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Tuesday, 23 October 2018
Page: 10791


Ms KEAY (Braddon) (18:42): This is an extremely important topic for my state of Tasmania. I would like to reiterate some of the comments of the member for Griffith in saying that this side of the House, Labor, have been very united in our position on GST distribution for all states. While working through some very challenging state-by-state situations, we've come together in a most unified way.

I have to say that the history of this debate has been very long and very tortuous for states like mine, Tasmania. We have a government whose position—even when the Liberal Party were in opposition—has changed so rapidly, and now to something based on what Labor has been proposing. We've been consulting with states, consulting with each other and making our position very, very clear for the people of Australia. But when we've put forward policy positions on this, ways forward to deal with some of these challenges, we've met with considerable opposition from the Liberal Party, whether in opposition or in government. That has not given anyone in this country confidence in the Liberals' ability to put forward a proper solution for the GST and the way it's dealt with by each state. That's been an absolute shame, because on this side we've been very consistent. As to the other side, none of the states, like Tasmania, have any confidence that they wouldn't be worse off under this government.

Labor worked constructively with Western Australia in particular, in recognition of their position and the challenges they have been facing. But, equally importantly, Labor worked constructively to ensure that my state, Tasmania, would not be worse off. I can't say that that's been the case for the coalition. It's been a GST merry-go-round where on any given day the policy of the coalition has changed: changing the distribution to a per capita arrangement, increasing the GST, establishing a Productivity Commission inquiry, opposing but then supporting a floor price, and opposing legislation to ensure no states are worse off. And now this is where we find ourselves today.

As I've said, this issue is incredibly serious for the state of Tasmania. It's critical because of the revenue that comes to Tasmania through the current method of distribution, horizontal fiscal equalisation. It is a system designed to ensure that all states and territories are treated equitably. In 2018-19 Tasmania's total general government revenue is expected to be approximately $6.2 billion. Tasmania's largest source of revenue is GST revenue, estimated to be almost $2.5 billion in 2018-19, or approximately 40 per cent of the state's total revenue, which is quite considerable. This is a larger proportion than any jurisdiction other than the Northern Territory. Putting this into perspective, the current distribution of revenue represents 54 per cent of Tasmania's health expenditure or 71 per cent of education expenditure. So Tasmania's front-line services are incredibly reliant on GST revenue. More broadly, Tasmania's revenue sources underscore the state's reliance on all Commonwealth payments, including the GST, representing more than 60 per cent of state revenue. So you can see that Tasmania is not in a great position to start generating its own revenue. This government, and maybe the future Productivity Commission report, might suggest that Tasmania start selling off state assets, which would be a short-term fix but diabolical for the state. So any reduction in revenue to Tasmania will see devastating consequences to our schools, hospitals, police force, emergency services and the like. Let's put this into the context of what we're facing in Tasmania now. Our hospitals are already in crisis. This is due to state and federal Liberal budget cuts. Only very recently a leaked report stated that Tasmania is facing a $100 million underspend just in health. Our school retention rates and tertiary education rates are some of the lowest in yet. Yet for the last six years the coalition has threatened Tasmania's fair share of GST revenue.

The alarm bells for my state of Tasmania have been ringing since April 2012. The then opposition leader, the member for Warringah, visited Western Australia; and he then backed Colin Barnett, who was calling for the GST to be distributed on a per capita basis. Imagine what that would mean for the small state of Tasmania, with a population not much bigger than that of Geelong. This is what that member had to say at the time: 'I think that it does seem quite unfair that the people of Western Australia get so little back for their GST revenue that they provide to the rest of the country.' That's fair enough. But then he continued: 'I think that what ought to be very seriously considered by the government right now is a proposal that the GST revenue should be distributed on what is closer to a per capita arrangement. I think that makes a lot of sense.'

Sadly, that made absolutely no sense for the state of Tasmania at that time. That little thought bubble would have meant that WA, quite rightly, would have received an extra $2.4 billion but Tasmania would have been $700 million worse off—that's considerable for the size of our budget and our reliance on our GST revenue—which is the equivalent of $1,300 per person worse off. It would have meant that we would have had to cut a lot of services—fewer teachers, fewer nurses. It was during the fallout of the global financial crisis, which hit Tasmania hard and a lot later than other states.

Like the good soldier and supporter that he is, the great political genius Senator Eric Abetz poured further fuel on the fire when in March 2013 he said, 'The coalition might move closer to a per capita distribution.' What a good champion for Tasmania Senator Abetz is! In May 2013 Tasmanian Labor launched a 'Hands off our GST' campaign. From that point, the coalition ran dead on the issue in the lead-up to the 2013 general election. Things remained quiet until July 2015, when the then Prime Minister, the member for Warringah, thought it would be a good idea to start debate about an increase in the GST itself. The member for Warringah said that changes in the tax mix were on the table and he would prefer to look at overhauling the GST rather than increasing the Medicare levy—this from the man who famously promised no cuts to health and education and, of course, said there would be no changes to the GST. We all know that was a bit of a falsification, as we know from history.

Prime Minister Abbott then said he was pleased that former New South Wales Premier Mike Baird had proposed raising the GST to 15 per cent because, in his words, the tax was 'a joint exercise by the Commonwealth and the state'. There was another gem from the member for Warringah after a COAG meeting: 'I'm not ruling things in, I'm not ruling things out, but my preference would be to consider the GST issue rather than the Medicare levy issue.' History now records what happens to the member for Warringah in September 2015 but it seems that under the leadership of the former member for Wentworth and his newly minted Treasurer—who is now this week's Prime Minister—the plans to increase the GST remained. In November 2015, in a speech to the Melbourne Institute's economic and social Outlook Conference, it was reported that the Treasurer gave the strongest hint yet that the Turnbull government planned to swap income tax increases for increases in the goods and services tax. The debate continued over the Christmas and New Year period of 2015-16.

On multiple occasions, the former Prime Minister and his so-called loyal Treasurer were given the opportunity to rule out an increase to the GST, but they chose not to. Finally, on 16 February 2016, the Prime Minister saw the writing on the wall and ruled out the government taking an increase in the GST to the next election—finally. That was another backflip. There are all of these backflips. But it was still under active consideration around the cabinet table, apparently. On that very same day his employment minister, Senator Cash, told the media:

We haven't taken it off the table completely, not at all.

This is just like juggling balls; I'm not quite sure where it's all going to land.

The GST debate paused for the 2016 general election, conveniently. But, after a narrow election result, the Prime Minister and Treasurer still had a problem to resolve. Rather than take responsibility, they hived off the issue to the Productivity Commission to inquire into the effectiveness of horizontal fiscal equalisation and to make recommendations to improve the system. But Labor knew something had to be done to address the concerns of Western Australia and ensure that states—like mine, Tasmania—were not worse off. In August 2017, Labor leader Bill Shorten announced that a Labor government would invest $1.6 billion in the Fair Share for WA Fund, bringing Commonwealth funding for Western Australia up to the equivalent of a 70 cent floor. Crucially for states like mine, Labor's policy did not change the current GST distribution formula. This government then chose to ridicule Labor's plan while dithering themselves, not really having much of an answer.

In October last year, the Productivity Commission released their interim report. The former Prime Minister and Treasurer had a golden opportunity to rule out any changes to the distribution of GST revenue that would reduce Tasmania's share. Instead, they chose not to. The Treasurer said that smaller states could require transition plans. In effect, that was an admission that Tasmania would be worse off. That's because the interim report revealed that Tasmania would be subject to a $168 million cut in one year alone. We would have to then beg and beg the Prime Minister and Treasurer of the day to give us a top-up each year. This $168 million cut that the Prime Minister and Treasurer were quite happy to pass on to Tasmania, unless we begged hard enough, is equivalent to 1,600 teachers, 1,500 nurses or 1,300 police.

The Tasmanian Treasury responded in no uncertain terms to the interim report, saying:

Any reduction in revenue would have a significant impact on the State. Without any other funding from the Commonwealth this would mean either an 18 per cent reduction in expenditure on government services, or 18 per cent increase in State revenue from taxes, fees and dividends, or a combination of both. Clearly this would create an unsustainable budgetary position for the State.

The Government would have to decide how it would deal with the loss of revenue. Generally, there are three main options - a reduction in spending, an increase in own-source taxation revenue or an increase in State debt. The sale of State owned assets is an option which would only temporarily address the issue …

This is what Tasmania was facing only very recently: the prospect of putting up more state taxes and cutting spending and services to very vital front-line services when our health system is terribly underfunded and our education outcomes are not great. Otherwise, we could just sell off our state assets, which Tasmanians cherish very much and very much want to stay in state-owned hands. Time and time again, between the release of the interim report and the final report, the coalition was given the opportunity to rule out Tasmania being no worse off. Time and time again, they didn't.

Finally, in June of this year, the Productivity Commission released their final report. What an absolute doozy that was. The former Prime Minister was full of assurances that Tasmania would not receive one cent less than what it receives now. But you have to put that into context over a period of time, in perpetuity. The prominent economist Saul Eslake's opinion of this was:

Mr Turnbull's 'guarantee' implies that Tasmania's share of the GST pie would fall from 3.7 per cent to 3.2 per cent over that period.

That would mean Tasmania getting $367 million or 13 per cent less in 2021-22 than it would if its share remained at 3.7 per cent.

That was another diabolical result for Tasmania. You have to think what the Tasmanian state Liberal team were doing. They were doing absolutely nothing. They didn't say a word. They were just going, 'Yes, okay. We'll cop that.' In real terms, this meant that Tasmania's share of the GST pool would decline and the ability of the government to fund essential services would have been solely reliant upon the government of the day providing those top-up payments to my state.

Foolishly, the Tasmanian Liberal Premier seemed happy to sign up to the new arrangements without actually seeing the detail. He and his Treasurer, Peter Gutwein, were assured by a phone call from the now Prime Minister, the Treasurer at the time—this is all getting a little bit confusing, isn't it? But how wrong they were. Labor and economist Saul Eslake were standing up for Tasmanians while Liberal Premier Will Hodgman fell silent. Mr Eslake called on the Premier to finally start protesting loudly on Tasmania's behalf along with other smaller states that stood to lose vast sums of revenue from this new arrangement. State and federal Labor called upon Premier Hodgman and Treasurer Gutwein to not accept a deal that was fundamentally against Tasmania's long-term interests.

But, of course, we saw some unedifying scenes in August this year with yet another Prime Minister being rolled. It's all very confusing. But did the chaos over the GST end? No, it only worsened. First of all, we had the revelation that the Prime Minister abused the Tasmanian Treasurer during GST negotiations, calling him a mendicant. Then, in early October this year, despite arguing for months that there was no need to legislate a GST floor, the Prime Minister decided he would follow Labor's lead and propose the legislation. We welcomed the Prime Minister's backflip—there have been a lot of those over the years on this issue—but we remained concerned that a legislated guarantee was needed so that no state would be worse off. Again, the Prime Minister and the Treasurer rejected Labor's calls. Even after every single state and territory Treasurer united in calls on 3 October for the guarantee, the Prime Minister and the Treasurer refused to give it. I have to say that the Tasmanian state Liberals at that point were ready to cross the floor, bowing to the pressure of we Tasmanian backbenchers and Tasmanian Labor senators when we wrote to them to support the amendments that we were proposing to make sure that Tasmania would not be worse off. They finally said, 'We might actually cross the floor on that.' They actually took a bit of a stand. How long did it take those terrible Liberal senators to stand up for my state!

That's a potted history of this government's backflipping on whether or not Tasmania should be worse off—with a Liberal Senate team not actually standing up for Tasmania but Labor arguing for six and a half years to make sure that my state and our services and the jobs of our teachers, our police and our nurses would be protected because we would have our fair share of GST revenue.