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Queensland: Premier rejects New South Wales and Victorian calls for fiscal equalisation in tomorrow's Premiers' Conference

PETER THOMPSON: The Commonwealth offer to the States has already been given to the Premiers, and although the figures have not been made public, the offer contains some real growth in funds. But there's growing argument about how the cake should be divided. How much is allocated to each State directly affects services like hospitals, education and roads. As we heard yesterday, on A.M., New South Wales and Victoria believe that the current funding formula is unfair, with the less popular States getting more money per head.

Now, Queensland's Premier, Wayne Goss, has rejected the claims of Joan Kirner and Nick Greiner, that this so-called fiscal equalisation is irrational and unsustainable. Along with Western Australia's Carmen Lawrence, Mr Goss argues that the current system represents a national commitment to all Australians regardless of where they live.

Mr Goss joins us now from his Brisbane office. Good morning, Premier.

WAYNE GOSS: Peter.

PETER THOMPSON: Why should New South Wales and Victoria continue to subsidise your State?

WAYNE GOSS: Well, I do not believe that you can describe the current situation as a subsidy to the smaller states, and there are two reasons for that. Firstly, what fiscal equalisation is about is delivering an equivalent level of services to all Australians no matter where they live. It is a cornerstone of a federal system. It is about building Australia as a nation. The alternative would be to have two urban sprawls in the south-east corner of Australia.

But the second point is this - and this is the point that is conveniently ignored by Premiers like Mrs Kirner, and that is if you look at all payments, not just the financial assistance grants, where you see this transfer of funds to the smaller states, but also the specific purpose payments, then there is, in fact, no subsidy.

If Queensland, for example, was compared directly with Victoria, while we gain $300 million on general financial grants, we lose $315 million in specific purpose payments in a comparison with Victoria. So who is subsidising who?

PETER THOMPSON: When you lose money on specific purpose payments, for what are they?

WAYNE GOSS: Those specific purpose payments are made to all states, and they go to activities such as higher education, hospitals and roads - to give three very important examples - for Queensland. And I, frankly, am very frustrated at seeing Queensland kids miss out on tertiary places and TAFE places to Victoria.

We have one of the biggest road networks of all the Australian states because of the decentralised nature of our state, yet we miss out in comparison to Victoria, again. The subsidy argument doesn't stack up. It is a smokescreen for Victorian budget problems - the reason for which is much closer to home than Queensland.

PETER THOMPSON: It's not only Victoria, of course. New South Wales Premier, Nick Greiner, has the same views.

WAYNE GOSS: Well, that's right. But, I mean, the Victorian Premier is the one who's led the charge, and their situation is claimed to be much worse, but for both Victoria and New South Wales, it is convenient to point the finger at the smaller states. It's convenient to point the finger elsewhere when it comes to their budget problems. The truth is, fiscal equalisation is not the cause of the current budget problems in Victoria and New South Wales. That cause is much closer to home.

PETER THOMPSON: Joan Kirner says the subsidy is more than $100 per person, to people living in the smaller states.

WAYNE GOSS: Well, you can work out the figures a number of ways, but Mrs Kirner is referring, there, to only half the picture.

PETER THOMPSON: So it's a half truth?

WAYNE GOSS: Yes, it's a half truth. The other half of the truth is in the specific purpose payments. The states get two main payments from the Commonwealth - general financial grants, where Mrs Kirner's figures are quite accurate, but when you look at the specific purpose payments, as I said before, Queensland loses out heavily to states like Victoria. But there is another important consequence here that has to be examined and that is that the smaller states, including Queensland, have lost out heavily for decades because of the industry protection that has gone to Victoria, in particular, and New South Wales, at the expense of our exporting industries, like primary production and mining.

PETER THOMPSON: Nick Greiner says that fiscal equalisation was applied at a time when states like Queensland were actually called mendicants. Now, is Queensland a mendicant any longer?

WAYNE GOSS: No, I don't believe that's the proper basis for supporting fiscal equalisation. It is a matter of commonsense that it costs a lot more to deliver a school or a police station to Mt Isa or Cunnamulla than it does to Newcastle or to Ballarat. It is a question of delivering an equivalent level of services to all Australians right across this country.

PETER THOMPSON: Well, that may cost more, but let's look at Queensland's case where your taxation system on railways, for example, delivers you a lot more revenue.

WAYNE GOSS: Well, certainly, all states have differences in their economy. I mean, the consequence of tariff and industry protection in Victoria has meant that you have a concentration of manufacturing industry there, of population, and as a consequence, enhanced state revenues for decades.

I mean, EPAC recently issued a paper that estimated that if Queensland had had equivalent industry assistance then we would have had gross state product of a billion dollars a year more. Now, the cumulative effect over that, over years of that, is just enormous, but that's ignored and the Victorian and New South Wales Premiers concentrate on one small part of the picture - financial grants. When you look at the whole picture, I believe the policy stacks up and it would be premature to review or overturn the policy at the conference tomorrow.

PETER THOMPSON: Just very briefly, what are the political consequences if New South Wales and Victoria get their way on this?

WAYNE GOSS: Well, I don't believe that they can do anything practical tomorrow. We have a report from the Independent Commonwealth Grants Commission in June next year. Both New South Wales and Victoria have commissioned their own academic studies which will be available early next year. I think we have to wait for those reports, and we have to make a decision on the review then, at the Premiers' Conference next year, but we can't do it in advance of getting those three major studies.

PETER THOMPSON: Mr Goss, briefly and finally, you have the Commonwealth offer - are you happy with it?

WAYNE GOSS: Well, when I first walked into the Premier's office, two and a half years ago, there was a script in the top draw that said: 'You are never to be happy at a Premiers' Conference'. Now, allowing for that and allowing for the fact that we, like all states, need more to cope with growing services, the offer will never be enough. But I think given that times are very tough, I would say it's probably the best the Commonwealth could do.

PETER THOMPSON: Thanks for joining us. Wayne Goss, Queensland's Premier.