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Thursday, 15 October 2015
Page: 7750


Senator URQUHART (TasmaniaDeputy Opposition Whip in the Senate) (11:22): I rise today to speak on the private senator's bill, the Commonwealth Grants Commission Amendment (GST Distribution) Bill 2015. While I have great respect for Senator Wang, and I do not begrudge him trying to secure money for his state, I cannot agree with this bill. It is fundamentally unfair, counter to the national interest and realistically could not gain the support of the states that it would need to be implemented.

What this bill proposes is a significant change to the calculation of the GST breakdown between the states, which would see the majority of states in this country lose billions of dollars between them. The bill would instruct the Commonwealth Grants Commission, in preparing its annual recommendation on GST distribution and when considering mining revenue, to take into account only the most recent completed financial year data available. Unfortunately, the explanatory memorandum reveals the dire consequences that this would have on the rest of the country, just in the 2015-16 financial year alone.

If this bill were to proceed to implementation, the effect would be that New South Wales would get $1.1 billion less to provide vital services to its people, and $1.5 billion would be ripped away from the Victorian state government's budget. South Australia would have to get through some very challenging economic times with $444 million less. The Northern Territory would have its revenue reduced by $344 million, and my home state of Tasmania would be absolutely debilitated by a $229 million cut to our state income. At the same time, Western Australian would get a massive $3½ billion dollar windfall and Queensland would also secure a cool $118 million. Clearly, this is not fair.

I understand the challenges that the mining states are going through, but the problem cannot—and it must not—be solved by gutting the revenues of the other states and territories. The states' share of GST goes towards vital services that Australians need—things like health, education and transport are all heavily supported by revenue provided by the goods and services tax. If the bill before us were to pass, state budgets would be debilitated and vital public services would crumble.

In Tasmania, New South Wales, the Northern Territory, Victoria and South Australia we would see large-scale job cuts and resultant losses in services that the states simply cannot afford. Tasmania's share of the GST revenue equates to approximately 40 per cent of the state's total revenue. This bill would rip the heart out of the Tasmanian budget, and it would rip the heart out of the services that Tasmanians depend on. Clearly, this bill is not a workable solution to the problem of Western Australia's declining financial position. It is not a long-term solution to the problems facing the state and it certainly is not a proposition that is in the national interest.

But, more than that, it is absolutely unworkable. The government has said that the only way any changes will be made to the GST is through the agreement of all states and territories. Clearly, such a significant change to the formula for the calculation of the GST distribution that would see their budgets crippled as a result would never secure the consent of the states and territories. There is no way that New South Wales would line up for a $1.1 billion cut, Victoria would never agree to losing $1.5 billion, South Australia certainly could not forego $444 million and the Northern Territory, I am sure, will not voluntarily give up $344 million. And I see Senator Scullion shaking his head! And Tasmania, most definitely, cannot wear the loss of $229 million.

Our current formula of distributing the GST among the states and territories seeks to ensure that all have the financial capacity to provide their residents with services of the same standard in areas such as education, health, transport and public safety. But it does not mean that there will be equal services in each state. It is up to each state government to decide how best to spend its budget. But for each state government to even get to the starting line in providing decent services to its people, we do need a fair system. And ripping money out of the majority of states and territories to benefit two is not the answer.

Ironically, the parlous state of the Western Australian economy in the late 1920s provided the impetus for the federal discussions for interstate financial transfers. The reality is that the Commonwealth Grants Commission was created for Western Australia's benefit. We cannot forget that the current principles of horizontal fiscal equalisation have benefitted the state of Western Australia for the past 80 years.

I quote the Western Australian Department of Treasury and Finance:

… in the early days of Federation, the Western Australian economy bore little resemblance to its present prosperous form. Isolated by geography and unable to exploit the free trade between States that resulted from the newly formed Constitution, it became necessary in 1925 for the Commonwealth to establish a Royal Commission into Western Australia’s financial disabilities. As a result, in 1933 the Commonwealth Grants Commission was formed to oversee a more equitable distribution of Commonwealth finances, which resulted in Western Australia being given the status of “claimant State”, and being in receipt of special grants from the Commonwealth for the next 30 years or so.

The cuts to most of the states and territories contained in this bill would come in addition to the Abbott-Turnbull government's $80 billion cuts in health and education levied in their first vicious budget. If it proceeded to implementation, this bill would create further holes in the eastern states' budgets to the tune of billions of dollars. Essential service delivery would be put at risk and people who rely on these services would suffer. This is not the way the parliament and our government should go about such a major structural change in financing the Federation.

Thus far, the Abbott-Turnbull government have promised everything to everyone on GST distribution. Prior to the last election the Prime Minister went to Tasmania and South Australia and said, 'She'll be right,' before then going to Western Australia and promising to fix the problem. Unfortunately for the coalition, with modern communications we do not need to rely on the bush telegraph to hear them telling different stories to different audiences.

After the election, when their magic pudding economics did not eventuate, those opposite turned to more devious tactics. Rather than taking the case to the Australian people and admitting that they want to increase the GST, Mr Abbott and Mr Hockey set out to try to starve the states into submission. By massively cutting state health and education funding, to the tune of $80 billion, they hoped that the desperation that would ensue would force the states to call for an increase to the GST to make up the shortfall. This bully boy behaviour was, quite frankly, appalling and dishonest. Not willing to face the Australian people with their clear intention to increase the GST, Mr Abbott and Mr Hockey tried to force the premiers to be the fall guys.

Mr Abbott and Mr Hockey then promised the last Commonwealth Grants Commission review would fix the problems. The report was presented to the Council on Federal Financial Relations. The Abbott-Turnbull government then realised what we already knew: that this is a zero-sum game and that the eastern states were not going to cop having to carry the load in a change of GST relativities to benefit Western Australia at their own expense—no surprises there. Bill Shorten then put forward a practical idea to assist Western Australia with the financial pressure it is under by bringing forward infrastructure funding. Surprise, surprise—within a month or so Senator Mathias Cormann announced $500 million in infrastructure for Western Australia, noting the GST distribution issue.

Labor awaits the government's Reform of the Federation white paper for a more considered view on changes that could be made to the Commonwealth grants formula. But, given the government's form to date, we will not die wondering. I am also concerned that it seems our newly minted Treasurer's mind is already made up and the consultation and discussion are simply a facade for him to push what he always wanted. Mr Morrison's true intentions were confirmed yesterday by Mr Morrison's Western Australian counterpart, the Western Australian Treasurer, Mike Nahan, who said on this matter:

The new Treasurer has indicated that he has full support for changing the distribution of GST.

Labor is also very concerned about the Turnbull government's refusal to rule out an increase to the GST. Mr Turnbull may try to put a positive spin on his lack of transparency, but the reality is that he is simply refusing to be honest with the Australian people about his intentions. But clearly we know what the Liberals want to do.

History tells us that they cannot be trusted when it comes to the GST. Before the election, Mr Abbott promised Australians no fewer than 33 times that there would be no changes to the GST. Those opposite then set out to do everything in their power to force others to push the issue. But we really should not be surprised. Of course Mr Turnbull and the Liberals want to increase taxes that hurt low- and middle-income earners the most. They are completely out of touch with the increasing cost-of-living pressures being faced by millions of Australian families. You only need to look at their intention to see millions of Australian workers lose their penalty rates, or consider their plan to put higher education out of reach of ordinary Australians, or think about the tax they want to levy on visits to the doctor. Those opposite have demonstrated their complete unwillingness to develop fair policy again and again and again.

We know what the new Assistant Minister to the Prime Minister and Mr Turnbull's right-hand-man, Senator James McGrath, is going to be arguing for, because he has already told us. As recently as July, Senator McGrath called for a GST to be broadened to include every single good and service in the Australian economy—fresh food, education, health, everything. Senator McGrath also wants the GST to be hiked to 15 per cent. This is the man that has the ear of our new Prime Minister. For our Prime Minister to try to pretend that nothing has been decided, that the Liberals do not have any specific intention to hike the GST, is disingenuous and counter to what key Liberals have already told us about what they want to happen.

Labor believes that just hiking the GST is a lazy approach. It is not reform—it is a tax grab. And it is in keeping with the record of a government that is now one of the highest taxing in recent history. They talk about keeping taxes low and then they do exactly the opposite. Their own budget papers show that Australia's tax-to-GDP ratio rose to 22.3 per cent in the Liberals' second budget. This is set to rise even further, to 23.4 per cent, over the forward estimates—the highest tax intake since the Howard government.

In the past two years, those opposite have increased fuel excise for every Australian motorist. They have scrapped planned changes to the tax-free threshold that would have lowered taxes for 10 million Australians. They have increased superannuation taxes for three million low-paid workers by scrapping the low income superannuation contribution. They have placed an additional two per cent levy on high-income earners. They have introduced 17 new or increased taxes and charges on everything from fresh fruit to visas. And now they are clearly cooking up a plan to hike the GST.

The GST is a regressive tax—that is, it hits the poorest people in the country the hardest. Because people on lower incomes spend a larger proportion of the money that they receive, they inevitably incur a larger tax impost as a proportion of their income than those on higher incomes. What is worse is that, while those opposite refuse to rule out increasing a tax that would hit those who earn the least the hardest, they came to this place yesterday and asked the Senate to support a bill that would hide the taxation affairs of the companies that earn the most in this country. They asked the Senate to agree to changes that would drape a shroud of secrecy over the taxation contribution of Australian companies worth more than $100 million. This is despite the recent revelation from the Australian Taxation Office that one in five of these companies paid no tax at all last year. And, at the same time, they have admitted they are considering hiking taxes for ordinary Australians. It simply is not fair. Labor understands that fairness must be at the core of any taxation reform. And that is a fundamental test that this bill also fails.

In summary, this bill is not the way forward. It would gut the budgets of the majority of states and territories and see the huge majority of Australians worse off. Not only that, but even if it were passed by the Senate it would have little chance, if any, of success when it came to securing the approval of the states that would see their revenue gutted by the implementation. I would urge senators not to support this bill.