Chris Ketter (Queensland, Australian Labor Party) Share this | Link to 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.

Peter Georgiou (WA, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

I've been a passionate advocate for GST reform. I am pleased that the government has finally listened to my calls on behalf of all Western Australians for a fairer slice of the GST pie. This bill is long overdue and will finally make an attempt to correct some of the wrongs of the horizontal fiscal equalisation and its effect on successful economies like that of Western Australia. The extra money will allow the state government to fund schools, hospitals, road upgrades and other infrastructure as needed and hopefully pay down some of our huge debt in Western Australia. It is clear from the Productivity Commission report that Western Australia generated more state sourced revenue than any other state and, as a result, has been penalised for its achievements over the last decade.

Horizontal fiscal equalisation provides a disincentive that spins off in relation to the approval and exploitation of mineral resources located within states and territories. This is the main problem here in WA. Under the existing system, the vast bulk of the additional royalties associated with new mining developments leaks to other states and territories within two or three years. Under the current system, Australian states do not need to strengthen their own natural-resource industries because they know they can sit back and wait for GST redistribution to equalise their capacity every year. If New South Wales and Victoria developed their offshore-gas sectors, they could create billion-dollar industries and inject millions into their own state government revenues. Under the current unfair system, we have effectively removed the incentive for states to develop all their resource industries, and the nation as a whole suffers.

The key question is: why would a state or territory take all the political heat associated with facilitating new mines only to have most of the additional royalty income shared with other states and territories that have not had to face similar political problems? Another critical question I'm asking is this: how is it possible that the revenue from gambling taxes is not included in the GST distribution formula? Western Australia's decision to limit pokie machines means the state has relatively little gambling tax revenue but is penalised for this in the distribution of GST.

The thing about the GST distribution is that it's a win/lose scenario. Giving more to WA must involve giving less to other states, particularly those that are typically overfunded—South Australia and Tasmania, in particular. It's time to get real. Instead of trying to keep everyone happy, the government should announce that the distribution of GST will move to a per capita basis over a five-year time frame, for instance, and in the short term those states that lose out would be partly compensated.

When it comes to the principal of HFE, all citizens should have access to similar services. The federal government should make this happen with specific grants to the states and territories. This would add accountability to the system. The way the GST is currently distributed completely lacks accountability. At the same time, I'm concerned that the government will be dipping into its own coffers to the tune of billions of dollars to ensure no state is worse off. The Treasurer said that all states would be better off with the Commonwealth injecting an additional $9 billion over 10 years to 2028-29. The states of South Australia and Tasmania and also the Northern Territory should suck it up. They've had it too good for too long at the expense of other states. They may even lift their game as a result.

In reality, the Commonwealth is doing the minimum as a step towards genuine GST reform. This bill is not perfect. There are still other issues that need to be changed as well. It will take about 10 years to reach full implementation. The date of effect for the updated HFE system, along with a boost to the GST revenue pool, is transitioned into effect from 2021-22, with the new arrangements applying in full from 2026-27. The GST floor is introduced in two stages, with an initial floor introduced for 2022-23 and then raised for 2024-25. The short-term transitional payments apply for three financial years, starting in 2019-20. The Productivity Commission inquiry is to be completed before 31 December 2026. Given what I mention here, I remain unconvinced about the government's desire or intent to pay off the nation's rapidly rising debt and I have concerns about its budgetary and fiscal management skills. I will be supporting this bill despite its many failings for a long-term solution. At least it's a small step in the right direction.

Anne Urquhart (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to speak on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018—a bit of a mouthful. What an absolute dog's breakfast the Abbott-Turnbull-Morrison government has made of this debate. Who could forget that in September this year, just weeks after ascending to the prime ministership of this country—an ascendancy he still cannot explain—Prime Minister Morrison is reported to have called the Tasmanian Treasurer, Mr Peter Gutwein, a mendicant for questioning the PM's original fix? The Tasmanian Treasurer, a mendicant for sticking up for his state! If this is the language that Mr Morrison uses to describe fellow Liberal treasurers, imagine what he says about the rest of us! He tries to hide his elitist attitude with his rolled up sleeves and silly hats, but we all know that, while the PM represents a seat in Sydney's southern suburbs, his true affinity is with Sydney's leafy eastern suburbs, exactly the same as the man that he deposed. The arrogance of the man, throwing around 'fair dinkum' more than Russell Coight, Alf Stewart and Steve Irwin to try to speak to us 'normal people' and then barking down the phone at the Treasurer of Tasmania, saying that over half a million Australians are mendicants, as if to say we're not entrepreneurial, not hardworking and not looking to grow.

It hits right at the core of Tasmanians. It's a smaller state, a little island at the bottom of this big country, but we produce. For over 20 years as a union official with the Australian Manufacturing Workers' Union, I worked day and night with hardworking Tasmanians to get a good deal at work, to continue to grow jobs and opportunities and to secure more investment in Tasmania. To say that our shipbuilders, our heavy vehicle manufacturers, our food manufacturers, our farmers, our component manufacturers, our miners, our foresters, our fishers and all our service providers are mendicants in this nation is an absolute disgrace. Why, Mr Morrison, are hardworking Tasmanians less worthy of good schools, great hospitals and decent roads? Why are we less worthy? And why, Mr Morrison, are hardworking Tasmanians less worthy of strong public services, decent housing and secure jobs?

His statement to the Tasmanian Treasurer and subsequent denials go to the heart of Mr Morrison's values. They go to the core of his elitist attitude to the country. And, worse, they demonstrate again that, when flustered, Mr Morrison buckles under pressure. In the face of legitimate questions from a fellow Liberal treasurer, he wouldn't seek to work through their differences but resorted to cheap abuse, demonstrating his inability to do the job and his disdain for hardworking Tasmanians.

Of course, it didn't have to be this hard for Mr Morrison. This robust debate, as we all call it now, with the Tasmanian Treasurer was about ensuring that no state was worse off. Mr Morrison denied for months that such a guarantee was necessary, even though politicians from all sides, including his own Liberal Treasurer and the Premier of Tasmania, were clear that the guarantee was crucial to ensuring that no state was left behind. So poorly did this ATM government handle this debate that they caved and announced a limited guarantee only after their own Liberal senators finally realised the problem and threatened to cross the floor to support a Labor amendment to protect every state's and territory's share.

If Mr Morrison really cared about Tasmania, really cared about supporting our students and patients and supporting our future prosperity, he would have committed to a guarantee back in July. We're not talking about a few thousand dollars here—a few days' bus hire or a few hundred trucker hats. Respected forecasters estimated that, at worst, Tasmania could lose $248 million without a guarantee. That's almost a quarter of a billion dollars. This would have been a massive hit to our health system, which is already in crisis after years of Liberal cuts and inaction. It would have further stretched our schools, leaving more Tasmanians behind after years of under-resourcing by the Liberals. Instead, Mr Morrison performed a last-gasp backflip, just days after ruling out a guarantee in Hobart. He held on for months. Why?

Tasmanians cannot afford a deal on GST that would impact on our state's ability to deliver the best possible essential services both now and into the future. Was it because Labor sought the guarantee? Is it pure politics for this Prime Minister? He saw a way to try to solve the issue, but he failed to account for some basic concerns. Faced with legitimate questions, he bunkered down for months and months, only relenting when his own senators couldn't stand by him anymore.

It continues this GST saga to which Labor provided a clear answer years ago—a saga in which Mr Morrison, as Treasurer, delayed releasing the Productivity Commission's report until after the Tasmanian and South Australian state elections in March in a desperate ploy to help his Liberal counterparts. It is a saga that continued for three-quarters of the Braddon by-election. As Mr Morrison dodged questions from all sides about how he would find a way through without leaving Tasmanians worse off, in July he announced the first part of his GST reform—and I say 'first part' because he neglected to include a provision that no state would be worse off. His announcement was flashy. It was the typical big-spending, carefree approach to budget management that we've come to expect from the Liberals. Every state and territory would be better off, with the top-up payment a sweetener. A flashy Facebook post on the Tasmanian Liberals' page claimed, under the Turnbull government. 'Tasmania's GST funding secured—$112 million better off,' and then in brackets it said 'over the next eight years'. The word 'secured' was underlined with a big, brash, gold line—or was this a big, brash golden lie, to try to rebuild some faith with the Tasmanian people ahead of the Braddon by-election, just a few weeks later?

Independent economist Saul Eslake has warned that the $9 billion top-up funding could be pooled from specific purpose payments made from the government to the states. As he notes:

After all, that's what the Abbott government sought to do in its first budget ... put its budget back into surplus by cutting payments to the states.

These specific purpose payments are used to fund vital services such as schools and hospitals, services that this government continues to gut, making their delivery unviable and unsafe in some instances. In Tasmania, we see the same occurring at a state level, as our state Liberal counterparts continue to rip money from schools and hospitals under the flawed logic that cuts, cuts and more cuts will deliver their utopian budget surplus. Teachers and nurses are protesting unfair work conditions—stressful and dangerous conditions—by walking off the job, and rightly so. Under Mr Morrison's GST fix, things in Tasmania are only going to get worse if the current state and federal Liberal governments are allowed to cut essential services at every turn. Labor's model of keeping the current system and providing a top-up payment that would not come from ripping money back off the states specific purpose payments or national partnership payments is a fair and equitable system that ensures states and territories have the ability to provide the much needed services for the people.

At the heart of the current GST system is the foundational idea that all states should be able to provide a standard level of services to its people. This takes into account states like Tasmania, which has to spend more to provide the same standard of services as other states due to disadvantage and isolation. Tasmania is the only state in the country that has the majority of its population living outside its capital city. We are the most geographical dispersed state. This makes the delivery of services increasingly difficult, and we have seen the current state government failing miserably with the delivery of such services. We have bed blocks in every hospital, ambulances that spend more time ramped at the entrance of a hospital emergency department than they do out on the road and a mental health crisis that sees patients seeking urgent medical care sleeping on the floors of our waiting rooms. Let that sink in. Patients are sleeping on the floors of our hospital emergency rooms.

We see them ripping money off the states' specific purpose payments or national partnership payments, which is a fair and equitable system that ensures states and territories have the ability to provide services for the people. Our state health and education systems are at breaking point. Every year, the cost associated with putting on a nurse or a teacher increases. Every year, the price of consumables increases. As Tasmania's population continues to age—at the fastest rate in the country—the cost of our health system is going to continue to increase.

Will Mr Morrison's fix solve that? Will it deliver more specialists to isolated Tasmanians living on the west coast? Will it be funded by reducing other grants to Tasmania, thereby not fixing any of the problems that I've just outlined? This government must ask itself, 'What level of services do Tasmanians deserve?' The potential clawback of grants and payments that are specifically used to fund, for example, early childhood education programs, essential vaccines programs and family violence prevention programs to fund a top-up payment to states and territories is not what I would call a fair go. This is the question that Mr Morrison refuses to answer, and one that, in many respects, he can't, because, of course, so much power is afforded to the government of the day.

If Australia continues with governments like the ATM Liberal-National shambles—a government that cuts essential services at every opportunity, a government that slashed infrastructure spending across the country and a government that wanted Australians to work until they were 70 on lower wages and with a lower pension at retirement—then we know that they will cut grant funding to pay for part or all of this GST top-up fix. Past behaviour is the best indicator of future behaviour, and this ATM Liberal-National government has form. It's a government led by a man who says Tasmania is a mendicant state. If he is re-elected next year, we will have to beg for top-up payments and other grants to continue at the promised and current real levels. Tasmanians deserve a government that will prioritise essential services, and that government would be a Labor government. It's time to get rid of this ATM Liberal-National government before they do any more damage.

Helen Polley (Tasmania, Australian Labor Party, Shadow Assistant Minister to the Leader (Tasmania)) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. Labor supports every state and territory getting their fair share of GST, and Labor supports this legislation. In fact, we called for this legislation. When we announced our position of making the floor which will apply to every state and territory, the former Treasurer, now Prime Minister, said that it was unnecessary and it wasn't needed. But, true to form, the Liberals have backflipped yet again on another Labor position—and we welcome it.

I won't go into great detail about the long history of the GST distribution, but there are a few points that I would like to make. Labor welcomes the fact that the Morrison government have caved to pressure from states to provide legislative guarantee on the GST that no state will be worse off. Unfortunately, there is still no guarantee that Tasmania will not be worse off past 2026-27. This is perhaps one of the most important debates, where any changes could almost certainly damage and harm Tasmania. This ineffective Prime Minister pitted states against one another. He has made GST reform a battle between the states instead of bringing states together. Instead of bringing the country together, this Prime Minister's chaos and division not only wreaks havoc within the government; he would prefer that it did that in the community, too. The Commonwealth government should always be concerned about the long-term financial security of every state, not merely one state or the other that they call home. Tasmania's inept Liberal senators have remained largely weak and ineffective on this issue, and Tasmanians will not forget it. We saw for months how ineffective the Tasmanian Liberals were at the state and federal level in being able to lobby for a better deal for Tasmania over the long term. Again, I remind the Tasmanian Liberal Senate team: Tasmanians won't forget this. They expect you to stand up to your Prime Minister when he's dishing out a raw deal for Tasmania.

The Turnbull-Morrison governments have taken Tasmania for granted in more ways than one, and not merely on the issue of the GST. As Treasurer, Scott Morrison did not deliver one new dollar on infrastructure for Tasmania or one new Public Service job. Mr Morrison and Mr Frydenberg's first plan for the GST distribution would have seen Tasmania lose a reported $248 million, without any protection. After pleas from Labor, the Treasurer rejected a plan to include the legislative guarantee that Labor had been calling for.

Mr Morrison hasn't hidden his real feelings about Tasmania. In fact, he has openly insulted Tasmania and Tasmanians when it comes to their fair share of the GST. Mr Morrison was rightly condemned recently when he described Tasmania as being 'mendicant', essentially calling Tasmanians beggars. That is what this current Prime Minister thinks of Tasmanians. No leader or Prime Minister should openly insult a state or territory. It shows an ineptness in his leadership and, frankly, an arrogance that Australia cannot afford. This comment showed Tasmanians the contempt that Mr Morrison, as Prime Minister of this country, has for Tasmania and, more importantly, for Tasmanians in general. It explains perfectly why I can recall only three times, maybe, over the last five years—as Treasurer and now as Prime Minister—that he has visited my home state.

Any GST formula must be fixed as equitable in its end result. States need certainty over the long term to plan for the future. Politics needs to be taken out of the GST debate to ensure business confidence and confidence within regional communities so that people will stay in Tasmania and are not forced to move to the mainland. Labor makes no apologies for standing up for our state and fighting for the best possible share of the GST revenue. Regional Tasmania is already suffering as a result of this government overseeing growing inequity between cities and regions. Tasmanians need a strong leader to stand up for their interests, not a leader who has, clearly, argued for cutting Tasmania's GST receipts behind closed doors.

In July Mr Scott Morrison promised, as Treasurer, 'No state will be worse off,' under new GST distribution changes, but he has changed his mind on this issue more times than I can count. The government's policy on the GST is only a short-term reform. We know that they have their real plan in the bottom drawer and that it will harm states like my home state of Tasmania in the long term. Let's face it: a leopard never changes his spots. We know that the Prime Minister, even before he came to this place, did nothing about being open and transparent in his business dealings, particularly before he was sacked as the general manager of Tourism Australia. So his track record is not a good record. Tasmanians don't trust him and I don't believe they will change their view of him heading into the next federal election.

The government is only passing the buck to future governments by not guaranteeing funding for Tasmanian hospitals and schools over the 2026-27 commitments. Mr Morrison is the Don Draper of Australian politics, without the talent or the good looks. This Prime Minister is a man who was sacked, as I said, from Tourism Australia, and it has now been revealed why he was moved on. He was appointed by his mates in the Liberal Party, and he was sacked unanimously by the board of Tourism Australia and by the Liberal tourism minister of the day. Not even John Howard was prepared to stand up for him. That's the calibre of the man who has taken the chair in the big office as Prime Minister of this country.

These are serious findings by the Australian National Audit Office. It is not Labor saying these things; it was the Australian National Audit Office. The former Treasurer, and now Prime Minister, oversaw Tourism Australia from 2004 to 2006. Eighteen months into his contract he was sacked, terminated—with very healthy severance pay of $300,000, I might add. This has been revealed in recent days because I think it's important. It goes to the calibre of the man who is the Prime Minister. Tourism Australia and the deals that he did—that information was kept from the board. So, as he has proven to be as Prime Minister, he is not open and transparent. The procurement guidelines were breached, and private companies were engaged on contracts worth $184 million before paperwork was signed and without appropriate value-for-money assessment. That's the calibre—

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

Senator Polley, please resume your seat. A point of order, Senator Williams?

John Williams (NSW, National Party) Share this | Link to this | Hansard source

My point of order is about the subject of discussion. We are talking about GST equalisation and fairness throughout the states, but Senator Polley is using this as a political session to throw mud at the Prime Minister. I think it is unacceptable, and you should bring her back to the topic.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

Senator Polley on the point of order.

Helen Polley (Tasmania, Australian Labor Party, Shadow Assistant Minister to the Leader (Tasmania)) Share this | Link to this | Hansard source

It is completely relevant to outline the character of the man who is charged with being Prime Minister of this country. It has everything to do with the GST.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

Senator Polley, resume your seat. A point of order, Senator Reynolds?

Linda Reynolds (WA, Liberal Party, Assistant Minister for Home Affairs) Share this | Link to this | Hansard source

Senator Polley commented that the Prime Minister 'didn't have the good looks of Don Draper', which was clearly a reference to Mad Men. But had I or Senator Williams said that Senator Polley 'didn't have the good looks of Sally Draper', for example, she would have taken great offence at that. While it might be a small point, I think it is a significant point. She commented on the looks of somebody else in this place—in this case, a man. It would not be acceptable the other way around.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

There is no point of order, although I do draw Senator Polley's attention to the subject matter at hand. I remind senators that, while the discussion may be free ranging, all courtesies to people in the other place should be observed. Senator Polley.

Helen Polley (Tasmania, Australian Labor Party, Shadow Assistant Minister to the Leader (Tasmania)) Share this | Link to this | Hansard source

Thank you, Mr Acting Deputy President. I will continue. The procurement guidelines were breached, and private companies were engaged on contracts worth $184 million before paperwork was signed and without appropriate value-for-money assessments. This now disgraced ex-ad man used to be in charge of Treasury, and he is now the Prime Minister. No wonder he has been so inconsistent on the GST. This is a Prime Minister who is anti accountability and anti transparency. Clearly, he makes decisions on the run. He has thought bubbles without consultation. He actually became Prime Minister this way.

Tasmania relies heavily on the GST, and I will always stand up for my home state. The GST goes to the heart of how you can actually provide, through your governments, to the people of Tasmania. That includes the funding of our hospitals. As my good colleague Senator Urquhart outlined, we have people sleeping on the floor in our accident and emergency departments, in hospital after hospital, because of this government's cuts to hospitals. Our schools have been cut. All of this relates back to the GST. We have the most ageing population. We have a population with, unfortunately, some of the worst chronic diseases in this country. We rely on our portion of the GST. It is irrelevant whether it is a Liberal or Labor state government. We need that money for our residents, for all Tasmanians. So I will of course stand up and call out this Prime Minister for his backflips, his thought bubbles, his lack of consultation, his lack of empathy for those people who can least afford it. I will never apologise for standing up for my home state. That's what I was elected to do. If the Prime Minister and those opposite don't like to have his behaviour called out—it goes to good judgement, because leopards never change their spots—then I will do that. I will take a reprimand any day of the week when it comes to standing up for what I believe all Australians should know and understand about this Prime Minister and this government.

He had another backdown only yesterday, where he cut the funding to Foodbank Australia. Why did he back down? Because he was getting political heat—even from the National Farmers' Federation. That's the calibre of this Prime Minister. He was trying to outscrooge Mr Scrooge on the eve of Christmas. I will never apologise for saying that. Any cuts to the GST revenue will have a devastating impact on service delivery in regional areas of my home state. They have already been struggling under the Abbot/Turnbull/Morrison government and their cuts to education and health, as I outlined earlier. There has been so much division from those opposite. Clearly, we know that they have tried to instil the infighting among themselves into the rest of the nation by pitting one state and territory against another. That's not the Australian way. A Prime Minister should be bringing the country together.

Our hospitals are in crisis. Our schools are already under-resourced after years of Liberal cuts. Today we hear from the Institute of Health and Welfare that Tasmania has a higher prevalence of mental health risk, more than any other state in this country, and needs funding. We had an inquiry that outlined that—that 14-year-old Tasmanian having to wait 18 months to get psychological assistance and counselling. That's not good enough. That comes back to the lack of GST and the cuts made to health by this government. The funding for mental health in Tasmania is the worst of any state. Currently, Tasmania can't provide the national standard of care needed for people suffering a mental illness.

I know that senators in this place have been working very hard through shadow responsibilities to make sure that Australians are aware of the need for more money to go into mental health. I was participating in the community affairs committee hearing in Tasmania. We know only too well that Tasmania needs another 50 psychiatric beds just to meet the national average. Tasmania just can't afford to lose even one dollar of GST.

On this side, Labor is proud of its record on the GST. Tasmania's federal parliamentary Labor Party lobbied all four Liberal senators, calling on them to support this amendment which protected the legislation and our state's GST share, which they ultimately did. But during the whole lead-up to that the Liberal Senate team in Tasmania was silent. It seems that Mr Morrison and the Liberals have finally woken up to these concerns, despite repeatedly saying that they would not support a legislative guarantee.

Labor still has reservations about what may occur post 2026-27 if a coalition government is on the Treasury benches after the next election. Can I say once again, Tasmania cannot afford a deal on GST that would impact on our state's ability to deliver the best possible essential services now and into the future. The community knows that Labor will always stand up and fight for our fair share of GST. We know and the community knows—Tasmanians know—that the Liberals won't, because, as shown by their hatred for Medicare, their DNA is not one that actually cares about everyday Tasmanians or Australians. They can't be trusted with the GST and we know they can't be trusted with the economy.

Louise Pratt (WA, Australian Labor Party, Shadow Minister for Environment and Water (Senate)) Share this | Link to this | Hansard source

I welcome this long overdue change to the GST distribution scheme, which Western Australian Labor has been fighting for for a long time. I pay tribute to Premier Mark McGowan and his government on their advocacy and fighting for this change and working with federal Labor to get workable change on the national agenda—advocacy that I must say was sorely lacking from the Barnett government, but perhaps he knew at the time that it would fall on deaf ears. It has been unfathomable to me, with the number of WA cabinet ministers in the current government, why this issue remained unaddressed for so long. I commend Bill Shorten and Chris Bowen for putting forward solutions and for committing to a legislated floor. These strong commitments have helped induce action from the current government.

As we know, the GST was introduced in 2000 as a way to raise revenue to support the states and territories. The money raised has been distributed through the Commonwealth Grants Commission policy of horizontal fiscal equalisation. This is a method that attempts to ensure that all Australians benefit from the wealth of the country and that no state or territory is disadvantaged by circumstance. It is seen, in principle, as a fair and equitable way of ensuring that all Australians benefit from the wealth we generate as a nation. But the sad fact is that, 18 years on, the model of horizontal fiscal equalisation is not working as it should and some states, particularly my home state of WA, have been severely disadvantaged.

The Liberal government have been slow to recognise WA's needs and, in my view, have taken for granted the seats that they hold there. Our GST relativity fell from 0.98 on the commencement of the GST to less than 0.30 in 2015-16. It rose slightly in 2017-18. WA received the lowest amount of GST revenue per capita, at just $872 per person in 2017-18. That does not match the expenditure of Western Australians, who buy goods that are subject to the GST. The main reason WA's fair share has fallen has been the mining boom. WA was assessed as being able to raise significantly more revenue than other states. This is via mining royalties. Additionally, specific approaches from the Commonwealth Grants Commission in working out GST relativity work against WA.

At last the government listened to these concerns and last year commissioned a report to look at the distribution. In May the Productivity Commission released its findings on the current state of the GST and horizontal fiscal equalisation. It found that our system was failing to keep pace with the changing situation and economic circumstances that our states and territories find themselves in. It found in particular that resource heavy states, such as WA, were negatively affected by the current system. As resource prices are determined by the international market, they are very much prone to fluctuation, making it difficult to pre-empt how much revenue a state will get.

The current system fails to incentivise states to be creative with their taxation system to try to improve it. With the risk and uncertainty that surround today's economic climate, states and territories don't want to risk their GST revenue pool by looking at other innovative ways of raising revenue. When states try to improve their financial position, their share of GST decreases, and this has had a significant impact on Western Australia.

With this in mind, I very much support the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 as proposed, because it sticks to the principles of horizontal fiscal equalisation but does not distort that decision-making within government by punishing good innovation. I commend the state government of WA, and indeed the state's Chamber of Commerce and Industry, for putting forward solutions that have been adopted. The reason Western Australia's share in the mining boom has fallen is that the Commonwealth Grants Commission assessed WA improperly. It assessed WA as being able to raise significantly more revenue than other states via mining royalties. It did this because it has forward-projected those revenues without taking into account the actual drop in revenue prices from mining royalties to Western Australia. In addition—and this is a very perverse thing within the GST assessment—the exclusion of gambling revenues from GST assessment for all states penalises WA, because, unlike other states, we don't have a gambling industry.

As a result of all these factors, our GST share has fallen at times to a record low of 30c in the dollar, the lowest in the country. And while the share is projected to increase to 47c in the dollar for this financial year, it is still significantly lower than that of any state in the country. We previously raised concerns about the use of the three-year rolling average for the price of key commodities, including iron ore, particularly in the period following the end of the mining boom, when the price of iron ore and therefore the royalty dropped but the assessment of how much revenue Western Australia would raise did not. The revenue that was assumed simply did not exist. Frankly, it was obvious at that point that it wouldn't exist. But the formulas, according to the ask, couldn't be changed, because it might be a bit unpredictable. This is no way to assess state finances. Frankly, but for the floor, these problems still very much exist inside the assessment process.

This legislation and the major change in this bill is the introduction of a floor to prevent the share of the GST from falling to the kinds of record lows that Western Australia has seen. A floor of 75c is essential to ensure that this situation that has affected WA does not happen again. We did experience an enormous strengthening of our financial situation in WA during the mining boom. This might seem like a fair trade while the state is doing well, but the old GST formula was not designed to accommodate the rapidly changing economic environment in which the state currently finds itself. Just as people were saying that the Western Australian economy could reach no limit, that is was going to keep growing, the mining boom ended. Our share of GST has not recovered to pre-mining-boom levels, because of the lag in that assessment.

These assessments, while not changing in this legislation, will be mitigated by this new floor within the benchmark system. The benchmark for redistribution will be changed from the strongest-performing state—which is currently WA, but that is moving to change—to the strongest of either New South Wales or Victoria. There's good reason to do this. By changing it, we can ensure that these spikes are minimised, because these states have more-diversified and larger economies, so they're not as subject to a particular runaway phenomenon in a particular economic stream.

In short, Western Australia has not reaped the benefits of the mining boom. We've also had to contend with rapid population growth and remote service delivery. This redistributive effect through horizontal fiscal equalisation has been a very poor motivator for growing the wealth of the state and the nation. So, I don't object to the redistributive elements that ensure that we support the whole of our nation, but I don't want to see perverse outcomes in our GST situation.

I asked the Parliamentary Library to do some modelling on this, with the following example: if the mining states of WA and Queensland seek to raise royalty rates in order to increase revenues, the Commonwealth grant process causes them to lose almost as much GST revenue as they would gain in royalty revenue. I asked the Parliamentary Library to model this for me. Their example was to suppose that there were eight states, all of equal size, and that the states collectively raise $8 billion in mining revenue. When working out an average that each state should be able to raise from mining royalties, the Commonwealth Grants Commission would arrive at an average of $1 billion for each state. It would then provide the Commonwealth Grants Commission with the GST revenue to adjust up or to withhold revenue to adjust down to ensure that each state received exactly $1 billion of that value.

Now, suppose that, of the $8 billion raised, $7 billion was raised in just one state, with the remainder being raised equally across the remaining seven states. What incentive does it provide to those other states to raise revenue? Frankly, none. There is no incentive at all, because they have to take on the challenges of how to raise revenue. The impact of that is that it will just be redistributed to the other states.

And, as I highlighted before, there are problems with the way that the Commonwealth Grants Commission deals with gambling revenue. It considers that there are no material factors outside of the control of an individual state that change the amount each state could raise from gambling revenue. In the view of the Commonwealth Grants Commission, each state has the same capacity to raise gambling revenue, irrespective of whether they choose to do so or not.

There is great irony in this. Arguably, some states have made decisions to forgo revenue, with policies opposed to mining. But, in effect, they have not forgone revenue because of this; they have benefited from Western Australia's revenue. But Western Australia has chosen not to have a gambling industry, particularly poker machines, on policy grounds. We don't like the social implications of embedding pokies in social venues around the state and then mopping up the gap in social consequences later. But the Commonwealth Grants Commission's approach still assumes that WA could raise this revenue and the average amount of gambling revenue as for other states. This is, if you like, included in our assumed funding base for the state. This is completely perverse.

As a result of this, Western Australian people are missing out. For every one dollar they have spent at the shop on GST-taxed goods, they have sent up to 7c out of the state. Western Australians have, rightly, had enough. Linking the index of the redistribution to volatile and heavily-fluctuating resource markets, rather than to broader and diversified economies, has not lent itself to stability and fairness in the system. New South Wales and Victoria have well-performing and, more importantly, more stable and diverse economies. Linking this index to their performance ensures that our GST system remains consistent and predictable.

So I commend federal capital Labor for taking the lead on this and for recognising the needs of Western Australia. They started with the Fair Share for WA Fund, then a floor and committed to a legislative floor. I am keenly aware that states and territories need to be treated fairly under the new system, that sudden changes could put pressure on the states and territories and they could end up worse off as a result of this change. Western Australia has lived through this. We need plans that promote stability and ensure states and territory governments can plan for the future. The current system is highly susceptible to changes in economic circumstances, and, indeed, property taxes changes can also adversely affect the share of the GST received. These are areas that are also highly volatile in today's economic environment. So we do understand the concerns of other states in looking at this legislation. It has been extremely hard for WA to deal with this fiscal uncertainty, and I wouldn't wish that uncertainty upon any other state. To this end, we support the guarantee that no state or territory will be worse off during the six-year transition period while the new system is rolled out. I'm not going to go into detail, but I recognise the role that top-up funds will have during this critical time.

I note that the bill also requires the referral of our GST system to the Treasurer to refer it to the Productivity Commission to see whether the new system is working and that it will need to report by the end of the year, in 2026. Stability should be the purpose of this bill. Uncertainty about what happens next does not help our cause. This legislation is a good step in addressing the inequalities that exist in our GST system. The floor so desperately needed by WA will perhaps, in the future, benefit other states. It will ensure that states and territories receive a reliable and predictable share of the GST that is fair and equitable.

Western Australia has had a significantly difficult time, and we have been justifiably outraged by the lack of our fair share in GST revenue. All of this has happened at a time when Western Australia's net debt has grown per capita to the highest of any other state. Our own revenues dropped at the same time as our GST revenue dropped. At the same time, with the end of the mining boom, the labour force participation rate dramatically decreased, with a fall from 69 per cent in February 2016 to 57 per cent in 2016. We had an increasing population, increased unemployment and decreasing participation rates, and none of these things were good news for Western Australia. At the same time as all of this was happening, for every dollar spent in the consumption of GST goods, up to 70c went to other states. That's 70c for every dollar paid of GST. We only kept 30c in the dollar. That has improved. WA will foreseeably receive 47c in the dollar in 2017-18, so that has improved somewhat. But it still means that, for every litre of petrol a Western Australian buys—and we know that petrol prices are at record highs—we are sending 6.6c out of the state. This has gone on too long. This legislation is welcome and overdue.

I want to highlight that Western Australia's fight for a fair share will not end there. Given the size of our state and the many remote regional communities within it that are difficult to service, we are still getting a raw deal in many other areas. Western Australians are also concerned to know that, with 10.8 per cent of Australia's population, in other areas not including the GST we receive just seven per cent of the Commonwealth spend. This is less than every other state or territory by a significant factor. Today I'm pleased we can work together inside our Federation to improve cooperation between the states and the Commonwealth so that we can continue to be a competitive nation but also a compassionate nation that fairly distributes our resources to maximise the wellbeing of our nation. Thank you.

Malarndirri McCarthy (NT, Australian Labor Party) Share this | Link to this | Hansard source

I'm certainly not going to mince words in the very short time I have for now on how very important this issue of the GST is to the Northern Territory. The Northern Territory is facing unprecedented falls in GST revenue, which is impacting on the government's ability to deliver core services. This impact is widening the gap on Indigenous disadvantage and infrastructure deficits.

NT GST revenue has fallen by $500 million per year. This $500 million shortfall is entrenched by the watering down of horizontal fiscal equalisation principles in this bill, remembering that the GST makes up 50 per cent of the Northern Territory's total revenue and the NT government's $6.5 billion budget. The NT has a relatively limited own-source revenue base, which is 30 per cent of total revenue, despite the new $37 billion INPEX LNG project coming online. I certainly want to remind senators that this project is also subject to the Commonwealth's 40 per cent petroleum resource rent tax and 30 per cent company tax.

The NT's current sharp economic downturn is exacerbating the situation, with the debt-to-revenue ratio rising. Since 2016, the NT's GST revenue forecasts have seen a cumulative decline of $3.4 billion over the forward estimates. As a small, self-governing member of the Federation, with a limited own-source revenue base compared to the larger jurisdictions, it is disproportionately more difficult for the Northern Territory to absorb significant changes to its GST revenue. While all economies are subject to cyclical effects, as a small, open economy, the economic cycles in the Territory are more pronounced than in other jurisdictions. The NT's making some very tough decisions in its fiscal response to the economic downturn, and this includes over $800 million in savings and efficiencies and new own-sourcing revenue measures.

The Northern Territory, regardless of the government in power, has always been a strong supporter of the principles of horizontal fiscal equalisation, so it's enormously disappointing to see the failure of the Northern Territory senator Nigel Scullion and his Country Liberal Party to stand up for the Territory around these changes to GST that will impact adversely on the Northern Territory. Senator Scullion failed to say a single word when the then Treasurer, Scott Morrison, announced last year that the government was slashing GST distribution to the Territory by an estimated $2 billion over the next four years, and he's certainly done nothing to get his colleagues to listen to the Northern Territory government's very reasonable argument about funding essential services, such as housing, education and roads. He's refusing to say, as Minister for Indigenous Affairs, what impact this new funding arrangement will have on efforts in the Territory to close the gap on Indigenous disadvantage. Every February we certainly talk about the need to look at the report card of Indigenous disadvantage and closing the gap, which the parliament admits that we're not doing. How then, when we know we desperately need extra resources and support in the Northern Territory, are we going to close that gap?

There's certainly been a parade of Liberal government figures through the Territory in recent months, all talking up their candidates in Lingiari and Solomon, but not once have any of them said what they'll be doing about this unprecedented financial situation facing the Northern Territory. They have not said one word about how they will be advocating for us, ensuring that we get our fair share. Not once have any of these candidates ever said what their plans are for dealing with this reduction in GST revenue which will impact the people of the Northern Territory the hardest. You cannot pretend to be standing up for the Territory, for the most disadvantaged communities in this country, and saying you're their voice, yet refuse to front the people who have made the decision to change the basis for GST redistribution.

Scott Ryan (President) Share this | Link to this | Hansard source

Order! Senator McCarthy, you will be in continuation when debate resumes.