Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

When I was speaking earlier on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, I was recounting the history of the GST legislation.

I mentioned that the GST was first introduced in 2000, but we know that Mr Howard, the former Prime Minister, indicated in 1995 that there was:

… no way that a GST will ever be part of our policy. … Never, ever. It's dead.

But we know that after he was elected, the Liberals changed their tune, with Mr Howard describing the GST in the year 2000 as 'something the country has needed for more than 20 years'. Of course, this issue goes to the heart of our concerns about this government's propensity to backflip on its promises.

The Liberal Party has more form on changing its mind in relation to the GST. During the 2013 election campaign, Mr Abbott said:

Let me be as categorical as I can, the GST will not change. Full stop. End of story.

And:

… the GST simply can't change unless all of the states and territories agree …

And yet, here we are debating the coalition's changes to the GST that the states and territories have reservations about. A letter from the Treasurer of Queensland makes it quite clear that this is a unilateral change by the Commonwealth.

The reservations that we have expressed stem partly from the fact that the new arrangements mean that, while states and territories not performing as well economically as the stronger of New South Wales or Victoria will be topped up, those who outperform the benchmark will keep their surplus funds. That means that there will need to be more money to distribute, hence the need for an injection of Commonwealth funds to the overall GST money pool. Other reservations of the states and territories centre on the ministerial discretion in decision-making written into this legislation.

There are still questions to be answered by the coalition: Where is the money coming from? How will the new system address economic volatility? What is proposed after the seven-year guarantee that no state or territory will be worse off expires? What will the terms of reference be for the Productivity Commission review? Will the states and territories be guaranteed input into that process? These are questions that I hoped would be answered when the Senate Economics Legislation Committee, of which I'm the deputy chair, inquired into this bill last month. That committee received evidence from all states and territories, the Treasury, the Minerals Council of Australia, Rio Tinto, the Institute of Public Affairs, the Chamber of Commerce and Industry of Western Australia, and the Chamber of Minerals and Energy of Western Australia through a public submission process and through our public hearing in Canberra.

There was evidence, particularly from Western Australian business and resource groups, that the proposed change in distribution method would encourage states and territories to work harder to develop their own economies in order to retain a greater share of the benefits, if outperforming the benchmark state. There was evidence from other states and territories that the current system of HFE is adequate and not broken, and in some cases, as in the case of the South Australian submission, there was an argument that it should be retained.

Labor senators made additional comments in that Senate inquiry report that echo the reservations that I've outlined to the Senate. We pointed out that, once again, the coalition dragged its feet on an important financial reform and, once again, it took Labor action, through announcing our policy, to get the government moving. It was Labor who announced that we would legislate a floor for GST relativities—action that was eventually copied by the Morrison government after they had said in July that 'there's no need to do that'. That was in the committee report. The flip-flopping marketing man, our new Prime Minister, Mr Morrison, soon recognised that Labor was right, just as we were right to fight for the no-state-worse-off guarantee to be enshrined in legislation—another element initially rejected by the Morrison government, with new Treasurer Frydenberg suggesting administration costs would be too high. I note from the report that Mr Frydenberg said:

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

Based on that, the Treasurer had previously expressed his opposition to the no-state-worse-off guarantee. But it was only a week until Mr Frydenberg flip-flopped his way back to Labor's position—a position quite vocally shared by the states and territories.

So it's clear that only Labor can stand up for the states and territories when it comes to unfair coalition legislation. And we echo their call for transparency around the top-up funding and where that will come from. We want to know how this government, which is consistently big on headlines and thought bubbles and short on detail, intends to find the $9 billion that it is promising to top up the funding pool. Labor shares the real concerns of the states and territories about whether other funding sources will be cut to offset the Commonwealth contribution to the GST pool. That's why Labor senators recommended in our additional comments to the committee's report:

That the letter from the Federal Treasurer to the State and Territory Treasurers stating that 'any additional financial assistance referred to in the bill will not be offset or partially offset by a decrease in other grant funding to the states' be tabled during the Parliamentary debate.

I'm grateful Minister Cormann did provide that letter—I believe he tabled that yesterday. I see that we have a letter from the Treasurer to the Treasurer of Queensland. I just want to read into the Hansard the very important commitment.

I also confirm any additional financial assistance referred to in the bill will not be offset or partially offset by a decrease in other grant funding to the states.

So, that, I think, goes some way to addressing some of the concerns that we have.

A number of the states and territories made reference to this letter in their evidence. In my home state of Queensland, the state government's submission said:

The Australian Treasurer gave assurances in his letter to the Deputy Premier and during the second reading in Parliament that the updated system will not be to the detriment of other payments to states. However, this is not reflected in the Bill or the Explanatory Memorandum.

… … …

The Bill (and Explanatory Memorandum) should be amended to require that pool top-up and additional financial assistance will not come at the expense of other payments to the states.

I want to take a minute or two to look at the Queensland government's submission. For Queenslanders, it highlights some of the concerns that we have. We know that Queensland has the most decentralised population of all the Australian states and is uniquely exposed to arbitrary changes to the GST system when we abandon the principle of full HFE. This is reflected in the Queensland government submission. The system that we've had has meant that Queensland has received less than its population share of GST revenue in some years and more than its share, depending on the economic circumstances. Queensland is particularly exposed in this matter because the GST revenue for Queensland in 2018-19 represents about one-quarter of the state's total revenue. We really need to get this issue right. The Queensland government submission said:

Despite promises of consultation and opposition from states to proposed changes, the Morrison Government introduced the … bill in October 2018. The Bill will permanently change the system of distributing GST revenue …

The Palaszczuk government in its submission acknowledged that the government has taken, as I said, a unilateral decision to amend the legislation. The Queensland government does welcome the recent amendments to the bill, in particular the 'no state will be worse off' guarantee and the Productivity Commission inquiry, but there are still some concerns. The Queensland government made seven recommendations, which, I think, are all eminently sensible.

One of the things that I was concerned about in relation to the revised GST arrangements is that under the government's preferred model, in the year 2023-24, Queensland was going to be the only state over the transition period that would be financially disadvantaged in comparison to the existing arrangements. During the course of the Senate hearing, I sought clarification from Treasury officials, and they made it very clear that the no-worse-off guarantee applies to individual years over the course of that transition period. Ms Phipps said:

… we would look at what the difference was between what a particular jurisdiction had got over the course of the previous years under the updated system. If, in the example Queensland gave, they were $100 million worse off in 2023-24, but, for example, were $80 million better off in the updated system across the years prior to that, then the top-up would be $20 million to make sure that, in that year, Queensland was cumulatively in the better of the two systems—was better off.

It has been clarified that those top-up payments do occur within the transition period.

We forgive the state and territories, particularly Queensland, for their cynicism or scepticism about this issue. My home state has been the victim of vicious coalition cuts at both the state and federal levels—devastating cuts to health and education. In most recent times, we've had the Newman government that sacked 14,000 workers, and we've seen cuts at a federal level to public hospitals and penalty rates, and there are less apprentices. We know that it's Labor that have done the hard yards on economic management. We've announced hundreds of policies in the lead-up to the federal election. Our policies are researched and they're costed. We're absolutely up-front about where the money's coming from with our election commitments.

I want to conclude today by mentioning some of the points that the shadow Treasurer, Mr Bowen, has written about in an opinion piece. Mr Bowen has said, 'You can trust us with the economy,' because on this side of the chamber we take a holistic approach to economic growth, encompassing tax, infrastructure, connectivity, entrepreneurialism, foreign policy, and, most importantly, investment in human capital. While the coalition cancels COAG and prioritises campaigns, but not campaign bus trips, and covert fundraising efforts, Labor are getting on with the job. We are developing the policies Australia needs to prepare for the future and to bring back the fair go. Labor are stable and united. Labor have listened to the Australian people. We have the policies and the drive. Labor are ready to govern.