Long-term proposal will ensure that no State is left worse off

 

The Turnbull Government has long recognised that what has been happening with WA’s share of the GST is unfair, not sustainable in a Federation and has to be fixed.


The proposition that in a Federation stronger States should support other States so that all have the capacity to provide similar outcomes for their populations is a good and important principle which we must continue to protect and preserve.

However, an arrangement which puts any one State into the position, as it has WA in the past, where it receives less than 30 per cent of its share of the GST back as a result of fiscal equalisation cannot possibly be sustained.

All WA’s Federal Liberal Members and Senators have long argued that this unacceptable situation for our home State must be fixed .

Firstly we secured about $1.4 billion in federal GST top-up payments for WA to provide additional funding towards much needed WA infrastructure.

This was always intended as a short-term measure. Initially, in 2015-16, it effectively stopped the drop in WA’s share of the GST from 37.6 per cent to below 30 per cent. For 2018-19 it has effectively lifted WA’s share of the GST to 50 per cent.

This short-term measure, which we developed and delivered, is incidentally all Bill Shorten is prepared to do for WA on an ongoing basis – and only from 2019-20 when WA’s share of the GST will already have increased further under the current system anyway.

Yes he copied and re-branded our top-up payment methodology before trying to make it look like a genuine long term GST fix for WA, which it isn’t. In fact, Bill Shorten has repeatedly ruled out genuine longer term reform of our GST sharing arrangements.

In contrast, WA Liberal Members and Senators have continued to pursue the broader, more substantial medium to long term reform which we always understood is required and expected by the people of Western Australia.

That is why we advocated for and secured the Productivity Commission inquiry into the impact of GST sharing arrangements on national productivity and growth.

Today the federal government will release that Productivity Commission Report, together with our proposal on how those GST sharing arrangements should be reformed.

We want to make GST sharing arrangements fairer for WA, better for national economic growth and job creation, while also making sure that no State is worse off.

We propose to implement our reform proposal over an eight year period, while taking immediate steps to further improve WA’s share of the GST over the short term.

Initially, we intend to make further top-up payments to lift WA&rsq uo;s share of the GST further from the 50 per cent effective share secured in 2018-19 to 70 per cent from 2019-20 onwards. We would then lock in a 70 per cent floor followed by a 75 per cent floor as soon as WA exceeds those levels, which is currently projected to occur in 2022-23 and 2024-25 respectively.

The additional federal funding to lift WA’s share of the GST to 70 per cent and 75 per cent by way of further top-up payments would be untied. The WA Government would be able to spend it on its priorities, including on schools, hospitals and infrastructure.

As part of our plan we would also reform the GST sharing formula.

Our proposal is to no longer equalise to the ‘highest State’, which has been the reason for the extreme volatility leading to unfair outcomes for WA.

Instead, over a six year period from 2021-22 to 2026-27, we would transition to a new equalisation standard, namely the higher of NSW or Victoria.

To help ensure no State and Territory is worse off as a result of these reforms and to facilitate their implementation in a way that is seen to be fair everywhere, we will make additional federal contributions to the GST pool. This means that each State (including WA) will get more as their share will come from a larger pool than it would have done under the existing arrangements.

To ensure all States are better off, both during and following the transition to this new equalisation standard, the Government would permanently boost the GST pool, that is in addition to GST collections, by making additional federal payments to the pool on an ongoing basis, sourced from our other revenues. Importantly, unlike Bill Shorten who wants to increase taxes on families, businesses, retirees and everyone and everything that moves including to fund his inferior GST reform model, we will pay for this after having reduced the tax burden on working families and businesses right across Australia.

Under our plan, by 2026-27, Australia’s GST sharing arrangements (combined with our commitment to lower taxes on working Australians and business) would help strengthen growth, better protect us against economic shocks and provide a more stable and predictable source of revenue for all States going forward.

Our proposed arrangements involving further top up payments to WA, a boost to the GST pool with additional federal payments, inserting a GST floor and moving to a new GST distribution formula would be brought together in a new Intergovernmental Agreement between the Commonwealth and the States.

The Government will be consulting with the States on this agreement and any alternative transition arrangements that may be proposed.

This is an opportunity now for our State Government here in Western Australia to put politics to one side and to join in with the Federal Government to help get all other State Governments and the Federal Opposition on board in support of this plan which is clearly good for WA.

This is an opinion piece published in the West Australian on 5 July 2018.