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Wednesday, 11 December 2002
Page: 7708

Senator SANTORO (12:45 PM) —When I made my first speech in this place last week, I said that a principal objective that I had, as a representative of Queensland, would be to assist in the process of keeping the Queensland government honest. In that speech I said:

... the states have a duty to use the tax funds they draw from the Commonwealth responsibly. The states now have access, in the GST, to the first major true growth tax they have enjoyed since they turned over income taxing powers to the Commonwealth 60 years ago ... They have been given a historic opportunity to be truly responsible for tax revenue that comes to them by right, with no strings attached, but is collected by another government which takes on the political odium of doing so.

Since I made that speech, I have been looking at some of the financial statistics. In 2002-03, Queensland received 46.3 per cent more overall in Commonwealth moneys than it received in 1997-98. It received 44.7 per cent more in 2002-03 from the current budget than it received in 1998-99, the first fiscal year for which the Beattie government was responsible. It received 55.9 per cent more in 2000-01 than it received in 1999-2000, and 2000-01 was the first budget year in which the GST funds flowed to the states. So that all this is in perspective, it should be noted that the national total of Commonwealth funds disbursed to the states and territories rose by 47.7 per cent between 1997-98 and 2002-03. The 2002-03 amount is, of course, an estimated amount. The 2000-01 increase compared with 1999-2000—the first year of GST funding—was 55.7 per cent.

The principle of the arrangements between the states and territories and the Commonwealth on GST is novel. All GST revenue is divvied up between the states and territories under the Commonwealth Grants Commission formula. The rate of growth in funding from this source that the states can expect depends on the growth in taxable consumption spending. In other words, the better the country performs as a consumer society, the more money flows to the states. All state governments, wherever they are located and of whatever political persuasion they are, complain that they have been dudded by the Commonwealth. It is a national sport. Sometimes these complaints have been justified, but in the light of cool analysis many cannot be justified.

In the case of Queensland, my own state, for example, it is fairly difficult to argue for compensation for tax revenue forgone that was never raised in the first place. A changeover, such as the one that occurred in 2000-01, when the whole basis of state revenue raising was changed by national agreement, was always going to alter the parameters. Queensland can still be a low tax state—in reality that is, not in rhetoric. The present Queensland government, please note: the bottom line is that the states now have a growing pool of revenue that can be spent according to their own budgetary priorities. By any measure, at least on the face of it, that is a significant advance in financial independence. It may not be a pot of gold—it certainly is not a bottomless one—but it is nonetheless a mechanism that creates significant budgetary freedom hitherto unknown.

Those of us who welcome and wish to advance the cause of state differentials, on the basis that a country as large in area and as geographically and climatologically diverse as ours needs to encourage sensible regional difference, can only applaud. I am sure this applause is actually echoed in the corridors of the Labor administrations that now hold government across the country. They just will not say so publicly, and the Queensland government in particular is remarkably coy about the benefits that flow its way because of the new arrangements. Talking about benefits, just yesterday the Minister for Science announced more than $478 million in funding for cooperative research centres— that is a record.

For the record, Queensland received one-third of the CRC grants that were announced, a performance that reflects credit on the research capabilities of Queensland institutions, the education sector and private enterprise. That certainly deserves applause. What also deserves applause is the Commonwealth's readiness to fund excellence and the promise of outcomes on the rational basis of reasonable and judged expectation. It would be a shame if unnecessary state rivalries muddied the waters there.

Ten CRC applicants based in Queensland—and I think we should reflect on and give proper weight to the words `based in Queensland'—were successful in the selection round. Four of them are entirely new, two will be developed from existing CRCs and four CRCs will receive supplementary funding. The Queensland recipients who have received grants worth a total of $140.35 million deserve to be mentioned for the record. They are: sugar industry innovation through biotechnology, $28 million; interaction design, an IT operation, $12.4 million; Australian biosecurity, emerging infectious diseases, $17.5 million; integrated engineering asset management, also an IT operation, $17.5 million; sustainable tourism, operating in the environmental area, $26.7 million; mining, $27 million; coastal zone, estuary and waterway management, $3 million; rainforest and reef and catchment to reef, which is an ongoing project, $2.25 million; enterprise distributed systems technology, another IT operation, $3 million; and the Great Barrier Reef World Heritage areas and Torres Strait program, an ongoing operation, $3 million.

Two new CRCs in the information and communication technology sector originate from Queensland, and another Queensland based CRC in this sector will receive supplementary funding. With respect to the rest of Queensland's CRCs who were successful in this funding round, four are from the environment sector, two are from the agriculture and rural based manufacturing sector, and one comes from the mining and energy sector. This reflects Queensland's natural advantage and the range of existing skills and industries on which the state is building and has been building for a very long time.

I note Senator Brown's comments in relation to funding for conventional fuels research following yesterday's CRC announcements, apparently, in his view, at the expense of research into renewable energy. It is important that we in this country build on our existing levels of excellence in established and proven energy sources. This is particularly important for Queensland, one of the great resource states of our nation. That is why it was sensible to draw back from Kyoto, as the Commonwealth government has done. We must continue to research ways of producing even cleaner energy from Queensland's high quality, low-polluting coal resources. That does not mean holding back on research on alternatives or on renewable energy technology. It does mean recognising that Queensland's coal resources are immense and that in an energy hungry world, it simply is not an option to forgo its use or the extension of its use.

Commonwealth-state relations are almost exclusively about financial relations. We need to continually improve these relations and find ways of securing the true financial independence of the states. The revenue picture has been forever altered by the historic decision to implement the new tax system—the Commonwealth's responsibility— and to provide the states and territories with a growth revenue source that is fed by the consumer society in which we all live and from which we all benefit. This is an opportunity which the Queensland Treasury certainly understands and which it welcomes. The Queensland government is publicly less happy, but that is politics—and, of course, it knows it.

One of the chief areas of public policy reform that should attract our attention in these early years of the 21st century is that of financial administration by the various levels of government in this country. The states generally—and from my point of view, Queensland in particular—have a lot of work to do in that area. Queensland's balance sheet remains in fairly good order, but it is true to say that there are some problems now apparent that were not so clearly definable in the early years of Labor administration.

We have all suffered from the turmoil in world equity markets, at the personal level in our own savings and investments and particularly in the superannuation area. Queensland's fully funded public sector superannuation has been similarly hit by this global effect. That has in turn had an effect on the government's bottom line. We have heard some fairly heroic explanations of these events from the Queensland government. We have yet to see the latest audited figures so that we can judge how the state budget is actually performing. According to the Queensland government, this has been slightly delayed so that it can take into account figures that will be available early next year. It will make very interesting reading indeed.

It is fair to say the outcomes report for the year ended 30 June 2002 produced by the Queensland Treasury did not make happy reading. It produced an actual GFS net operating balance of minus $894 million—a real deficit, in other words—against an estimated actual deficit in the budget of $486 million. That is a miss by 45.6 per cent or $408 million. That is a fairly sizeable deflection from the target. It is about the same as aiming to shoot yourself in the left foot and shooting yourself in the right foot. It is in this area of financial management that the most care needs to be taken by the states, including the Queensland government. Anyone can top up the coffers by rolling out the speed cameras, upping the ante on poker machine tax or raiding the pre-tax equivalent profits of government trading enterprises, but we need to move beyond this kind of marginal, Micawber economics. There is a now a firm and growing revenue base available to the states from the GST, and the states should make very wise use of that. State governments need to take full and responsible advantage of the opportunity they have been given. They should recognise the political pain that has been taken on by the federal government and make use of that political pain in a very responsible manner.