News Parliament

BILLS - TREASURY LAWS AMENDMENT (MAKING SURE EVERY STATE AND TERRITORY GETS THEIR FAIR SHARE OF GST) BILL 2018 - SECOND READING

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.