liberal-National WA government, the state had an operating deficit of $3 billion and a total public sector net debt of $32.5 billion. While one of the Barnett Liberal-National government's favourite pastimes was to blame the GST for their fiscal problems, they were the ones to blame, fairly and squarely, for WA's enormous budget deficits. It's not just me who thinks this; this economic assessment of the Barnett Liberal-National government is supported by some fairly important people in Western Australia and around the country.
The Productivity Commission's report into horizontal fiscal equalisation explicitly states that, while Western Australia's GST experience has been unprecedented, it was 'exacerbated by earlier budget decisions of the WA government'—quite an understatement. The 2018 Special Inquiry into Government Programs and Projects in Western Australia, carried out by respected WA leader and businessman, John Langoulant, similarly stated that if the Barnet government had heeded the WA Treasury's warnings about unchecked spending and the expected and, as I said earlier, utterly predictable drops in WA's GST 'it is highly likely that the state's current budget and debt positions would have been mitigated, and in a material manner.' Always understated, John Langoulant, but he does get to the truth. Even renowned Australian economist Saul Eslake has come out and said:
WA's present fiscal woes are the result not of a flawed system of distributing revenue from the GST among the States and Territories, but rather of its inability to control its own spending.
After two terms of a Liberal state government failing to manage spending, net debt increased by an incredible 500 per cent and Western Australia had its credit rating down-graded—the first time it had been downgraded in WA in 15 years; and this after the biggest mining and construction boom this country has ever seen.
At the end of nearly a decade of the Barnett Liberal-National WA government, Western Australia, who had just gone through the largest mining boom in Australia's history, had the equal lowest Moody's rating of all the states and the second-lowest rating for Standard & Poor's. The reality is that Liberal governments around this country have a track record for unchecked, destructive spending habits. What this legislation really is is a chance for the Prime Minister Party to mop up the tens-of-billions-of-dollars hole one of the members of his current cabinet left in Western Australia.
The Labor Party in opposition watched this budget disaster unfold in Western Australia, and we have been backing changes to the GST to protect Western Australians from suffering further at the hands of the Liberal government's continuing economic mismanagement. The Labor Party, both state and federal, has been leading the charge on GST the whole way, and this legislation is in no small part due to our efforts to always speak on behalf of Western Australians. At the end of August, last year, the Leader of the Opposition, Bill Shorten, announced our Fair Share for WA Fund, committing $1.6 billion for Western Australia, bringing their share of the GST up to 70 per cent.
At the time, the government roundly criticised us for this top-up method. The Treasurer at the time, now the Prime Minister, said that 'top-ups forever is a mugs game', but he didn't offer any alternative solution to fix the GST imbalance. The then Treasurer—now maybe the last Prime Minister in a long line of Prime Ministers under the current government—didn't really care about helping Western Australians. But now he is supporting this top-off. I wonder what he is now thinking about those statements.
In July, after the government released its interim response to the Productivity Commission's inquiry into the GST, the Leader of the Opposition, Bill Shorten, demanded the government 'make the floor the law', which would give Western Australians much-needed certainty and stability in the GST distribution. That demand was ridiculed by this government and the current Prime Minister, then Treasurer, said that there was no need to legislate the GST deal. So, again, we see the Prime Minister, then Treasurer, not really caring about protecting Western Australians. But now Liberal seats in WA and his job are at risk. Member for Tangney, I am not sure of your margin but, after the results in Wentworth, you might need to get out door-knocking a bit more, because we know the member for Pearce has to.
It's pretty close. It's about jobs in Western Australia and the GST—jobs at risk. The Prime Minister now decides it's time to fix the GST with legislation. The Liberals have been ignoring the cries from my state for many years, including the cries of Western Australia Liberal colleagues, and in that I include in the member for Tangney. I know that when he was state secretary of the Liberal Party he had a good old crack, as did Premier Barnett, but we know that the five Liberal cabinet ministers from Western Australia in the government benches had been utterly unable to get the Abbott or Turnbull governments to do anything about fixing or introducing reforms to the GST distribution that would benefit our state, and, for that matter, benefit the other states.
But when five Liberal seats are on the line in Western Australia the Prime Minister comes running. When the Prime Minister gets scared he'll lose his job, and that his colleagues might too, he starts to at least pretend to care for Western Australia. Even then, when the Prime Minister didn't it right, he tried to push this legislation through without including a guarantee that no state or territory would be worse off as a result of the new model. Labor wouldn't let this fly, and quite rightly. All state and territory Treasurers, including the state Treasurer of Western Australia, Ben Wyatt, called for a guarantee of funding.
The government tried to make it look like Labor was not on Western Australia's side, but we have always been ready to legislate GST changes and we have been ready for over a year. We just weren't willing to accept lazily drafted legislation that wasn't in the interests of all Australians. Now, we are finally here and I'm relieved reform in this sector is finally happening. This bill will go a long way to removing the politics of GST distribution, so the state and territory governments can get on with governing and be assured of a reliable GST source for at least some time into the future. The legislation ensures there is a review of this new system. I think that's very wise. It will be a good thing to revisit at the appropriate time, as set out in the legislation.
Horizontal fiscal equalisation has been important for our Federation for a long time. It ensures that if your family moves from a place in my electorate, say, Baldivis in Western Australia, to Cairns in Queensland, you know your children will have access to similar standards of education. At different times people will go on holiday—for instance, this week my mother, who lives in Rockingham, is with my sister from Queensland and they're in Tasmania right now. I know that because of horizontal fiscal equalisation they will be able to access the same level of care as they do in their respective homes. Should an accident befall them or if my mum gets a bit crook, she'll receive the same level of health care she would get at home in Rockingham. I think that's a very important part of what horizontal fiscal equalisation seeks to do for our country as a whole. I'd like to thank the member for McMahon, the shadow Treasurer of the Labor Party, and also the Leader of the Opposition, who consulted widely in bringing about this reform. They consulted with Western Australian colleagues, and I thank them also for their very hard work on this over many years, including the former member for Brand. I used to work for Gary Gray on this very issue.
Thank you. He is. The Leader of the Opposition and the shadow Treasurer have consulted with all states—with state Labor. Sensible, responsible commitments have been made that have thankfully brought the Liberal government to this place. Facts cannot be avoided. They will not be forgotten. We will all remember that Labor supported WA and started this movement, and we will end this movement together with the government in supporting this legislation. I really hope this legislation brings an end to a sentiment that has been getting a bit of ground in Western Australia, which I think is very unfortunate—a sentiment that is not totally supportive of our Federation. So, I really do hope that the states and territories get their fair share of GST and that the distribution is set to be more steady. Even though it was always predictable, I hope it is even more predictable, so that Western Australians can once again be more enthusiastic about our Federation. With that, I support the bill.
I rise to speak on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. This legislation delivers once and for all a permanent fix to WA's unfair share of the GST. It is not a bandaid. It is not a political quick fix. It is a sustainable change to the GST distribution system that delivers the GST share that WA deserves. This is a story of action and a story of inaction: a story of action by Liberals representing Western Australia, and a story of inaction from Labor Party members and senators who represent Western Australia.
WA Liberal members and senators have long advocated for this GST reform. We remember when the Prime Minister announced the Productivity Commission inquiry into the GST. He said it had only happened through the strong advocacy of every single WA Liberal member and senator. I thank particularly my colleague Senator Dean Smith, who has long championed the Productivity Commission approach. In fact, it's the hard work of all WA Liberal MPs and senators, and indeed all Western Australians, that has kept this government and previous governments focused on delivering this real solution.
This legislation will secure $4.7 billion in extra GST for the essential services we need. It will lock in a 75c GST floor so WA gets more of the GST that it pays. The government will rewrite the old GST formula and we will also invest more funding in the system so that WA and every single state and territory are better off. The government's GST plan is fair, reasonable and sustainable. There's a fair go principle to the way the GST is shared around the country, and I think every Australian accepts that. Strong states support the less strong states. We make sure that every Australian, no matter where they live—east or west, country or city—has access to the essential services, the things we all rely on, like frontline nurses, police officers and teachers.
The fair go principle that's used to distribute the GST between the states and territories must also recognise those states that have a go. WA is an amazingly entrepreneurial state. Our state has grabbed hold of the mining resources. We have developed those resources. We have created thousands of jobs for WA families and the many thousands of people who chose to move to WA to make a better life for themselves and their families. WA drove the national economy and contributed an extraordinary amount of revenue to the development of our state and our nation. But, off the back of the mining boom, every Western Australian knows so well that the GST formula didn't keep up with the realities of the economic situation. WA got down to below 30c in the dollar. When introducing this bill, the Treasurer made the following point:
The situation was so ridiculous that Tasmania and the Northern Territory both received more GST revenue than Western Australia, despite having populations that were one-fifth and one-tenth, respectively, of the size of Western Australia's population.
The current system of GST distribution was effective when the Australian economy and the state and territory economies were relatively stable, but the mining boom was a shock to both the WA and Australian economies. It has exposed weaknesses in the system over the last decade—weaknesses that could not have been foreseen when the GST was introduced. So it was time to make improvements to the system.
I congratulate the then Premier of Western Australia, Colin Barnett, who championed GST redistribution and raised WA's abysmal share of GST as the No. 1 issue when he represented WA interstate. Colin Barnett well and truly brought the fight to Canberra, and he's to be credited with the fact that national political attention has been so well focused on this issue. I will defend Colin Barnett—unlike those opposite, who seek to denigrate his time in office. Under Colin Barnett's leadership of the state of Western Australia, 450,000 people came to Western Australia to make WA their home. The families of those 450,000 people had teachers in their schools. The essential services we rely on kept pace with that population growth. Labor accuse Colin Barnett of reckless spending, but they never say which projects Colin Barnett invested in that they would do without. They certainly don't do it when they're celebrating the corporate hospitality they enjoy at Perth stadium.
The national headlines saw Colin Barnett arguing WA's case. Mr Barnett focused the Rudd and Gillard governments day in, day out on a better share of the GST for Western Australia. But federal Labor just weren't interested in helping the west. They were interested in milking WA. That's exactly what they did. Mr Barnett argued that WA should receive no less than 75c of each dollar we collected in the GST, and we have to remember this very strong advocacy for WA, especially when we look at where we are today, after a very long journey. This floor is now included in this legislation to lock into law WA's fair share of GST.
Despite Rudd and Gillard Labor hanging WA out to dry, the first action of this Liberal government when we were elected in 2013 was to put a stop to the drop in WA's GST share. This government, our government, has invested an extra $1.4 billion in additional essential infrastructure and hospitals funding for WA to top up our GST share, the first government to do so. This government took action after years of inaction from the Rudd and Gillard governments. The top-up funding was an invaluable investment in our state. But top-up funding for individual states is never going to be a long-term solution for the GST. I've likened this to a patient who presents at the emergency ward of a hospital. That top-up funding was that patient in emergency getting much-needed pain relief. They welcomed it. It was important. It kept them going. But WA is not a state that wants to rely on welfare or pain relief. We wanted a real structural fix to the distribution of the GST that was fair and reasonable. Those cash injections and top-ups were welcome, but they weren't the solution that we so desired, because we know that the GST formula needed to change. Not once did the Labor Party advocate changing the GST formula. They wanted to keep WA on welfare in just the same way they'd like to keep so many Australians on welfare as well.
So the Prime Minister tasked the Productivity Commission with reporting on the impact of the GST distribution on national productivity and economic growth. I remember that meeting well. Treasurer Scott Morrison, now Prime Minister, explained to me and my colleagues that as the Treasurer for this Federation, the Commonwealth of Australia, he needed to act in the best interests of the Commonwealth and of our nation as a whole, not in the best interests of one state over another. That's why he set in place this process for the Productivity Commission to gather the evidence that was so required to prove that the GST distribution was bad not only for Western Australia but for our entire nation. As we predicted, the PC inquiry confirmed that the system for distributing the GST was broken and needed to be fixed. The Productivity Commission review gave us the pathway to reform and the evidence we needed to make critical long-term GST reform that sticks.
States that have a go will get a go with the new GST formula. Entrepreneurial states that seize and develop their opportunities, as WA does so well, will no longer be penalised. Reforms outlined in this legislation will deliver an additional $9 billion in extra untied funding to all states and territories over a 10-year period, and an additional $1 billion in perpetuity, once fully implemented, will be CPI linked. Payments will be verified annually by the Commonwealth Grants Commission and adjustments made accordingly. The government's additional contribution to the GST pool will not be offset or see a decrease in other grant funding to the states. This is more funding to invest in schools, hospitals, roads and transport.
To assist the transition to the new GST distribution system, the Commonwealth will provide short-term funding to ensure no state receives less than 70c per person per dollar of GST. This rises to 75c from 2024-25. Benchmarking all states and territories to the broad-based economies of our two largest states, New South Wales and Victoria—whichever is higher—will remove the extreme circumstances like the mining boom from Australia's GST distribution system.
The productivity inquiry gave the government the evidence it needed to make critical GST reform. The Chamber of Commerce and Industry of Western Australia and in particular its chief economist, Rick Newnham, also played an important role in ensuring that other states and territories best understood the impact that this failed GST formula had in relation to WA and in relation to the national economy.
This legislation provides the certainty that is needed for the new GST distribution system in the long term. We are committed to transitioning to a new GST system and a new GST formula in a way that's fairer and sustainable and that benefits all Australians. With this legislation, Australia will have a GST distribution that protects against economic shocks and provides a more stable source of revenue for all states and territories. Every Liberal member across the country is backing hardworking Australians and backing this government to fix the GST.
This commitment to backing hardworking Australians isn't always shared by members opposite, because Labor say a lot and do nothing. The Rudd and Gillard governments did absolutely nothing to fix the GST. After holding out for so long, the current Leader of the Opposition has been dragged reluctantly to support the GST reform. There has been much confusion about where Labor actually stand on fixing the GST, including fixing the GST formula in the long term. For so long, Labor clung to a policy to fix the GST formula that in fact didn't change the GST formula in any way.
The member for Burt said that Labor would just have to consider top-ups, recognising the political reality that actually changing the GST is almost impossible. So said the member for Burt. The member for Burt also said that, if the government did adopt a change to the formula, it might happen in the land where pigs might fly. Well, the pigs are flying, Member for Burt. You gave up; we delivered. We got on. We are reforming the GST. You weren't. You were going to keep WA on welfare, and that was wrong. So, Mr Deputy Speaker, I hope the member for Burt is looking very closely at this government's real fix to the GST that locks in a floor, changes the GST formula and guarantees additional funding for every state and territory. Through the confusion, Labor gave up. For Labor, it all got too hard. But this Liberal-National government and this Prime Minister are not scared of the hard decisions. We've stayed the course, and we've delivered the real GST reform that we need, in this legislation.
Australia is seeing strong economic growth, record job creation and a federal budget that is on track for a return to surplus. That's not good luck. Good management and fair economic policies put in place by this government have contributed to the work of so many hardworking Australians and the jobs created by small businesses in this country. The Prime Minister's leadership and determination on fixing the GST; tax relief to encourage hardworking, aspirational Australians; backing small business to create more jobs; and getting electricity prices down are delivering for all Australians.
This government's GST plan is real. It's long term. It's a permanent fix to the GST solution, which the WA people deserve. It is a plan that has been delivered by the Liberal and National parties, not a plan that has been delivered in one way by those members from the Labor Party opposite, particularly those members from Western Australia from the Australian Labor Party, who have made no practical contribution at all to this real fix. As I said, the member for Burt thought it was all too hard. He explained this legislation as occurring only on the day that pigs might fly. Well, Member for Burt, the pigs are flying. The government's plan to fix the GST is real: a long-term, permanent solution that WA deserves and the plan that will benefit every state and every territory.
I support the intent of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 to make sure that every state and territory gets its fair share of GST. But I'd just like to correct the former speaker, who was having a crack at the members of the ALP representing electorates in Western Australia. I know for a fact that they lobbied for a long time and hard to get the result we're at today. The fact of the matter is that those opposite had to be dragged to the table to agree that no jurisdiction should be worse off. They didn't want to do that. So that was a bit disingenuous, but there you go. So I do support the intent of the bill but, like everything this shambles of a government does, it does it for the wrong reasons or even, as we've seen, as a result of an administrative error—like deposing a sitting Prime Minister.
Mr Robert interjecting—
Don't leave now, I'm talking about when you deposed a sitting Prime Minister. Stay! Hang around. It's going to get better.
Really mate? Check his download costs! But I digress a bit, Mr Deputy Speaker; you're very right. But the reasons were never explained about the Prime Minister being moved off or why they voted for a white supremacist slogan by mistake. There's been a bit of policy on a run. Let's hope that this bill is not the result of an administrative error. Let us hope that the coalition members are now paying more attention to which side of the chamber they are sitting on when they vote and more attention to what they're actually voting for.
We have, as I said a little while ago, advocated for a long time for a legislated guarantee that no state or territory be worse off under changes to the GST distribution. That's important. So now the government and the Treasurer have reluctantly, it's fair to say, agreed with our position that this simple proposition, this guarantee, should be legislated, that the guarantee should be included in law. Initially, the Treasurer said that this was not necessary. But now, reluctantly, and only under Labor pressure, I'm glad that he caved in—or, perhaps to put it a little bit more charitably, he's finally seen sense and has included this guarantee in this proposed legislation before us today.
I do support the amendment guaranteeing that no jurisdiction will be worse off. Obviously I very much welcome the guarantee that the Northern Territory won't be worse off. But I'm sad to say that this is an example of a government that's focused on itself and in policy disarray. It's a government that, it is probably fair to say, has almost ceased governing, reacts to pressure and gets the big calls wrong. It's been a bipartisan view for many years, in relation to the distribution of Commonwealth revenue, that all Australians have access to vital government services wherever they live in our great nation. That simple proposition—delivering it in a fair and equitable manner—is not so simple. The cost of delivery of government services varies widely across the country. I am the representative of a remote area of Australia—the northern capital but still remote from the large capitals of the eastern seaboard. In the Top End of the Northern Territory, where I'm from, we're very much aware it costs a great deal to deliver services—health, education, transport, roads, policing—and it is more expensive to deliver those services in those regional areas and remote areas than it is in the densely populated areas of south-eastern Australia. So it is not just a question of dividing up the revenue total according to population. Other more complex issues have to be considered—such as distance, climatic factors and historical disadvantage.
As the Treasurer said in his second reading speech, the way the GST is distributed has not been updated since it was introduced in 2000. But the GST now makes up more than half of Commonwealth payments to the states and territories. I do acknowledge that Western Australia has legitimate concerns around the current model for GST distribution. Their share fell to 30c in the GST dollar for GST raised in WA.
Again, as the Treasurer said in his second reading speech, the current system of horizontal fiscal equalisation was not designed to deal with significant economic shocks. The mining boom that we saw in WA was such an economic shock. The Productivity Commission found that the current GST system can deliver perverse outcomes when there is a significant shock to the economy, such as that boom, so this bill changes the method of equalisation from the strongest state, which is currently Western Australia, to the next-strongest state, whether it be New South Wales or Victoria.
The GST is distributed to the states and territories according to what is called horizontal fiscal equalisation—a term only an economist could devise. In the Territory we know the term 'horizontal fiscal equalisation' well because it has been the backbone that has enabled the Northern Territory to deliver services to Territorians. The system seeks to equalise the capacities of all states and territories by bringing them up to a standard set by the Grants Commission—and that is the fiscal capacity of the fiscally strongest state; and, as I said, Western Australia is presently nominated. This is to ensure each state and territory—whether it be where my good friend is from in Tasmania, in remote areas of WA or in any other state—has the same capacity to deliver services and infrastructure.
At the beginning of the GST period in the 2000s the strongest state was Victoria, and then New South Wales. WA, as we have spoken about, became the fiscally strongest state in about 2009 because of the boom. Members will have noticed, however, that mining in WA has largely transitioned from the construction and investment phase of the mining cycle to the production phase. Of course, we hope that there will be more construction and more investment in the future. In fact, I was just in the Pilbara chairing a parliamentary hearing on how the mining industry can better support local economies. I saw off the coast of Port Hedland about 15 iron ore carriers coming to take the iron ore to the huge markets in Asia. I hope for the best for WA because what's good for the WA economy is good for our national economy.
There needed to be a change to take into account the fact that there are peaks and troughs. This change to equalise to the second-strongest state, whether it be New South Wales or Victoria, will have the effect of removing from that GST process some of the effects of the extreme economic changes, like the boom. Victoria and New South Wales are two states that are have more broad-based, diversified and stable economies. They will provide a better benchmark.
How do these changes affect us in the Northern Territory, particularly those who I represent who live in Darwin and Palmerston? This legislation guarantees that we will be no worse off under the new scheme for GST distribution. Thank goodness we did it too. We on this side fought for this legislative guarantee. As I've already commented, the Treasurer wasn't keen to do it.
Significantly, this bill does not include additional top-up funding for Western Australia or for us in the Northern Territory, which was also announced in the government's response to the Productivity Commission's report. This funding is $1.7 billion for Western Australia and $69 million for the NT. These payments will be handled separately. In the case of the Territory I'll be watching closely to make sure that it happens. The NT government has calculated that we might have lost $500 million in GST revenue up until now. This legislation protects us from future cuts but does nothing to restore or even recognise this lost $500 million. That is $500 million less for police, teachers and nurses—and, trust me, in the Territory we need all three and more. So I will continue to stand with the Territory government—with the Chief Minister, Michael Gunner, and the Treasurer, Nicole Manison—and fight for every GST dollar. Territorians deserve no less. They deserve the same level of services as other Australians.
This current government, the Abbott-Turnbull-Morrison government, does not appear to believe that Territorians do deserve the same level of services as other Australians. We all know—or those opposite should know—that Territorians are doing it tough. We've had our own transition from construction to production. In fact, it was just this morning that the first shipment of LNG left Darwin Port bound for Japan. That is a great thing. We have officially transitioned today from the construction phase into the production and operational phrase. But the huge reduction in jobs at the project is obviously having a knock-on effect for our businesses, retail and service industries. The Territory Labor government is working hard to develop opportunities and new economic activities, particularly in tourism, agriculture and energy. Indeed, there are boundless opportunities in the Territory, but we need some investment and we need it now.
Frankly, the Morrison government is not helping. I will just give those present and those listening two quick examples. The first is the City Deal for Darwin. We need it now, not when it suits the Prime Minister and the Territory's Country Liberal Party in the lead-up to an election, whenever that may be. We need it now. It's been 550-odd days since the former Prime Minister, Malcolm Turnbull, and the new envoy for the Morrison government promised a city deal for the Northern Territory. That infrastructure funding is important to the Territory. it means jobs and opportunities for local businesses. It means families coming to the Territory to live and work. It was promised 550 days ago—but, still, nothing.
We know from leaks from the government that it's going to be $100 million, and we're happy with that. That's what we asked for. Michael Gunner's NT government put in $100 million and we said to the government, '$100 million.' We know from leaks that we're going to get the $100 million, but it's just going to be when it suits the Prime Minister to visit. But there can be no excuses when he visits next. It may be during a visit of Japanese Prime Minister Abe to Darwin next month. That city deal must be signed—no excuses. It must be signed, because Territorians, as I said, by then will probably have been waiting 570 days. Townsville, and I'm happy for them, waited 30 days for their city deal to be signed. For Launceston it was zero. I'm happy for the Tasmanians. I'm happy for the northern Queenslanders. They're our northern brethren. But it will be 570 days, if he signs it. He might just announce that he is going to sign it close to the election, and wouldn't that be a shame?
The other thing we've been let down by is cuts to our Public Service. Would you believe that 40 per cent of Public Service jobs have been cut during the Abbott-Turnbull-Morrison government—40 per cent! For those opposite, that's a lot. It's really affecting our economy. I'm happy that the GST is going to be legislated so that we are not left behind.
It is with great pleasure that I rise to support the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. It's a rather long title, but it's very important. Deputy Speaker, before I start I want to take you back to 27 February 2018. I've got a news story here from The West Australian, written by Sarah Martin. In it she talks about the member for Burt, who said that fixing the GST system is 'almost politically impossible'. The article states:
… he did not believe the Federal Government would implement any changes to the GST formula, despite the Productivity Commission reviewing the issue.
… … …
“Whatever the Productivity Commission does they (the Government) will not implement those changes,” …
He said that trying to get any changes through is 'almost politically impossible'. The article finally states:
… if the Government did adopt a change to the formula—which might happen “in the land of pigs might fly”—then the Opposition would look at it.
Well, the good news is that pigs are flying, they are definitely flying, and the GST fix is in, and that's what we're talking about right now. I don't want to be too harsh on the member for Burt; he does have a colourful turn of phrase. I did enjoy reading through this.
Ms Butler interjecting—
That's right, exactly: pigs are flying.
This has been a long time waiting for Western Australians. It's been a consistent sore point for this great state, my great state. Last year, I did about 30 town hall forums across Canning and this was the issue that consistently came up—GST: it needed to be fixed. We surveyed over 40,000 Canning constituents last year, and GST was raised most consistently. We started a hard copy petition and we gained over 2,000 signatures to that petition to get our fair share. I realised it was a real issue when I went to Quambie Park in Waroona, which is an aged-care facility, which this government actually gave $1.3 million to under the Building Better Regions Fund. At Quambie Park, I was speaking to the residents, and an elderly woman in her 90s stood up and said, 'When are you going to fix the GST?' I think that really drove home the point that people in WA had had enough of the unfairness at the heart of this system.
This government believes in a fair go for those who want to have a go. As Liberals, we believe in reward for effort as the proven means of providing prosperity for all Australians. At the heart of Australian culture is this idea of a fair go. WA does a lot of heavy lifting economically for this country; it is productive and enterprising. I know in Canning, especially, we have a lot of workers from the resources sector. They kept Australia going, particularly during the GFC and the years that followed, during the boom. It's really important that we get our fair share, and that's what this bill seeks to do.
The old model of horizontal fiscal equalisation was based on the principle of a fair go, with each state and territory equalised to the strongest. But it became clear that it couldn't adapt to sudden changes in economic conditions. Of course, we had the boom in WA, and when the boom slowed down, WA hurt and hurt pretty bad. We went down to having a GST share as low as 30c in every dollar. And that is unfair. This coalition government, this Liberal-National government, asked the Productivity Commission to have an inquiry into the HFE. On 15 May this year, the inquiry report to government showed broad support for HFE, but it was very clear the model couldn't adapt to local economic shocks, as we saw in WA. So what did this government do? The government responded to the inquiry report on 5 July this year and proposed reforms to the way the GST is distributed that will leave all states better off while protecting the integrity of the system.
What the government has proposed is a three-step transition plan that ensures that no state will be worse off under the new system. The government will provide short-term transition payments to ensure no state or territory share will fall below 70c per person, per dollar. It will put in a floor, which is very, very important. It will phase in a new HFE model based on reasonable equalisation, so each state and territory will be equalised to the stronger of either Victoria or New South Wales. Then we'll do a full transition to the new model and a permanent in-system of 75 per cent relativity floor. The government will also permanently boost moneys available in the GST revenue pool, which is another important part to ensure that no state or territory is worse off. So, on the 1st of this month, 1 October, the government further committed to no state being worse off during the 2021-22 and 2026-27 transition periods. Every state will receive funding that is at least the better of the current system or the updated system.
What does all this mean for WA? It's very clear we're actually reforming the system; we're no longer just doing top-ups. This government has done top-ups for some time. Labor were for legislating top-ups. We went with the Productivity Commission's suggestion of reforming the system, and that's what we're doing. So this isn't just some political fix. This will be enduring, which is really, really important. As I said, this will be a much fairer system so no state or territory will be worse off, and, importantly, we'll see an extra $4.7 billion directed to WA, starting in fiscal year 2019-20.
I really hope to see some of that funding committed in Canning. There are many projects that I'd like to see worked on. I'd like to see the Peel Health Campus developed, for example. It hasn't kept up with the pace of population growth, and we need funding to improve the services to a very senior population down in the Peel region. I want to see more roads and rail in Canning. We've got the Tonkin highway fully funded and we've got the Byford train station funded, but I'd like to see the Lakelands train station funded. I'm looking forward to seeing that $4.7 billion that's going to come to WA being put to good use—building up our public infrastructure, making Western Australians' lives just that little bit better and, of course, at the end of the day, making the system fairer, which is at the heart of this bill, and that's why I support it.
I've often stood up in this place just to remind the House that 'WA' does not stand for 'wait a while', so it's great to see that the government is finally listening. Four weeks ago, the mighty, mighty Eagles won the grand final—against some team from Victoria that nobody's ever heard of! Those around me know that I'm not a huge fan of football. In fact, I'm not a fan of any kind of 'sports ball'. I do find it difficult to coordinate blue and yellow into a stylish outfit! But I am a proud Western Australian, a very proud Western Australian. Just as the grand final cup was brought home to WA by the Eagles, the GST is now on its way home to WA. Every Western Australian member in this House and, possibly, also in the Senate is going to claim some kind of credit for this momentous occasion. Indeed, every one of the Western Australian members of the coalition will crow about how great they are and pat themselves on the back for this. But let's not forget just how we got to this point.
Labor support the introduction of the GST bill, and we support the introduction of the bill because it brings the government into line with what Labor have been advocating for some years now regarding the GST. The government has followed Labor's lead at every stage of this process. Bill Shorten first introduced a floor for WA—
Sorry, Mr Deputy Speaker. The Leader of the Opposition introduced a floor for Western Australia; the government followed our lead. Labor said that the GST floor should be legislated. The government first dismissed this and then adopted the exact same position. Labor committed to ensuring that no state was worse off. The government scoffed at that and then, again, adopted the exact same position.
The reality is that Labor has been leading on this issue of GST distribution for years. It was Labor that announced the Fair Share for WA Fund in August 2017, an announcement that made the Liberal Party take seriously the concerns in Western Australia about GST distribution, even though at the time they had a lot of criticisms about that solution. In fact, the then Treasurer, who is now Prime Minister, said, 'Top-ups forever is a mug's game.' It was Labor that committed to legislating for a 70c floor in July of this year, July 2018, and again this government ridiculed it. The former Prime Minister, Mr Turnbull, first raised the prospect of a GST floor two years ago, but we saw nothing. Western Australians saw nothing—after he came to WA and promised it. If the coalition had introduced a floor back then, when the previous Prime Minister said he would or committed to it, WA would have been $3.5 billion better off by now—$3.5 billion—and I know that all of those in Western Australia know exactly what a difference that would've made to our state.
Now the government has accepted a legislated floor and top-ups—showing, of course, that Labor had it right all along, despite their opposition to and criticism of the various measures that Labor has proposed over the years. When Labor and state and territory treasurers unanimously called for a guarantee within this legislation so that no state or territory would be worse off, this government said there didn't need to be one. And now, guess what? There's a guarantee within the legislation.
So this bill finally legislates the government response to the Productivity Commission's report into horizontal fiscal equalisation—that's a bit of a mouthful, I must say. It will change the model of equalisation, meaning that it will no longer be measured against the strongest state or territory but the stronger of either New South Wales or Victoria. A 70c floor—which Labor has been calling for, all this time—is proposed for all states and territories, for the year 2022-23 and 2023-24, followed by a floor of 75c for all states and territories for 2024-25 and beyond.
The bill also provides a mechanism for the Commonwealth to provide an additional top-up into the GST pool in perpetuity. On top of this, it contains a legislated guarantee that no state or territory will be worse off. This guarantee is cumulative, meaning that, if a state or territory's entitlement over the transition period from '21-22 to '26-27 is less than what they would have received, the guarantee will then activate. Labor supports this part of the bill, but we do have some concerns and reservations. The first of those is that the guarantee is for the transition period only. So the question is: what happens beyond then? What happens if a state or territory is worse off after the transition period? The answer to that is unclear. Would this result in a future Liberal government making cuts to schools and hospitals, as they've done before?
The bill requires also that there be a review by the Productivity Commission as to whether the changes are operating effectively, efficiently and as intended, and as to the fiscal implications for each state and territory as a result of this legislation. Labor has no issues with this review. But it is worth noting—and this is a very important point, I might say—that the last time the government initiated a Productivity Commission review into the GST, it rejected the commission's findings, and rightly so, given that the commission's preferred model would have been unacceptable.
The bill has been referred to a short Senate inquiry, which is to report by 8 November this year. This review will enable the states and territories to make submissions. In Labor, we will be awaiting the outcome of this review to ensure that we're listening to all Australians on how this legislation will affect them.
Overall, though, it is good to see the government finally following in Labor's footsteps and recognising that the current GST system results in an unfair deal for states like Western Australia. Of course, WA is predominantly the state to gain most out of this, but it is also the state that has suffered immeasurably over the last few years, receiving only 30c in the dollar of GST.
Labor takes the needs and concerns of Western Australians seriously. The WA state government is cleaning up the financial disaster that they were left with when the Barnett government left WA's state government. The Leader of the Opposition has visited Western Australia so many times that I have lost count. He's taken his obligatory selfie with a quokka, which makes him an honorary Western Australian! He has visited much more than either the previous Prime Minister or the current Prime Minister.
We know that WA needs leadership on the GST. Labor has led this government all the way to this legislation. It's great that they're following Labor's lead. It's important to also note the unique position that WA is in. No other state or territory has had its GST share fall below 86c, but WA's share of GST fell to 30c in 2015-16 and in 2016-17. It's heartening to see that the government is finally taking action to ensure that WA is no longer suffering the after-effects of the disastrous Barnett government. In comments made after the government made its about face, the New South Wales Treasurer said:
WA (is) being rewarded for poor financial management.
That was referring to the Barnett government's failure to manage the rewards of the mining boom.
These comments are an indictment of the Barnett government's management of the WA economy. They are also, and perhaps more importantly, an indictment on the role of the then Treasurer of WA, who in early 2011 decided to raise royalties in an attempt to force a change to the GST distribution so that they could keep most of the money. That then Treasurer is now the Attorney-General of Australia, the member for Pearce, who left WA high and dry for the federal parliament. The Attorney-General might be interested to know that the failures of his then WA government have delivered hard times on the people of Western Australia, including in my electorate of Cowan and no doubt also in his electorate of Pearce.
After a record boom, Western Australians were right to expect that their government would not squander it away on their pet projects. They were right to expect that their government would make sure that the state was resilient to the effects of a downturn in the mining and construction industry, like we are seeing now. Instead, Western Australia has no buffer to show for the boom. In my electorate of Cowan, I hear every day from people who are doing it tough in the face of the recession of the mining and construction boom. These are people who are qualified professionals, such as engineers, who can no longer find work because the work just isn't there. Ensuring that the GST system works well for all states and territories, especially my home state of Western Australia, is key to ensuring that those people can prosper again, despite the missed opportunity of the mining boom.
In closing, I just want to reiterate that this side of the House will always speak for the people of Western Australia. We have shown that in advocating for a GST system that works for Western Australia but that also leaves no other state or territory worse off. We've shown that we advocate not just for Western Australians but for all Australians in proposing top-ups where they're needed and in proposing a legislated floor. Labor has led this government all the way to this legislation, and I'm sure that we will continue to do so.
It's a pleasure to rise in this House today to back the coalition government's plan for a fairer and more sustainable way of distributing GST for all Australians through the bill before us, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. That's a mouthful, but I think this is a tremendous piece of legislation. I want to commend the Treasurer for his willingness to listen to the concerns of various colleagues. I know I had discussions with the Treasurer to ensure that Queensland was getting its fair share as well. The important thing about this government is that we are bringing a piece of legislation to this House today, again, that will see every state benefit, including Queensland and my electorate of Forde.
This bill seeks to provide a new solution to the equal distribution of GST across the country. It is a plan that is designed to leave all states and territories better off while guaranteeing that no state's share of GST will fall below 70c in the dollar from 2022-23 and 75c from 2024-25. The way GST is distributed in Australia has not been updated since it was introduced in 2000 by then Prime Minister John Howard and then Treasurer Peter Costello, and since then the revenue has more than doubled. Not only that, but it is also expected to grow another 65 per cent over the next decade. With the conditions introduced in 2000, it's important to reflect in the changed environment that they are no longer conducive to the environment we operate in, leaving the system flawed and, as we all recognise, in need of reform.
The Productivity Commission found that, although the current GST distribution system functions well and achieves higher levels of fiscal equity, it can deliver perverse outcomes when there is a significant shock to the Australian economy, such as the mining boom. Being from Queensland, I readily acknowledge the shortcomings of the system that have resulted in WA receiving only 30c in the dollar. This bill is designed to avoid the situation we've seen in Western Australia's with that record low of 30c in the dollar. This compares to Victoria and New South Wales, who saw more than 90c in the dollar, with smaller states seeing even higher rates. The current system of horizontal fiscal equalisation does not account for those unprecedented shocks or changes. The mining boom exposed vulnerabilities in the system that could not have been anticipated when the GST was introduced. But, importantly, once again it is this government that shows that it seeks to learn from those experiences and make relevant improvements to the system rather than waiting round to see what those opposite would do and see the same errors repeated.
This bill will create a new standard for the GST distribution system to ensure the fiscal capacities of all states and territories are at least the equal of New South Wales or Victoria. The government's interim response was released on 5 July this year. The proposed reforms to the way GST is allocated will leave the states and territories better off and protect the integrity of the system. In essence, the states should have sufficient resources—that is, the fiscal capacity—so that all Australians have equal access to vital government services no matter where they live across the country. Importantly, this can be seen in conjunction with a number of other measures that we are undertaking.
The government's plan will first create a new equalisation benchmark against New South Wales or Victoria, whichever is higher, and all states will transition to this new equalisation standard over six years from 2021-22 to 2026-27. Secondly, it will introduce a permanent in-system relativity floor of 70c from 2022-23, increasing to 75c in the dollar from 2024-25. Thirdly, this bill will see a permanent boost to the GST distribution pool of funds available for all states and territories providing direct Commonwealth cash injections in addition to GST collections each year from 2021-22 onwards. This bill will enable an initial boost of some $600 million in 2021-22 and a further $250 million boost in 2024-25, indexed each year to grow in line with GST.
As part of the fourth stage during the transition period from 2021-22 to 2026-27, the states and territories will be guaranteed the better of the old system or the new system. This means that at the end of the transition period each state and territory will have received the better of the cumulative total over the entire period of either the old system or the updated system. Payments will be verified annually by the Commonwealth Grants Commission over the transition period and any adjustments will be made accordingly.
The fifth stage, to be completed by December 2026, will see the Productivity Commission conduct an inquiry to assess whether the updated system is working efficiently and effectively and operating as intended.
Lastly, we'll separately see short-term top-ups to Western Australia and the Northern Territory to keep their relativities above 70c and $4.66 respectively from 2019-20 to 2021-22. At the end of this period, at 2026-27, Australia will have a horizontal fiscal equalisation system that seeks to protect against economic shocks and provides a more stable source of revenue for all states and territories.
Importantly, in my state of Queensland, over the six years from 2021-22 to 2026-27, Queensland will benefit from a $518 million boost in untied funding. This will see additional funding across the state—and, importantly, in my community—available for schools, hospitals, roads and other essential social support services. Importantly, this is on top of the already record funding we are providing to schools and hospitals, as well as infrastructure, across Queensland.
The horizontal fiscal equalisation fair-go principle changes the way the GST is allocated among the states and territories to benefit all Australians. The government's horizontal fiscal equalisation reforms implemented in this bill continue to uphold this principle so that all Australians are on an equal footing no matter where they reside. This bill will see the Commonwealth injecting an additional $9 billion into the system over the 10 years to 2028-29 to make every jurisdiction better off.
But the states will also benefit over a shorter period in the fact that they will receive additional funds over the next four years, as a result of decisions in this government's 2015-16 budget, from applying GST to online purchases and other compliance matters. Importantly, the additional funding from the Commonwealth will not come at the expense of existing payments to the states and will be provided in perpetuity. The Commonwealth's projections use the Productivity Commission's estimates, based on numbers that the states have provided.
The government has consulted extensively with all the states on its proposal since the release of its interim response. Unlike changes to the rate and base of the GST, changes to the distribution of GST revenue do not require the approval of the states, but, to provide certainty to the Australian people, the Commonwealth is now seeking to legislate these reforms by amending the Commonwealth Grants Commission Act and the Federal Financial Relations Act.
In the end, GST provides an important source of revenue to all states and territories. We have built a system that operates in a changing economy. Once again, this is a demonstration that this coalition government is focused on delivering responsible, forward-thinking economic management for the country and in particular, in this case, with the GST. It is only a coalition government that is delivering strong economic growth, record jobs growth and a stronger economy and only a coalition government that will and can deliver the real benefits for Australians right across this great country. I'm pleased to be speaking in support of this bill and commend this bill, given that it's a responsible GST plan that will benefit all states and therefore all Australians. I commend this bill to the House.
Well, it's the day we may never have thought would arrive. Indeed, it's a day that I've previously said was almost politically impossible, and the solution before us today vindicates that position. I have been listening to the government speakers debating this bill, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. I have personally led the debate on bringing about this GST fix for Western Australia. After years of pleading with the government, finally they have seen sense. Finally they have agreed to Labor's proposal that the GST for WA and across the country be fixed, to be made fair, and that, in doing so, no state would be worse off—the element that makes political impossibility instead a reality. What a ride we've had to get here. This is the 23rd time I've stood in this place talking about a fair share of the GST for Western Australia—the 23rd time!—and I've been in this place only since the middle of 2016.
WA need our fair share of GST and we need it now. We've been disproportionately propping up the rest of the nation for too long, and it's left our state worse off. WA has a legitimate complaint. It should never be forgotten just how much WA was financially crippled by joining the federation in the first place. Indeed, it was precisely because of this that horizontal fiscal equalisation was born and formalised through the Commonwealth Grants Commission back in the 1930s, following such fiscal difficulties pushing WA to try to leave the federation. Never in the history of the GST forming the basis for funding for HFE has any other state or territory fallen below a relativity of 86c, yet we in WA copped 30c in 2015-16 and 2016-17. Even now, it has only crept up to 34c.
Labor has been leading the charge to get a fair share of GST for WA from the very beginning, calling for changes to the unfair system. Labor announced our legislated Fair Share for WA Fund at the end of August 2017, recognising the issues that Western Australia has experienced. We committed at the time $1.6 billion, to be paid for with our measures to improve the budget bottom line, which would have put WA up to a 70c level. At the time, the then Treasurer, now the Prime Minister, criticised us for this top-up method, calling it a mug's game. That was despite Labor's proposal giving certainty in the medium term, compared to the government's prior approach of piecemeal, ad hoc, last-minute top-ups that caused as much fiscal harm as they did good. So it wasn't long before the government announced its own package of funding for Western Australia. Now it appears the Liberals have agreed to our position on the GST carve-up—that is, we introduce an initial floor of 70c in the dollar for WA, then for all states from 2022, and then a 75c floor from 2024.
You can't trust this government on the empty promises that they make, whether it's to maintain funding for schools and hospitals, to save the ABC, to have stable government, or to keep the same Prime Minister—or, dare I say, even the same Deputy Prime Minister. So you can understand our apprehension at agreeing to an unlegislated GST floor. Bill Shorten's and Labor's position was to make the floor the law. The now Prime Minister told us in July that we didn't need to legislate a floor, that it was unnecessary; yet on our side of the House we persisted. Then, once he'd ascended his throne, the Prime Minister agreed to do it.
Similarly, despite the government saying that no state would be worse off under their plan, they said that they didn't need to legislate that either. We know that the people of Australia need certainty in this era of empty promises and thought bubbles from the Abbott-Turnbull-Morrison government. The state and territory treasurers need that certainty too. We needed the assurance that no state or territory would be worse off written into law. After all, not just does Labor understand the plight of Western Australia; we understand the reliance of Tasmania, the Northern Territory and others on GST to support their state and territory budgets too.
The Prime Minister got himself tied in knots a few weeks ago spruiking his GST plan ahead of the meeting of state and territory treasurers, saying it was good to go and no further assurances needed to be made. It takes a special kind of person to bring together all sides of politics from all states and territories. This Prime Minister and his Treasurer managed to do that—but it was against them. That is not to mention the prospect of the government's Tasmanian senators crossing the floor against them. Not one state or territory treasurer agreed to the GST carve-up without an assurance that no state or territory would be worse off. Even the Treasurer of the great state of Western Australia, Ben Wyatt, faced with the toughest of budgetary circumstances, supported the other states, knowing that no other state should have to suffer what WA had.
And oh boy hasn't the Prime Minister undertaken the most spectacular backflip of them all in the last week? When Labor said the commitment to ensure no state would be worse off should be enshrined in law, the Liberal Party scoffed at us. Last week, they agreed to do just that until 2026. Seriously, given the short-term tenure of Liberal Prime Ministers, this one might have a future in gymnastics, because in just the last 12 months the Treasurer turned Prime Minister has held nearly every conceivable position possible on the GST. The 2020 Tokyo Olympics are not that far away, Prime Minister! Meanwhile, Labor has consistently stood for a fair go for WA and for all Australians on the GST.
So what have we got before us today? This bill seeks to legislate the government's response to the Productivity Commission's report on horizontal fiscal equalisation—a response that was delayed for months. In fact, it doesn't really enact the Productivity Commission's recommendations at all. It makes you wonder why we had to wait, really. The bill will make changes to the model for equalisation to avoid abnormal variations by pegging it to the higher of New South Wales or Victoria, which have historically been the consistently better-performing states. This change will occur over a transition period, involving additional funds from the Commonwealth to ensure that Western Australia receives at least a 70c floor from 2021—indeed, through unlegislated grants from 2019—and a 75c floor from 2024, as well as to ensure no shortfalls in funding to other states and territories.
This bill also seeks to legislate a 'no state or territory will be worse off guarantee' during the period of full transition from 2021-22 through to 2026-27. This guarantee will mean that, over the course of the transition period, states will be topped up to ensure they receive the better of the old or new equalisation model over the transition period. This has been accepted by state and territory treasurers. While this is reasonable, we are not totally unconcerned about this. The guarantee only sustains for that transition period. What happens after that?
As I mentioned before, it appears that it is only Labor that really understands or cares for all states and territories in the Commonwealth, and in particular their own plight if they receive less GST revenues. Western Australians know the struggle and don't want to see any other state or territory face the same fate. That is why, unlike those opposite, our Labor Party has worked so well together across all states and territories on a GST solution. Our leader, Bill Shorten, and our shadow Treasurer, Chris Bowen, should be acknowledged for their leadership and constant consultation on this issue. The other states and territories can only hope for a Labor government to be in office at that point at the end of the transition to ensure financial security beyond the point of transition.
Then there is the issue of other Commonwealth payments. It is one thing for the government to say that it will put more money into the GST pool, but what then happens to the other funding for the states, such as for schools, hospitals, roads and other infrastructure? I am pleased that the new Treasurer has written to his state and territory counterparts in this letter to confirm that the additional financial assistance in this legislation will not be offset or partially offset by the decrease in other grant funding to the states. Finally, this bill legislates for a Productivity Commission inquiry at the end of the transition period to make sure everything is working as it should—efficiently, effectively and as intended.
Contrary to the wilfully misleading advertisements run by Senators Cormann, Cash, Reynolds and others, Labor will support this bill in the House and in the Senate. We need to get the GST fixed for WA and across the rest of the country. We need to fix this as soon as possible, because WA is currently being left behind. In fact, if the government had come on board last year when Labor made its commitment to a 70c floor and delivered a solution in its 2018 budget, WA would already be more than $3 billion better off. That $3 billion would have gone a long way in fixing the financial disaster left by the previous state Liberal government.
We must not forget the role of the member for Pearce in wrecking that WA state budget. In early 2011, the member for Pearce was the WA state Treasurer. As Treasurer, he prepared the state budget on the basis of a higher than allocated rate of GST distribution. When called out for this by Labor and the media, he said that the rate of GST for WA was so low that the federal government would just have to change it. Well, since coming to this place and into government in 2013—five years ago—what has the member for Pearce done on GST for WA?
Nothing. All the member for Pearce has done is bake in WA state budget deficits for nearly a decade, and this is the guy touted to be the next Liberal federal Treasurer. Well, geez. God help us. Bringing us back to the present, if the GST had been fixed by the government in its last budget, WA would have been more than $3 billion better off. That would have paid for the Perth Stadium twice over. It would mean that, thanks to the strict budget management of the McGowan WA Labor government, the WA state budget could, instead, be in surplus already. But the GST should not be a political issue between us. This is not something the leader of the Senate should be writing to me about, pleading with me to agree with. It would be funny if it weren't farcical.
My WA Labor colleagues and I all received letters from the Leader of the Government in the Senate, the Minister for Finance, as a fellow Western Australian, imploring us to support his, the Treasurer's and the now Prime Minister's changes to the GST distribution. If you told me a little while ago that I would receive a letter from one of the most senior Liberal ministers in the country, asking me to support what was already Labor policy, I would have laughed at you, yet that's exactly what we all received. Western Australian Liberals have ignored WA too long. They've taken WA for granted for too long, and they have not been fighting for a fair go for WA. Now that they've realised that WA exists, they are in damage control trying to fix it. Well, I'm glad that the WA Liberals have finally joined Team WA, even if it is only for their own politically expedient reasons. We don't need to go to the next election with the GST issue still hanging over our heads. This issue needs to be fixed and will be fixed for all Western Australians as soon as possible. This GST legislation is a start in getting a fair go for WA and a fair go for all Australians. I proudly commend this bill to the House.
As Tasmanians, we know the issue about GST just as well as the Western Australians. We have had the rest of the states and the Commonwealth trying to take GST and our fair share away from us for decades. Tasmania relies quite heavily on GST. There's no doubt about that. Tasmanians, compared to the national average, are on lower incomes, are poorer, have worse health outcomes and have worse educational outcomes, sadly, despite investments, particularly from our side when we were in government, in trying to remedy some of that.
The point about our state's revenue that I want to raise today is that our annual budget is around $6 billion and 62 per cent of that comes from Commonwealth revenue. That is a very heavy reliance on Commonwealth revenue for our state. We obviously need this funding to provide the same health and education services that other states expect and receive. Indeed, we know that our health system in Tasmania is currently in crisis. We know that the current state Liberal government and the federal Liberal government are currently underfunding our state's health system. We've had numerous reports about the underfunding of the health system in Tasmania at this point in time. We know that Tasmania cannot afford to lose any funding from GST.
Having said that, we've also acknowledged the issue with Western Australia. The thing about the Labor Party is that we always said the same thing in Tasmania that we said in Western Australia, unlike various government prime ministers and ministers who say one thing in Tasmania and then a different thing in Western Australia, in the hope that they would never be found out. But the reason that we're here today is that this legislation finally has a no-worse-off clause in it for every state and territory. We're very pleased that it has that clause in it. The government got there but was dragged, kicking and screaming. We heard it on rumour because some of the Tasmanian Liberal senators threatened to cross the floor. We talked to the Tasmanian Liberal senators and the other senators in Tasmania. Indeed, the federal Labor team—all of my colleagues and I—wrote to every Tasmanian senator asking them to insist on legislation that Tasmania be no worse off. We have been raising this issue in the media. Prior to the Braddon by-election and prior to the state election, interestingly, we heard very little from the state Liberal government or from our state Liberal senators about GST and making sure that Tasmania actually got a guarantee that we would be no worse off.
Indeed, we had the Liberal state government say before the state election, 'It's not an issue, it's not an issue, it's not an issue.' But after that, when the Productivity Commission delivered its report that was deliberately delayed for the Tasmanian state election, they said, 'Oh, we might have a problem here.' Only Labor has consistently said all the way along that we would have a problem if we didn't get a guarantee that Tasmania would be no worse off. It is only because of Labor that this clause is finally in this legislation. We stood up to the government, we stood up to the Liberal senators, we stood up to the Tasmanian Liberal state government and said: 'We need to insist on this. Our state, long term, cannot afford not to have a 'no worse off' guarantee.' And I'm pleased to see it legislated, finally.
Tasmanians were really shocked, when the PC inquiry came out, in terms of what it would mean for our state. The state government modelling says we'd be $240 million worse off if that had gone ahead. Some of the other modelling on the PC's earlier interim reports had us at up to $1 billion worse off, so we know what is at risk here for Tasmania. I and our shadow Treasurer are on the record that we're concerned about what happens to Tasmania at the end of the transition period covered in this bill. I and my Tasmanian colleagues are particularly concerned and want to make sure that Tasmania's GST share does not fall off a cliff at the end of this transition period. We're also concerned what a new PC inquiry would recommend that would impact Tasmanians adversely. What we don't want to see is a PC inquiry tell us to sell our state owned electricity assets. What we don't want to see is a PC inquiry try and do a population distribution again, because Tasmania would be more than $1 billion worse off a year under that model. We need to do everything that we can and we certainly will be. Hopefully we'll still be in this place in 2026-27 standing up for Tasmania and making sure that, at the end of this transition period, Tasmania's GST fair share does not fall off a cliff. We will be making sure that the PC inquiry, when it's done, takes into account the fact that, when it comes to higher education, 27.5 per cent of Tasmanians aged 15 to 75 have no qualification beyond year 10—27 per cent of our population have no qualifications post year 10.
The majority of Tasmanians have more chronic illness and poorer health outcomes than the majority of Australians. Our hospitals and health system are fundamentally in crisis in our state. We have ambulances ramping at the hospitals. We have massive elective surgery waiting lists, some of the worst in the country. We have report after report saying that our health system in Tasmania—because of our social determinants of health, because of the chronic illnesses, because of the poor health outcomes—is critically underfunded. State and federal Liberal governments need to do more to ensure that Tasmanians get the services they need, equivalent to the services of other Australians. That's today, with the current GST and that 62 per cent reliance on Commonwealth input to our state budget. Of that 62 per cent, 41 per cent is GST revenue and 21 per cent comes from other Commonwealth payments.
The other thing we're concerned about is that the Commonwealth might try to claw back those other payments to make up for these top-ups. We're concerned that other funding instruments and partnerships may be clawed back by the Liberal government, because we have seen it before. We've seen the Liberal government try to undo agreements and claw back money from states before. Tasmanians know that the federal Liberal government cannot be trusted. That is why we needed the 'no worse off' clause in this legislation and that's the reason we can agree to it today—because that's actually in the legislation.
We understand that that Commonwealth has given the state treasurers an undertaking that other payments will not be withdrawn from the states to make up for these top-up payments. We would like to see something a bit stronger from the Treasurer on that and to have that undertaking tabled in this place. We'd like to hear directly from the Prime Minister and the Treasurer that they will not try to claw back other payments to states that we rely on. As I said, Tasmania absolutely cannot afford it. We are heavily reliant on these payments to provide just the services that every other Australian deserves and expects, particularly when it comes to health and education.
If you have a look at our health and education, the current distribution of revenue represents 64 per cent of our health expenditure or 71 per cent of our education expenditure, based on 2017-18 figures. There would be an enormous impact on our state if we were to lose any of these funds at any point in time.
So, if the current Liberal government tries to claw back any payments, rest assured that we'll be coming after them. We will be fighting out there every time they try and take anything away from our state that we need to deliver the same services to us as to any other Australian. And we're putting everybody on notice that, come the transition, in 2026-27, we will be fighting for Tasmania again, and we'll be insisting that our state continues to be no worse off. Indeed, we want to see our state much better off. We hope to see the outcomes, particularly in health and education, for Tasmanians improve. So I'm pleased to say that we're able to support this bill today, only because of Labor leading and Labor demanding that no-one be worse off, and because of the pressure that we put on the Liberal state government and the Liberal senators from Tasmania to insist that this clause be in the legislation.
In essence, this bill, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, is bad public policy. I don't believe it's supportable, and I won't support it. I fear I'll be the only person in this chamber who will call out, 'No,' when the key time comes.
I think it's actually quite shameful that this reform is being pushed in this form by the government—
Ms Collins interjecting—
and, I'm sorry, by the opposition. I responded to the member for Franklin, and I see the member for Bass here. I do acknowledge that the Labor Party has fought hard on this issue. But I think you've choked at the last minute. I don't think you should support it, and I'll tell you why.
For a start, the no-worse-off guarantee is only for eight years. That will be here before we know it. I would have thought that any effective no-worse-off guarantee would not have a time line on it. I worry that eight years is really just to push it beyond the next election, beyond the next parliament—'It's just too hard, so we'll park it for a while'—instead of addressing the fact that there is a need to reform the GST. It clearly is unacceptable that Western Australia, as a result of the trailing nature of the calculations, is getting, roughly, only 30c in the dollar, I think. So there is a need to fix it, whereas this eight-year, no-worse-off guarantee really just parks it. To me, it reeks of a political fix, just to get it beyond the election and a bit beyond that.
I think it's also an attempt to try and condition the community that there will be deep and problematic changes in the future. In fact, Deputy Speaker Hastie, you're a military man; you'd understand the term 'shaping the battlefield', and I think there's an element of that.
I also worry that there's no guarantee that Tasmania's share will grow in line with the inevitable growth in national GST receipts. Of course the GST pie is always growing. So it's not enough to say, 'We won't be worse off.' We would need effective guarantees. I think it would be very difficult to actually legislate this, but I'm sure it could be done: we would need some sort of effective guarantee that, as the GST pie increases, Tasmania's gross amount also increases. So I feel that that is another significant deficiency in this bill.
I note that the member for Franklin spoke about the issue of special purpose payments. I think this is a very serious issue. I think, actually—and it's through you, Deputy Speaker, to the member for Franklin—this alone is a serious enough deficiency in this bill to warrant the opposition not supporting the bill. I can see it could be very easily done, and it would be very hard to identify it clearly and to fight against it: that, in two years time, three years time or four years time, at the end of the forward estimates, our special purpose payments could be reduced—perhaps subtly, but that could still be tens of millions of dollars or hundreds of millions of dollars. And that would be very, very harmful.
As has been identified in this place, Tasmania has a low domestic tax base and a very high reliance on federal funding, in both the GST income and also special purpose payments. If we were to see some of those special purpose payments cut or just shaved, it would have a disproportionate impact in Tasmania because of our high and completely understandable reliance on federal funding.
I will wrap a bit of context around my concerns. Australia is obviously a federation. When we came together in 1901—the six states and the territories—it was agreed then, and it was really a condition of Federation, that all of the states would be equal, would all be treated equally and would all get a fair go. There is more than a whiff in these reforms of Tasmania being at serious risk, because of the sorts of limitations I have identified, and of us being a second-rate state. There's risk that there will be uniformity in the mainland and then there will be Tasmania down on the bottom, having to fight its own fight on its own. I think this bill actually betrays our founding fathers and the architects of Federation. It really does puts Tasmania at the real risk down the track of being a second-rate state.
It's not like we have a lack of money. I would remind honourable members that Australia is the 13th richest country in the world. In fact, if you include Palestine and Taiwan as countries, there's something like 196 countries in the world and we're the 13th richest. We are fabulously wealthy. In fact, if you divide our riches across our relatively small population, we're the second wealthiest people on the planet. We are second only to the Swiss by one measure. In fact, I saw in The Australian newspaper a few days ago that, by another measure, we are the richest people on the planet. It's not that any state needs to go without and it's not that any state needs to be put at risk of going without in future years because of deficiencies in a reform like this. There is more than enough money and more than enough wealth and smarts in this country to ensure that every state receives the money they genuinely need and that the money equalised in an effective way to ensure that every person in this country gets adequate access to public health care, the education system and so on.
The fact that there may not be enough money sometimes, or it's said that there is not enough money sometimes, is really because politicians make bad decisions and we have our priorities out of whack. I remind you that the federal budget this current financial year will be in the order of half a trillion dollars. There's more than enough money, with good decision-making and good priorities, for every state and, in particular, for Tasmania. That's including Western Australia, where you're from, Deputy Speaker Hastie. There's more than enough money that, with the right decisions and the right priorities, every state gets a fair deal and that WA's needs are met, Queensland's needs are met and the needs of New South Wales, Victoria, South Australia and Tasmania are met. It's not that we have to engineer these weaknesses into our legislation that put us at risk in the future, because there's more than enough money to avoid us being put at risk.
There have been comments too about Tasmania's special needs. These concerns of Tasmanians are very real. It is heartening that all Tasmanian senators and members have had a say on this and have all said the right thing. As we need to, because Tasmania does have particular disadvantages and special needs. We're obviously an island state. It costs money to deliver government services in an island state. We are a small market for the delivery of those services. That creates inefficiencies and often added costs to the delivery of government services as well. We have lower incomes. We are older people.
I will just give some insight into the health of Tasmanians. As a general rule, we are less well than mainlanders—that's for some very understandable reasons—and the cost of our health care in Tasmania tends to be more than elsewhere. For example, Tasmanians have poorer sight compared to the national average. We have a higher rate of arthritis compared to the national average. We have a higher rate of hypertension. Actually, it is actually a markedly higher rate of hypertension compared to the national average. We have a higher rate of mental and behavioural problems compared to the national average. We have a higher rate of back problems, a higher rate of deafness and a significantly higher rate of heart, stroke and vascular disease. We have a higher rate of asthma. In fact, with most of our cancer rates, we have the highest rates of any state. In fact, it's all too often that we look at the figures, and we are second only to the Northern Territory when it comes to a lot of these measures of public health and economic disadvantage.
I make the point again that, at the same time that we have the higher costs of being the island state and we have the higher costs of a more unwell population, we also have a really tiny domestic tax base. We don't have your fabulous iron ore reserves. We don't have the coal of Queensland and New South Wales. We don't have the precious metals. We don't have the uranium of the Northern Territory and South Australia. For a whole lot of reasons, we have a smaller domestic tax base, and we have a lot of inefficiencies. So income from the Commonwealth, in particular our GST share and in particular our special-purpose payments, assumes a disproportionate significance for Tasmania. That helps to explain why all of us—the Liberal Party, the Labor Party and myself—are so exercised about this issue.
I suppose that where I diverge from my colleagues in this place is in what I'm going to do about it. I will vote against this. If I'm the only member who does vote against it, I'll be asking that my name be recorded in Hansard. To my mind, the simple eight-year guarantee that we won't be worse off is a start, but it is not enough to make this bill supportable. If there were going to be any no-worse-off guarantee, it should not have had a time limit. Eight years will be here before we know it.
And the bill is fundamentally deficient in that there's no effective guarantee to ensure that Tasmania's GST share increases proportionally with the increased receipts from GST nationally. That runs a very real risk that, in effect, we will actually be worse off in the future.
As I've already said—and I'll say it again—there is that very significant deficiency that there is no effective guarantee whatsoever that we won't see cuts to our special-purpose payments. This isn't just the member for Franklin raising it to score political points. It's not just me, from Denison, trying to score political points. I note that an economist, no less than Saul Eslake, one of the most eminent economists in the country, has made a point of focusing on that risk to Tasmania that we will have cuts to our special-purpose payments in the future.
I won't detain the House any longer, other than to say that I think this bill is bad public policy. I don't think it's supported. I won't support it, and I am very disappointed that I will not be joined at least by my colleagues from the Labor Party. It's one thing to voice your concerns, but it's another thing to act. I think our performance in this place should be measured by what we do, not by what we say. I am going to be very disappointed to see the ALP support the Liberal and National parties in supporting what I think is bad policy, policy that might not jeopardise Tasmania in the short term but jeopardises us greatly in the medium and especially the long term.
I'm pleased to follow the member for Denison—or Clark, whichever it is at the moment—on this important bill, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. We do have different opinions on this. Just like the previous speaker, I have my concerns about the GST and how it's calculated, and I will go into that in my speech. Where we diverge, I think, is in how we deal with it. We can't just curl ourselves up into a ball and pretend the world isn't moving on. We need to deal with the issue before us. If this bill does not pass the House, Tasmania stands—in very real terms, Member for Denison—to lose $112 million over the seven years into the future, so we're dealing with some real issues here.
Labor do support the bill before the House, and we are pleased to have led the debate on this issue. Everyone in this place knows that, if it had not been for the pressure exerted by Labor, the legislative guarantee that forms the moral cornerstone of this bill would never have seen the light of day. The legislative guarantee in this bill means that no state will be worse off as a result of the changes to horizontal fiscal equalisation and the way it's calculated. It is a guarantee that carries legislative weight for seven years. Without that guarantee, without that signed-in-blood undertaking, that carries the weight of this parliament behind it, we in Tasmania know that our state faced great hardship. That's why I and my colleague the member for Franklin and my other Tasmanian colleagues fought so hard to ensure that a legislative guarantee formed part of this bill.
In Tasmania, 40 per cent of all government revenues come from GST receipts. Tasmania cannot afford to lose even one dollar of GST, and that is why the legislative guarantee is so important. Without that guarantee, all that we would have had to depend on in Tasmania would've been the hollow verbal promise of this Prime Minister that he'd make sure we were well looked after. This is a 'say anything' Prime Minister who has shown time and time again that what he says one day will not last till the next. This is a Prime Minister who, by profession, thinks spin is more important than substance.
The bill before the House will tie future GST calculations to the strength of New South Wales or Victoria, which are the two strongest and most broad-based economies in the Federation. The changes mean that Western Australia, which undergoes resources based booms and busts, will not be used for this calculation. The bill also provides Western Australia—and, indeed, any other state—with the comfort of knowing that its share of national GST receipts will never fall below 70c for every dollar that it contributes and later rising to 75c in every dollar. As a result of the mining and construction boom, WA's share of the GST fell to 30c. My WA colleagues may disagree, but this scenario may have been manageable, except that, by the time the GST formula had been adjusted to the lower amount, the mining construction boom had ended and mining revenues had already fallen off a cliff. So the flood of royalties slowed to a trickle at the same time that GST receipts dropped to 30c—little wonder that, even in Tasmania, we could hear the cries of pain from our friends across Bass Strait and the Nullarbor. WA was in real pain, and that is acknowledged. It is worth noting that the GST formula that led to this situation was a construction of the Howard government in concert with state governments—most of them at the time led by Liberals. Horizontal fiscal equalisation works to ensure that GST receipts are shared according to need. But, clearly, in the case of WA, something had gone askew.
While most of us look at WA and see a state of wealth, I have the unique perspective among my Tasmanian colleagues of having grown up in Perth and having lived most of my adult life in Fremantle. WA is a state of diversity in terms of wealth and privilege. It's not all Beemers and Bollinger. Yes, there are the millionaire rows, even billionaire rows, along Dalkeith and Applecross, City Beach and Margaret River. But there are also places like Maddington, where I grew up, and Langford, Darch and Orelia as well as of course the Indigenous communities in the far north. I have friends in WA who tell me that the state continues to suffer from what they call a retail recession and that swathes of Perth suburban centres have had 'to let' signs on shop windows for three or four years.
The state Labor government, led by Mark McGowan and Ben Wyatt, are making improvements but they were left an awful mess by Colin Barnett and the Liberals, who squandered the mining and construction boom and left the state with massive debt. So the clarion call from the WA Labor Party was to fix the GST. That was the first order of business. Anybody reading the front page of the West Australian newspaper and tuning into talkback in WA knows that this was the No. 1 issue in that state—fix the GST. It was federal Labor that listened. It was federal Labor, under the Leader of the Opposition and the member for McMahon, who first agreed to deal with this issue.
It's worth noting that the current Attorney-General, the Liberal member for the Western Australian seat of Pearce, used to be Treasurer in Colin Barnett's state government. As Treasurer he brought down a state budget that depended on the federal government changing the GST formula. The change never came, and that left a massive hole in state finances. So the Liberals rewarded this by preselecting him for federal parliament, where he is bringing the same level of competency and attention to detail to his current portfolio.
Tasmania's total government revenue is expected to be about $6.2 billion in 2018-19, and its largest source is GST revenue of almost $2.5 billion. As I said, we can't afford to lose even one dollar of this. GST receipts are absolutely vital to our state. Let's be clear about why. The fact is Tasmania has a limited opportunity to scale up development of our state. Not only do we have a relatively small population—just over 500,000 people—but our beautiful state is regarded by most Australians as their wilderness. We live in Tasmania, but I hazard a guess that all Australians believe they have a stake in it, similar perhaps to how Australians feel about Kakadu or the Great Barrier Reef. But this love carries a price for the people of my state. We have been prevented from developing our state to its fullest potential in terms of industry.
My state was prevented by this parliament from damming the Gordon-below-Franklin river, and that is a move that would have generated hundreds of millions of dollars in hydroenergy dollars. I'm not seeking to rehash the merits or otherwise of the decision about whether it should or should not have occurred, but the fact is this parliament told Tasmania, 'You can't do it. You can't develop that project,' and that had a direct economic cost to my state. We've had similar instances over the years with pulp mills and other development opportunities. Our state has tried to progress these issues and we are told, usually by mainlanders: 'You can't do it. We regard your state as a treasure. We don't want these things happening.' That comes at a cost. It comes at a cost to the people of my state in terms of jobs and development. So somebody has to bear that cost. Frankly, if it means that we have a higher proportion requiring GST receipts in Tasmania than other states, then so be it. We should not be regarded—as I think the Prime Minister referred to the Tasmanian Treasurer, a Liberal—as a mendicant as a result, because that is simply not true.
Tasmania's health system has been in the news daily for all the wrong reasons. GST revenue represents 64 per cent of our state's health budget. Even with that, we are struggling. Even with 64 per cent of our health budget coming from GST receipts, we struggle on a daily basis with overcrowded hospitals, with waiting lists to get into emergency departments, with six, seven, eight and nine ambulances being ramped at the hospital. This is why GST receipts to our state are just so vital. We cannot afford to see one dollar removed from Tasmania in GST receipts. We cannot afford to lose $1 from our health budget.
Education is another area where Tasmania suffers. Our education budget relies on GST revenue. Seventy-one per cent of education funding in Tasmania is delivered through GST receipts. Yet our state still trails the rest of the country when it comes to outcomes in primary and secondary school. We have low intake into colleges and university. So, if anything—and I do take the member for Denison's point on this—we need more GST receipts, not fewer. We need more assistance in this regard. Our state needs more, not less. At the very least, what this bill does is provide a floor—'make the floor the law'. That's something Labor fought hard for. We made sure this government delivered it. It would not have happened without our side putting pressure on that side. The Prime Minister was all about saying we didn't need a legislated guarantee. It was only with Labor and the opposition leader saying a legislated guarantee is absolutely essential that it was incorporated into this bill. On that note, I'm happy to cede the floor and commend this bill to the House.
The Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 is a very important bill to the entire nation, but it is of particular importance to the states that tend to have more booms and smaller populations. I include in that, of course, Western Australia and Tasmania, but I, being a Queenslander, particularly include in that the great state of Queensland, which, like Western Australia, has been the beneficiary of a resources boom and, like Western Australia, is now moving to a situation where the plants have been built, the mines have been largely built and we're moving out of construction and into operation. As you very well know, Mr Deputy Speaker Hastie, being a Western Australian, there is the example of the LNG plant—maybe 10,000 people to build one and around 300 people to run one. So there's a material jobs impact once you move out of the construction phase into the operational phase.
We're very pleased in Queensland to see the progress being made in our resources sector, but, like everybody else, we certainly don't want to put all of our eggs into one basket. You have to diversify your economy and you have to have a diverse range of sources of tax revenue as a government as well. As you know, Deputy Speaker Hastie, in a country where we have both vertical fiscal imbalance, which means that the states have to rely heavily on the Commonwealth for their tax revenues, and a history of horizontal fiscal equalisation, the formulas that are used in order to distribute tax revenues are very important. We have seen, over a very long period of time, the Commonwealth Grants Commission using the principles of horizontal fiscal equalisation to try to find an equitable way to distribute Commonwealth tax revenues to the states to enable states to ensure that the services that they provide and the infrastructure they build are of a reasonable standard and that people in smaller and less populous and sometimes less well-off states aren't disadvantaged merely by geography. It's a massive challenge and we shouldn't underestimate the inherent difficulties in finding a fair way to distribute tax revenues from the Commonwealth to the states and the territories. I might also say, given the member for Solomon was here speaking so passionately earlier today, that we shouldn't underestimate those difficulties but we should expect there to be continuous attention given to seeking the fairest way of reallocating and allocating tax revenues.
It is sensible that the Productivity Commission looked at the way that the Grants Commission administers the principle of horizontal fiscal equalisation, and it is sensible that we're now looking at a way to update and modernise the way that GST is distributed between the states by the Commonwealth, having regard to the way that the Commonwealth Grants Commission is applying the principles that it has to use. I'm sure most people here would look from time to time at the Commonwealth Grants Commission's decisions and see the task that's before the commission in seeking to apply the principle in a way that is fair and robust.
One of the things that has concerned me, being a Queenslander, in looking at what's happening to Western Australia is that I could see a similar thing possibly happening to Queensland in the future. I think it is a sensible compromise position and something that Labor has been leading on to look at a way to try to prevent the operation of the principle in a way that doesn't accommodate outliers. Of course, at the moment, Western Australia is the outlier economy. Instead of equalising to the best performing state fiscally, moving that to the second-best performing state will have a smoothing effect, which will go some way to dealing with the outlier issue. When you change formulas like that or change principles like that, you need to think about the possible winners and possible losers, to put it in particularly crude terms. I don't want my state to be a loser in relation to the GST.
I'm very pleased that there is movement on having a GST floor and, of course, I'm very pleased that there is a transition period during which there'll be a guarantee that no state will be worse off. But, like everyone here, I'll be taking a very close look at what happens after that transition period, in the event that I am still in public office at that time, and I'll be taking a very close look at the way that the government applies the guarantee that they're making. We certainly don't want to see, for example, money being given with one hand and taken with the other. In other words, we want to see a very firm commitment from the Commonwealth that they won't try to recoup the money that goes to the states through the GST distribution through other means, such as cutting funding to, for example, hospital partnership agreements or remote housing agreements, to pluck two examples from the air. The state government in Queensland has been very concerned about funding cuts in both health and remote housing and has been very vocal about that, so I expect the Commonwealth to honour both the letter and the spirit of the commitment that it's making: no state will be worse off.
I'm sure every Queenslander here will be doing everything they can to hold the government to account, no matter which party they're from. Whether we are from the party of government or whether we are from the party that's in opposition, every single one of us will be watching very keenly to make sure that the government honours in spirit its commitment that no state will be worse off. And we'll be watching that the government does not seek to make sneaky cuts in other places to try to recoup the money that's being allocated to prevent the erosion of states' revenue. I understand that the Treasurer has written to state treasurers to make a commitment to that effect. I don't know whether the Treasurer has tabled that letter here in the parliament yet. I certainly would encourage him, if he hasn't tabled the letter here in the nation's parliament, in the House of Representatives, to do so. It would give further assurance to Queenslanders that the coalition will be, as I said, upholding both the letter and the spirit of the commitment to ensure states are not worse off. As I said, I certainly look forward to making sure there is no erosion of the benefits of GST distribution to Queensland following the transition period as well.
I'm very pleased that we've reached a position that parties and states of diverse interests can get behind. I'm pleased that we're in a position to support this government bill here in the House. I certainly look forward to seeing any comments on it that arise in the other place, but I'm pleased that there is some way of resolving this to give everyone certainty. Our state governments deserve certainty, and of course the people that we serve here in this place deserve certainty. I'm very pleased to see that the bill is progressing in this manner and I'm proud of my colleagues from Labor for the constructive manner in which they have engaged with this very difficult issue, which can pit state against state. As always, they have done it in a way that is stable and unified and where they have been kind to each other—and we could all do with a bit more kindness in public life. Ultimately, everyone has taken a very firm position, everyone has worked very hard in the interests of their own state and their own constituency, and we're in a position where we are now able to reach some agreement, as I said, across party and state lines in relation to the proper distribution of the GST. I'm very happy to support this bill.
This is an extremely important topic for my state of Tasmania. I would like to reiterate some of the comments of the member for Griffith in saying that this side of the House, Labor, have been very united in our position on GST distribution for all states. While working through some very challenging state-by-state situations, we've come together in a most unified way.
I have to say that the history of this debate has been very long and very tortuous for states like mine, Tasmania. We have a government whose position—even when the Liberal Party were in opposition—has changed so rapidly, and now to something based on what Labor has been proposing. We've been consulting with states, consulting with each other and making our position very, very clear for the people of Australia. But when we've put forward policy positions on this, ways forward to deal with some of these challenges, we've met with considerable opposition from the Liberal Party, whether in opposition or in government. That has not given anyone in this country confidence in the Liberals' ability to put forward a proper solution for the GST and the way it's dealt with by each state. That's been an absolute shame, because on this side we've been very consistent. As to the other side, none of the states, like Tasmania, have any confidence that they wouldn't be worse off under this government.
Labor worked constructively with Western Australia in particular, in recognition of their position and the challenges they have been facing. But, equally importantly, Labor worked constructively to ensure that my state, Tasmania, would not be worse off. I can't say that that's been the case for the coalition. It's been a GST merry-go-round where on any given day the policy of the coalition has changed: changing the distribution to a per capita arrangement, increasing the GST, establishing a Productivity Commission inquiry, opposing but then supporting a floor price, and opposing legislation to ensure no states are worse off. And now this is where we find ourselves today.
As I've said, this issue is incredibly serious for the state of Tasmania. It's critical because of the revenue that comes to Tasmania through the current method of distribution, horizontal fiscal equalisation. It is a system designed to ensure that all states and territories are treated equitably. 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 the state's total revenue, which is quite considerable. This is a larger proportion than any jurisdiction other than the Northern Territory. Putting this into perspective, the current distribution of revenue represents 54 per cent of Tasmania's health expenditure or 71 per cent of education expenditure. So Tasmania's front-line services are incredibly reliant on GST revenue. More broadly, Tasmania's revenue sources underscore the state's reliance on all Commonwealth payments, including the GST, representing more than 60 per cent of state revenue. So you can see that Tasmania's not in a great position to start generating its own revenue.
This government, and maybe the future Productivity Commission report, might suggest that Tasmania starts selling off state assets, which would be a short-term fix but diabolical for the state. So any reduction in revenue to Tasmania will see devastating consequences to our schools, hospitals, police force, emergency services and the like. Let's put this into the context of what we're facing in Tasmania now. Our hospitals are already in crisis. This is due to state and federal Liberal budget cuts. Only very recently a leaked report stated that Tasmania is facing a $100 million underspend just in health. Our school retention rates and tertiary education rates are some of the lowest in yet. Yet for the last six years the coalition has threatened Tasmania's fair share of GST revenue.
The alarm bells for my state of Tasmania have been ringing since April 2012. The then opposition leader, the member for Warringah, visited Western Australia; and he then backed Colin Barnett, who was calling for the GST to be distributed on a per capita basis. Imagine what that would mean for the small state of Tasmania, with a population not much bigger than that of Geelong. This is what that member had to say at the time: 'I think that it does seem quite unfair that the people of Western Australia get so little back for their GST revenue that they provide to the rest of the country.' That's fair enough. But then he continued: 'I think that what ought to be very seriously considered by the government right now is a proposal that the GST revenue should be distributed on what is closer to a per capita arrangement. I think that makes a lot of sense.'
Sadly, that make absolutely no sense for the state of Tasmania at that time. That little thought bubble would have meant that WA, quite rightly, would have received an extra $2.4 billion but Tasmania would have been $700 million worse off—that's considerable for the size of our budget and our reliance on our GST revenue—which is the equivalent of $1,300 per person worse off. It would have meant that we would have had to cut a lot of services—fewer teachers, fewer nurses. It was during the fallout of the global financial crisis, which hit Tasmania hard and a lot later than other states.
Like the good soldier and supporter that he is, the great political genius Senator Eric Abetz poured further fuel on the fire when in March 2013 he said, 'The coalition might move closer to a per capita distribution.' What a good champion for Tasmania Senator Abetz is! In May 2013 Tasmanian Labor launched a 'Hands off our GST' campaign. From that point, the coalition ran dead on the issue in the lead-up to the 2013 general election. Things remained quiet until July 2015, when the Prime Minister and the now member for Warringah thought it would be a good idea to start debate about an increase in the GST itself. The member for Warringah said that changes in the tax mix were on the table and he would prefer to look at overhauling the GST rather than increasing the Medicare levy—this from the man who famously promised no cuts to health and education and, of course, said there would be no changes to the GST. We all know that was a bit of a falsification, as we know from history.
Prime Minister Abbott then said he was pleased that former New South Wales Premier Mike Baird had proposed raising the GST to 15 per cent because, in his words, the tax was 'a joint exercise by the Commonwealth and the state'. There was another gem from the member for Warringah after a COAG meeting: 'I'm not ruling things in, I'm not ruling things out, but my preference would be to consider the GST issue rather than the Medicare levy issue.' History now records what happens to the member for Warringah in September 2015 but it seems that under the leadership of the former member for Wentworth and his newly minted Treasurer—who is now this week's Prime Minister—the plans to increase the GST remained. In November 2015, in a speech to the Melbourne Institute's economic and social Outlook Conference, it was reported that the Treasurer gave the strongest hint yet that the Turnbull government planned to swap income tax increases for increases in the goods and services tax. The debate continued over the Christmas and New Year period of 2015-16.
On multiple occasions, the former Prime Minister and his so-called loyal Treasurer were given the opportunity to rule out an increase to the GST, but they chose not to. Finally, on 16 February 2016, the Prime Minister saw the writing on the wall and ruled out the government taking an increase in the GST to the next election—finally. That was another backflip. There are all of these backflips. But it was still under active consideration around the cabinet table, apparently. On that very same day his employment minister, Senator Cash, told the media:
We haven't taken it off the table completely, not at all.
This is just like juggling balls; I'm not quite sure where it's all going to land.
The GST debate paused for the 2016 general election, conveniently. But, after a narrow election result, the Prime Minister and Treasurer still had a problem to resolve. Rather than take responsibility, they hived off the issue to the Productivity Commission to inquire into the effectiveness of horizontal fiscal equalisation and to make recommendations to improve the system. But Labor knew something had to be done to address the concerns of Western Australia and ensure that states—like mine, Tasmania—were not worse off. In August 2017, Labor leader Bill Shorten announced that a Labor government would invest $1.6 billion in the Fair Share for WA Fund, bringing Commonwealth funding for Western Australia up to the equivalent of a 70 cent floor. Crucially for states like mine, Labor's policy did not change the current GST distribution formula. This government then chose to ridicule Labor's plan while dithering themselves, not really having much of an answer.
In October last year, the Productivity Commission released their interim report. The former Prime Minister and Treasurer had a golden opportunity to rule out any changes to the distribution of GST revenue that would reduce Tasmania's share. Instead, they chose not to. The Treasurer said that smaller states could require transition plans. In effect, that was an admission that Tasmania would be worse off. That's because the interim report revealed that Tasmania would be subject to a $168 million cut in one year alone. We would have to then beg and beg the Prime Minister and Treasurer of the day to give us a top-up each year. This $168 million cut that the Prime Minister and Treasurer were quite happy to pass on Tasmania, unless we begged hard enough, is equivalent to 1,600 teachers, 1,500 nurses or 1,300 police.
The Tasmanian Treasury responded in no uncertain terms to the interim report, saying:
Any reduction in revenue would have a significant impact on the State. Without any other funding from the Commonwealth this would mean either an 18 per cent reduction in expenditure on government services, or 18 per cent increase in State revenue from taxes, fees and dividends, or a combination of both. Clearly this would create an unsustainable budgetary position for the State.
The Government would have to decide how it would deal with the loss of revenue. Generally, there are three main options - a reduction in spending, an increase in own-source taxation revenue or an increase in State debt. The sale of State owned assets is an option which would only temporarily address the issue …
This is what Tasmania was facing only very recently: the prospect of putting up more state taxes and cutting spending and services to very vital front-line services when our health system is terribly underfunded and our education outcomes are not great. Otherwise, we could just sell off our state assets, which Tasmanians cherish very much and very much want to stay in state-owned hands. Time and time again, between the release of the interim report and the final report, the coalition was given the opportunity to again rule out Tasmania being no worse off. Time and time again, they didn't.
Finally, in June of this year, the Productivity Commission released their final report. What an absolute doozy that was. The former Prime Minister was full of assurances that Tasmania would not receive one cent less than what it receives now. But you have to put that into context over a period of time, in perpetuity. The prominent economist Saul Eslake's opinion of this was:
Mr Turnbull's 'guarantee' implies that Tasmania's share of the GST pie would fall from 3.7 per cent to 3.2 per cent over that period.
That would mean Tasmania getting $367 million or 13 per cent less in 2021-22 than it would if its share remained at 3.7 per cent.
That was another diabolical result for Tasmania. You have to think what the Tasmanian state Liberal team were doing. They were doing absolutely nothing. They didn't say a word. They were just going, 'Yes, okay. We'll cop that.' In real terms, this meant that Tasmania's share of the GST pool would decline and the ability of the government to fund essential services would have been solely reliant upon the government of the day providing those top-up payments to my state.
Foolishly, the Tasmanian Liberal Premier seemed happy to sign up to the new arrangements without actually seeing the detail. He and his Treasurer, Peter Gutwein, were assured by a phone call from the now Prime Minister, the Treasurer at the time—this is all getting a little bit confusing, isn't it? But how wrong they were. Labor and economist Saul Eslake were standing up for Tasmanians while Liberal Premier Will Hodgman fell silent. Mr Eslake called on the Premier to finally start protesting loudly on Tasmania's behalf along with other smaller states that stood to lose vast sums of revenue from this new arrangement. State and federal Labor called upon Premier Hodgman and Treasurer Gutwein to not accept a deal that was fundamentally against Tasmania's long-term interests.
But, of course, we saw some unedifying scenes in August this year with yet another Prime Minister being rolled. It's all very confusing. But did the chaos over the GST end? No, it only worsened. First of all, we had the revelation that the Prime Minister abused the Tasmanian Treasurer during GST negotiations, calling him a mendicant. Then, in early October this year, despite arguing for months that there was no need to legislate a GST floor, the Prime Minister decided he would follow Labor's lead and propose the legislation. We welcomed the Prime Minister's backflip—there have been a lot of those over the years on this issue—but we remained concerned that a legislated guarantee was needed so that no state would be worse off. Again, the Prime Minister and the Treasurer rejected Labor's calls. Even after every single state and territory Treasurer united in calls on 3 October for the guarantee, the Prime Minister and the Treasurer refused to give it. I have to say that the Tasmanian state Liberals at that point were ready to cross the floor, bowing to the pressure of we Tasmanian backbenchers and Tasmanian Labor senators when we wrote to them to support the amendments that we were proposing to make sure that Tasmania would not be worse off. They finally said, 'We might actually cross the floor on that.' They actually took a bit of a stand. How long did it take those terrible Liberal senators to stand up for my state!
That's a potted history of this government's backflipping on whether or not Tasmania should be worse off—with a Liberal Senate team not actually standing up for Tasmania but Labor arguing for six and a half years to make sure that my state and our services and the jobs of our teachers, our police and our nurses would be protected because we would have our fair share of GST revenue.
I rise to speak on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair of GST) Bill 2018. I want to start by saying that we've seen what happened in Western Australia over the last couple of years with their share of the GST, where, for every dollar that the Western Australian people spent on GST, their state got only 30c back. People living in Perth, Geraldton and Broome wouldn't believe it if they read it—that they could go out and spend their cash, buy a new car and buy food each week and, for every dollar that they spent on GST, they'd receive only 30c back. That tells me that the way that the GST has been delivered over the last few years is broken. It just doesn't seem right.
I understand that the government here is increasing a lot more funding to the states. This bill isn't just making sure that every state and territory gets their fair share of GST; it's their fair share of GST plus their fair share of the income tax that we're collecting as well. Basically, we're throwing a lot more money at the state governments. That's what we're doing here. We're giving them the GST that they collect but, in order to keep every state happy, we're also giving them a lot more in other taxes that the federal government collects. Given that neither side has run a surplus since John Howard and Peter Costello back in 2007, I do have some concerns around that. I believe in reward for effort. When I look at what some of the state governments do and how they prioritise their funding, I have a concern with giving them more cash when they waste it on a whole lot of things or when they don't look for new projects that they could do in order to bring more income into their state.
If we look at Queensland at the moment, we see the Labor state government spending money left, right and centre on things which I don't necessarily think are important—for example, changing the name of the Lady Cilento Children's Hospital, which is going to cost, they say, some $50 million. It will probably actually cost a lot more than that. Also, when we wanted to invest money through the NAIF to support mining jobs, we saw the Premier in Queensland using her authority to block that and block more investment, more jobs and possibly more mining royalties for the state of Queensland. We've seen massive increases in the public service, whilst they have also got some $80 billion worth of debt. Millions were spent by state government ministers on the Commonwealth Games recently on the Gold Coast for accommodation. That's just Queensland alone.
If you look at Victoria and New South Wales, we're basically seeing those two states put a moratorium on gas exploration projects. They've basically said, 'No new mining projects and no new gas projects,' when Australians have actually had a shortage of gas. It's our government that's had to try to address that by basically making sure the gas companies keep more gas for Australians. They've had to try to possibly balance the projects they've had with Japan and others. We've seen states like Victoria and New South Wales say, 'No more gas.' So they're missing out on mining royalties but, at the same time, they're getting millions and millions of dollars extra from the Commonwealth in this deal.
In Tasmania, too—the member for Lyons touched on it before—over the last decade we've seen that they've basically stopped logging in some ways. They have a tourism industry, but state governments and activists down there have stopped income-producing assets being continued. Then they come into this parliament and cry poor. So I do have concerns about that because, ultimately, state governments have a lot of power in our Constitution and they need to be held accountable for the decisions they make.
Mr Snowdon interjecting—
I'd ask the member for Lingiari to withdraw that comment, if he would.
Thanks. You can speak in a minute. I do have concern that state governments aren't held accountable for their actions. In this bill, we give these states the GST pool but we're also throwing hundreds of millions of dollars in additional revenue, when we're not balancing the budget, towards them. I do understand that there will be a review of this act, kicking it down the road towards 2026, but I believe that the parliament needs to look at that and makes sure the states are held accountable.
I thank the member for Petrie for acknowledging me! This bill—the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018—is very important, but I want to acknowledge him and say that here he sits in his glasshouse—
You do have a right to be heard, and I'm pleased you were heard. I want to actually explain why what you said was, in a sense, an insult. What you've basically got up here and said this evening is that the governments of Queensland, Victoria, New South Wales and elsewhere in Australia are not accountable for what they do. They, like your government, are accountable at every election. If they make the wrong decisions, they will be held accountable. Let me give you an example of a decision taken by Campbell Newman when he was the Premier of Queensland. Campbell Newman, this great, bright Premier, decided he would change the funding available to public health. As a result, he cut public health expenditure in North Queensland. It's true to say this: the fact that they cut positions in public health, at the department of health in Queensland, led to the start of a syphilis outbreak which spread across northern Australia. That was a direct result of a decision taken by Campbell Newman. He was held accountable. What happened to him? He lost government.
Let's be very, very clear. State governments, which are, like governments in this place, elected by the people, are held accountable at every election. If they make the wrong decisions for their electors, for their states, they are held accountable. Member for Petrie, what you need to understand, my friend, is that that accountability goes both ways. You can spray who you like—the government of Queensland, the government of Victoria or the government of Tasmania, or the government of the Northern Territory, for that matter—but ultimately they should take responsibility, and they do. We may not agree with it, we may not even like it, but you shouldn't try to say, as you've tried to say, that they should be accountable to you for what they do. They are accountable; they are accountable every time they go to the polls.
This legislation, as we've heard, will change the nature of the way in which the principle of horizontal fiscal equalisation is applied. That's important, and it's important because it will have a significant deleterious impact on some communities across Australia, such as, in this case, the Northern Territory, and I want to explain why. GST is currently distributed to the states and territories according to this principle of horizontal fiscal equalisation, and, up until now, it has been based on payments to the fiscally strongest state. Western Australia became the fiscally strongest state in 2008-09, thanks to the mining boom, and will remain the fiscally strongest state for the time being. As a result, the government has now chosen to change equalisation to the second strongest state, either New South Wales or Victoria, and this, it has said, will remove the effect of extreme circumstances—like mining booms—from the GST distribution system, due to those states having broad based and stable economies.
But, in a place like the Northern Territory, it means that the Northern Territory's revenues will decline. That's an issue of huge importance to the people and the economy of the Northern Territory. It is of far greater importance to the Northern Territory than to anywhere else in the country. We say that because, on the Northern Territory government's own figures, GST revenue alone accounts for 47 per cent of the Northern Territory government's total revenue—47 per cent—compared to 24 per cent of total state revenues. If there is a change in the way in which the formula is applied and if money is lost as a result of that change in the formula, then it stands to reason that there would be a long-term impact on the Northern Territory budget and on the Northern Territory economy.
Since 2016, the Northern Territory's GST revenue forecasts have seen a cumulative decline of $3.4 billion over the forward estimates. This is in an annual budget of around $6.3 billion. That's a huge decline, and it reflects the significant declines in the Northern Territory's GST relativity between 2016-17 and 2018-19—from a 10-year average of $5.28 to $4.66, and now to $4.26, the lowest GST relativity in the Northern Territory's history. That's a loss in revenue of some $500 million.
I live in the electorate of Lingiari. For those listeners who may not know, the electorate of Lingiari is all of the Northern Territory except Darwin and three-quarters of Palmerston. So, if you exclude the major metropolitan centre of the Northern Territory and you look at the rest of the Northern Territory, that's Lingiari. What do we know about the electorate of Lingiari? Well, 42 per cent or thereabouts of its population are Aboriginal people, with a high proportion of those living in dispersed populations across that remote region of 1.34 million square kilometres. There is a challenge for any government, whether it's Labor, which is currently in government in the Northern Territory, or the CLP, which was previously in government—not that it did it very well, I have to say; in fact, it squandered its money. I was talking about accountability. They were held accountable. They were held so accountable they've basically got only two members left in the Legislative Assembly—they're hardly an opposition. They were held accountable for the way in which they ran the Northern Territory.
What I need to say here is that, whether it's the CLP or the ALP in power in the Northern Territory, they are going to be long-term dependent upon revenues from the Commonwealth. Almost 70 per cent of the Northern Territory government's budget has its source in Canberra, whether it's the 47 per cent through GST revenue or other direct payments. There's no getting away from it. Yet the principle of horizontal fiscal equalisation is that you have the fiscal capacity to provide a similar level of services that are available to everyone else in Australia.
Now, contemplate this. In a place like the Northern Territory, the population is dispersed, as I said, and 42 per cent live in the most disadvantaged communities in the country. I know of one community of 3,000 people where the average housing occupancy is 15. This morning in this place we had a discussion about rheumatic heart disease. Rheumatic heart disease is a disease of poverty, something which is preventable. But you won't prevent it unless you get rid of overcrowding and change environmental health and the way in which you apply health services, and that requires resources. They are extra costs which governments have got to meet. So, for the Northern Territory government to do its job, it requires the assistance of the Commonwealth. I heard the puerile statements from the member for Petrie, which just show how ignorant he is of the way in which this process operates across Australia.
I want to say this: I respect the fact that the states have got to get together and work with the Commonwealth around the distribution of these resources. But it is extremely important that there is an understanding of why we've got to have this process of fiscal equalisation and why, in the way in which this formula changes, it's likely the Northern Territory government will lose further revenue unless additional resources are provided to it. I have to say that, while this bill changes the formula, it does not provide for additional top-up funding, although I note that the Treasury and the Treasurer—I'm not sure if it is this Treasurer or the former Treasurer—had agreed with the Northern Territory government to provide them with some top-up resources. But, in the long term, they're going to require this into the future. If they are going to be able to provide the resources their citizens need for health, housing, education, roads and other infrastructure, then they need ongoing recognition of this principle of horizontal fiscal equalisation and they need to address the disadvantage that people have. If we don't continue to fight for that, then we're condemning the Northern Territory into a parlous future where the infrastructure that's required to provide a healthy population with the conditions it needs to remain healthy and to provide people a safe living environment, a proper educational opportunity, job opportunities and the like will only come when we can ensure that these investments are ongoing.
We know that the private revenue base in the Northern Territory is limited, but I note that the member for Solomon pointed out that they had their first sale of LNG floating out of Darwin Harbour this morning. That's a very good sign of revenues that will come into the Northern Territory and, indeed, the Australian economy as a result of gas exploitation off the Northern Territory and Western Australia and through production facilities in Darwin. We know that there are other major mining enterprises which operate in the Northern Territory and prospective mining enterprises which will operate. We know that the pastoral industry is important, that the agriculture industry is important and that horticulture is important, but together the revenues that come out of the private sector into the Northern Territory economy account for about 30 per cent. That is, taxation and other sources account for only about 30 per cent of Northern Territory government revenue. So we're going to have a consistent and continuing requirement for the Commonwealth government to accept its responsibilities, whether it's the Treasurer who's currently sitting before us as the Treasurer or a future Treasurer, to ensure that the citizens of the Northern Territory are not further disadvantaged by changes to the GST formula.
I know that the Northern Territory government will continue to fight. I referred to the opposition in the Northern Territory as the CLP, and that includes Senator Scullion, but we don't see them standing up for the rights and interests of the Northern Territory community or the Northern Territory population generally. We have a responsibility in this place, as they have, to speak up for the people of the Northern Territory and to support the quest by the government of the Northern Territory to get fair and decent treatment around the issue of horizontal fiscal equalisation and the distribution of GST resources across the country.
I understand what was going on in Western Australia. I have to say, I wasn't that sympathetic when I first heard it, but, nevertheless, I accept the requirement to address the losses that they incurred. We've seen that the opposition will support this piece of legislation, but we should not discount the impacts of changing GST formula for the smaller states and territories and, in my own case, particularly the Northern Territory, where, as I say—
That is simply untrue. He's a scandal, this bloke. He sits here, in all his glory, and tries to tell us that he's done more than anything else.
Mr Frydenberg interjecting—
You're in all your glory still. I have to say: with a haircut, you'll do okay!
Firstly, I'd like to thank those members who have contributed to this debate, on both sides of the chamber. The bill reforms GST payments to the states and territories by providing a fairer and more sustainable way of distributing GST. It's a plan that leaves all states and territories better off. Since it was introduced in 2000, every dollar of GST raised has been distributed to the states and territories according to the system of horizontal fiscal equalisation. However, in recent years, the mining boom created significant volatility in the distribution of the GST. The government's plan will, first, create a new equalisation benchmark, the stronger of New South Wales or Victoria, whichever is the higher. Second, it will introduce a permanent in-system relativity floor of 0.7 from 2022-23, increasing to 0.75 in 2024-25. Third, it will permanently boost the GST pool of funds available for distribution to the states and territories by providing direct Commonwealth cash injections each year, from 2021-22 onwards. These are in addition to GST collections. Fourth, during the transition period from 2021-22 to 2026-27, states and territories will be guaranteed the better of the old system or the new system. The CGC will annually verify the payments resulting from the guarantee in a way that is consistent with division 1 of part 2 of the Federal Financial Relations Act. The Treasurer must have regard to this advice and consult with each of the states. The Treasurer will maintain his current role under the updated framework, consistent with the existing law and long-established practice. Fifth, by 2026 the Productivity Commission will conduct an inquiry to assess whether the updated system is working efficiently and effectively and operating as intended. Sixth, it will separately provide 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. All states will be better off, with the Commonwealth injecting an additional $9 billion over 10 years to 2028-29. The GST pool from 2026-27 will grow by more than $1 billion each and every year, compared with what would have occurred without these reforms.
We have provided a national solution to a national challenge. That is what leadership is about. Let's bear in mind that, since the GST was introduced, the revenue pool has more than doubled, and it's expected it grow by another 65 per cent over the next decade. However, the GST as is has seen its integrity threatened and its sustainably threatened. We had a situation where Tasmania, with one-fifth of the population of Western Australia, and the Northern Territory, with one-10th of the population of Western Australia, were both getting more of the GST pie than Western Australia themselves. Clearly, that was unsustainable. What we have done is we've come up with a long-term solution, because, when it comes to the GST, we want to ensure that the services provided across the country are at a certain standard. As former Prime Minister John Howard said, 'I'm an Australian, and, as far as I'm concerned, all Australians should be treated equally, no matter where they live.'
If you're in Victoria, you'll be better off as a result of the government's boost to the GST distribution pool by $425 million by 2026-27. If you're in New South Wales, you'll be better off to the tune of $351 million by 2026-27. If you're in Queensland, you'll be better off to the tune of $518 million by 2026-27. If you're in South Australia, you'll be better off by $257 million by 2026-27. If you're in Tasmania, you'll be better off by $112 million by 2026-27. If you're in the ACT, you'll be better off by $46 million by 2026-27. If you're in the Northern Territory, you'll be better off by $189 million by 2026-27. If you're in Western Australia, you'll be better off by over $3.3 billion by 2026-27. These are based on the numbers and the projections put together by Treasury and put together on the basis of the data collected by the Productivity Commission.
This is an important piece of legislation. This is a result of the Commonwealth's leadership. This is a result of the Liberal and National parties taking the hard decisions and coming up with a long-term solution. I commend this bill to the House.
Question agreed to, Mr Wilkie dissenting.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.