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Federal Govt, states trade GST threats -

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Federal Govt, states trade GST threats

Reporter: Narda Gilmore

TONY JONES: Tensions between the federal and state governments have flared again in the ongoing
debate over GST revenue. Some states are threatening to take back control of corporations law,
which could block John Howard's plan for a national industrial relations system. But the federal
government isn't backing away from its threat to scrap the GST funding agreement unless the states
abolish more taxes. From Canberra Narda Gilmore reports.

NARDA GILMORE: On the surface its sounds like the Commonwealth and state governments are at one.

JOHN HOWARD, PRIME MINISTER: My government stands ready to co-operate with states and territories.

BOB CARR, NSW PREMIER: We don't want war with the Commonwealth, we want a cooperative relationship.

STEVE BRACKS, VICTORIAN PREMIER: We should be co-operating. I believe we should be co-operating in
the nation's interest.

NARDA GILMORE: But that's where the agreement seems to end. The last meeting between the Treasurer
and his state and territory counterparts ended in a stalemate. Peter Costello threatened to tear up
a deal which delivers GST revenue to the states, unless they abolish certain taxes. Now some states
are fighting back.

ANNA BLIGH, ACTING QLD PREMIER: We don't believe that any relationship thrives where only one side
is co-operating.

GEOFF GALLOP, WA PREMIER: It's not in the interests of our nation that the Commonwealth should try
and determine the way we spend the GST money that comes to our states.

NARDA GILMORE: WA is supporting Queensland's threat to take back control of corporations law, used
to regulate companies. That could undermine the Commonwealth's plans to introduce a national
industrial relations system.

ANNA BLIGH: The states provided those powers for the purpose of regulation of corporations not as
some backdoor way to undermine our industrial relations system.

NARDA GILMORE: The Treasurer says not only would the states be breaking a five-year deal with the
Commonwealth, it would be disastrous for business.

PETER COSTELLO, TREASURER: It would be a 15 years return to the past - one of the silliest
suggestions you've heard in a long time.

NARDA GILMORE: Amid this latest debate, the PM has given a speech on federalism where he rejected
any suggestion that his government is trying to trample on state rights, but he has vowed to push
ahead with some reforms to state and federal responsibilities using the government's senate
majority starting with industrial relations.

JOHN HOWARD: In the absence of referrals by the states, the government will do what it reasonably
can to move towards a more streamlined, unified and efficient system.

NARDA GILMORE: But the Prime Minister has now formally rejected a proposal for the Commonwealth to
take control of public hospitals.

JOHN HOWARD: Any possible gains would be outweighed by the disadvantages to local hospitals and
their communities of management by a more distant health bureaucracy.

NARDA GILMORE: On the issue of GST revenue the Federal Government is standing firm

PETER COSTELLO: You can't keep the GST and the other taxes. You have the GST and the other taxes
and that's why we need to abolish the other taxes.

NARDA GILMORE: The states aren't backing down either, but say they're willing to negotiate.

STEVE BRACKS: I'm hopeful that good sense will prevail. There'll be further meetings of the
federal, state and territory treasurers.

BOB CARR: Peter Costello should stop his bullying of the states - the tearing up of agreements.

NARDA GILMORE: The treasurers will meet again within the next few weeks. The states message to the
Federal Government is that co-operation works both ways. Narda Gilmore, Lateline.