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Tuesday, 28 February 2012
Page: 1086

Senator CASH (Western Australia) (18:51): I rise to speak on the Commonwealth Grants Commission's Report on GST revenue sharing relativities—2011 update and move:

That the Senate take note of the document.

Just two weeks ago I rose in this place as a senator for Western Australia and addressed the current outdated and inequitable formula which the Commonwealth Grants Commission continues to use to determine GST sharing relativities. My comments were well and truly well timed because WA has just received a slap in the face from the Commonwealth Grants Commission following its recommendation that almost $600 million be slashed from WA's GST share for 2013-14. The Commonwealth Grants Commission 2012 update has reduced WA's share of the GST to a mere 55c in the dollar. Based on the Commonwealth Grants Commission's recommendation, one may well ask: where are the incentives for states to develop their economies and, in turn, be rewarded for their ability to implement economic reforms?

There would appear to be none whatsoever.

The CGC's announcement further confirms what Western Australians know to be true: the current system unfairly penalises Western Australia for our economic success, and is so transparently inequitable as to be unsustainable in the longer term. It was bad enough that WA received just 68c for every dollar in 2010; now in 2012 we have been reduced to receiving a mere 55c. This is not only the lowest of any state; it is the largest drop in GST share in the history of the GST grants process. The irony of this is that previous WA Treasury forecasts indicated that, if the downward trend in GST revenue to WA were to continue, WA's share would drop to an unsustainable 33c in the dollar by 2014-15. That would appear to have been a conservative estimate because, based on the proposed 2012 Commonwealth Grants Commission cuts, WA Treasury preliminary modelling is now predicting that the WA share of GST grants will fall to as low as 27c in 2015-16. That is clearly unfair, unsustainable and unacceptable.

All WA asks in relation to its share of GST is for the Commonwealth Grants Commission to recognise the significant upfront financial outlays required to be met by the state to encourage and support some of the biggest mineral developments in Australia. In return for this support WA would be able to continue to provide the infrastructure required to encourage the development of additional export projects, infrastructure that needs to be established well before the first shipments of mineral commodities are exported to overseas markets and well before any mineral royalty is paid to the state. Withholding this grant funding is forcing Western Australia into an overreliance on debt and borrowing to fund infrastructure and services. Based on our full population share of the GST, a 55 cent share will cost WA about $2.4 billion each year. There is something very wrong with a system that penalises success and economic reform.

I accept that Western Australia is part of a federation and that the more prosperous states have a responsibility and a role to play in protecting the interests and supporting the reasonable needs of the less financially advantaged states. However, I also support the WA government's repeated calls for the federal government to recognise the inequitable distribution of GST funding to WA and to recognise the need for the federal government to understand and identify with the cost pressures being placed on the WA government in providing infrastructure to support our massive mineral export projects. What is good for WA is good for Australia. When you stimulate the WA economy you stimulate the national economy, and that has flow-on benefits for all Australians. WA Premier Colin Barnett is correct when he says:

I think every West Australian knows we are just being dudded out of Canberra. It's a disgrace what's happening.

… there basically is no commonwealth-state financial relationship".

We need a Commonwealth Grants Commission formula that rewards best performance and embraces the principles and concepts of competition and productivity. That is the only way to deliver the national economic and social outcomes required for us to continue to prosper as a nation.