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Transcript of press conference: Sydney: 5 July 2018: Horizontal Fiscal Equalisation Final Report; Turnbull Government's announcement on GST distribution

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SUBJECTS: Horizontal Fiscal Equalisation Final Report, Turnbull Government’s announcement on GST distribution.

CHRIS BOWEN, SHADOW TREASURER: Well thanks for coming. Well after 12 wasted months of talk, the Turnbull Government has finally agreed with Labor’s position that Western Australia deserves a floor in GST distributions. That’s been Labor’s position for a long time, and if the Turnbull Government had listened to Bill Shorten and Mark McGowan when we first announced our position, Western Australia would now be better off.

In fact, if Malcolm Turnbull first raised the prospect of a GST floor two years ago, and he's been talking since then, if a 70 cent floor had been in place since he first raised it, Western Australia would have been $3.5 billion better off by now. The Government commissioned a Productivity Commission inquiry. In and of itself, that's not a bad thing. But before the inquiry's results were released, the Government rejected its recommendation and came up with its own recommendation.

This just goes to show, just underlines the point - the Government could have done this a year ago or two years ago because at the end of the day their position does not reflect what was recommended by the Productivity Commission inquiry and they could have done this by themselves. This is 12 wasted months.

Now, it's a good thing that we're moving towards more certainty and we want to see as we have said previously that GST floor legislated as Labor's Western Australia Fair Share Fund would have been legislated and of course we believe that's an appropriate way forward. Now, the Treasurer today was asked “It looks like that billion dollar payment top-up effectually goes into perpetuity?”. He said “Correct’. Now, elsewhere he said ‘Top ups forever are a mugs game’. Now both of those Statements can't be true. The fact of the matter is, Labor proposed Commonwealth top-ups for Western Australia more than 12 months ago. Scott Morrison, the Liberal Party, said that was a terrible idea

and now they are building in Commonwealth top-ups not only for Western Australia, but right throughout the entire GST distribution system.

Scott Morrison wants to move from a GST pool to a ‘GST plus trust Scott Morrison’ pool. There's some real questions to answer about that. Questions to ask about that. Now, Labor will, of course, carefully consider the Productivity Commission's report and the Government's new proposed model. We agree that the Productivity Commission's proposed recommendation was not the right way forward. We never would have advocated that. Indeed, the Productivity Commission did itself find, though, in a different context, that top-up funding would mean that the GST distribution would be ‘Subject to the vagaries of the Commonwealth Budget." And this is the key point that Scott Morrison and Mr Turnbull have to address and that States and Territories are more than entitled an indeed are obliged to be asking the Government: what guarantees does Scott Morrison give that this top-up funding will be locked in? And even more importantly: what guarantees does he give that it won't be clawed back through cutbacks to schools and hospitals because that is their form.

Scott Morrison may well be sitting up the Budget for another round of 2014-style Budget cuts to fund the GST distribution model and to fund his big business tax cuts. That may well be what is being set up here and States and Territories are entitled to be very cynical. This is a Government which cut funding to schools and hospitals in 2014 with no consultation with the States, none whatsoever. And now Scott Morrison says, "Trust me, I won't do it again." And for States and Territories to agree to their distribution to be amended, for them to get less through the GST pool, but then just to take Scott Morrison on his word that he won't claw that back through national partnership agreements and State and Federal agreements in relation to schools and hospitals will be a very big call for them, indeed.

So States and Territories are entitled to get that guarantee from Mr Morrison. That those cuts won't come from schools and hospitals to fund this new GST distribution model. This is a trend now for the Government, this is a Government which is committed to $140 billion worth of personal income tax cuts on the never-never. More than $80 billion worth of company tax cuts on the never-never. Now, this GST top-up model on the never-never. Locking in big long-term Budget changes without indicating how they intend to pay for them and Australians, and Australian States and Territories, are entitled to be very cynical that there are more cuts to schools and hospitals coming because of this Government.

The Government which in 2014, for example, cut more than a billion dollars from the agreement on certain concessions to pensioners, concession cards and senior card holders without consultations with the States and Territories. Made other cuts to schools. As I said to schools and hospitals as well. Now, we always said Western Australia has legitimate concerns. We said that in Perth, we said it in Hobart, we said it in Brisbane. But we have also said that under our model, no State or Territory would be worse off. Now, Scott Morrison said that that was nonsense, you couldn't top-up GST payments from the Commonwealth, that it was not the way forward and now he is

proposing to lock top-ups in in a very considerable way and not just for Western Australia, but for other States and Territories as well. So States and Territories and Australians who are interested in good funding from schools and hospitals are entitled to be very cynical, are entitled to expect guarantees from this Government. Happy to take any questions.

JOURNALIST: The Government said it would fund this without tax increases, do you think that's possible?

BOWEN: As I said, if he says he's not going to increase taxes, that means he's either going to increase the Budget deficit or cut schools and hospital. I mean which one is it Mr Morrison? He may believe in magic pudding economics, that he can do it all. Australians know better than that.

JOURNALIST: Do you support the idea of ongoing Commonwealth top-up?

BOWEN: We'll take our time to work through this report and the Government's position. The Government did not provide us with a briefing on the Productivity Commission review yesterday or at any point. We have only had it the same time as the media. There was not that courtesy extended to us, nor in relation to the Government's response. That will take some time for us to consult with States and Territories. I have spoken to a number of State Treasurers over the last 24 hours. Some of them share my concerns, they're taking their time to sort it through. Others are more concerned about this in relation to leaving their Budgets to the vagaries of Scott Morrison's word and I think they have a right to be concerned about that.

JOURNALIST: On face value, though, does this new formula look fairer to you?

BOWEN: Well, again, we'll take our time to look at some of the detail around this. We have said legitimately that Western Australia, we’ve said that Western Australia has legitimate issues. We have said that continuously and it's good that they're being addressed.

JOURNALIST: Do you think the six year funding is appropriate?

BOWEN: Well, I think the point for States and Territories to be asking is, what locks my funding in for the long term? Not some short-term guarantee, but over the long term guarantees that it won't be clawed back through cuts to schools and hospitals or other payments to the States. Whether it's six years or four years or eight years is a legitimate questions for States and Territories to work through with the Commonwealth. But I think States and Territories should be looking to the longer term as well.

JOURNALIST: Is it not conceivable that the Budget can absorb this and there won't be any new taxes or cuts to Commonwealth services?

BOWEN: You’ve got to see this in the context of this Treasurer's form. $140 billion

worth of personal income tax cuts, more than $80 billion worth of business tax cuts. This on top. Of course, Budgets can in economic growth circumstances absorb new spending but you’ve got to look at the context of what this Treasurer is doing. Gone is the Budget emergency, the debt and deficit disaster, now he's locking in long term commitments with no idea what the economy is going to be like in 2024, 2025, or 2027. No idea. He doesn’t have a clue what the economy is going to be like. And I don’t blame him for that, nor can he. What I do blame him for is locking in potentially unsustainable Budget spending without any idea of what is sustainable in longer term.

JOURNALIST: Is a hike in the GST one of the ways to afford that?

BOWEN: No. No, we wouldn’t support that.

JOURNALIST: Given the long-term nature of this, if Labor wins office at the next election, will you keep this formula or back to the drawing board?

BOWEN: That's why I say we'll take a little bit of time to work this through because as the responsible alternative Government that’s what we should do. This will not necessarily require legislation although legislation to lock in a floor would be a good thing. But as an incoming Government, if we win the election, our ongoing bipartisan support would be necessary to make this work. Hence I say we'll have ongoing discussions with States and Territories about their concerns. We'll take our time to work through some of these, or this Government's recommendation, we reject what's in the PC report. We'll take our time to work through the Government's position. That would be the responsible thing to do.

JOURNALIST: You support a floor on GST for Western Australia, do you support them across the board?

BOWEN: That’s the way it should work, yes.

JOURNALIST: Just on Michael Danby’s retirement?

BOWEN: Michael has had a long period of service in the House of Representatives, 20 years. He's been an important contributor, might I say, on the matter of human rights in particular, standing up for human rights wherever he sees a breach. He's not been backwards in making Statements even though, even though that might not have been the most politically convenient for him to do at any particular time. He stood by his beliefs and I think the whole Labor family wishes him well for his retirement.

JOURNALIST: He was pretty divisive in the lead up to the 2016 election, is this a case of he won that election and then Labor told him to get out?

BOWEN: No, his decision to retire is his own. Ok. Thanks very much.