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Monday, 12 November 2018
Page: 7836

Senator KETTER (QueenslandDeputy Opposition Whip in the Senate) (21:43): I rise to add my contribution to the debate on the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. My contribution won't be as colourful as Senator Leyonhjelm's.

I do want to make it very clear at the outset that Labor does support this bill, but we do so with quite some degree of reservation. My reservation centres on three key points: firstly, the arbitrary nature of the Commonwealth's decision to introduce this legislation while questions from the states and territories remain unanswered; secondly, the complete lack of transparency from this government about how it intends to fund the top-up policy that this legislation introduces; and, thirdly, the likelihood that this untrustworthy government won't make good on its commitment not to cut other crucial funding to states and territories. Health or education funding, national partnership funding agreements on housing and early childhood education and care could all be at risk under a government that changes its mind and its Prime Minister at the whim of the polls. I will come back to these points shortly.

I also want to point out that it is Labor that has led the way when it comes to GST reform. It was Labor that listened to the concerns of the states and territories and took them seriously. It was Labor who took on board the plight of Western Australia, where not only the financial mismanagement of the Liberal Barnett government—although that was a key factor—but also the effects of the time lag in the current method of GST distribution meant that a drop in Western Australia's share coincided with a sudden economic downturn, significantly affecting the state's ability to balance the books. That's why Labor announced the Fair Share for WA Fund, a fund designed to bring Western Australia up to the equivalent of 70c in the GST dollar.

During the course of the Senate Economics Legislation Committee inquiry into this bill, the Premier of Western Australia, Mr McGowan, attended—as Senator Leyonhjelm indicated—and he made it very clear that he thought that the Labor announcement of the Fair Share for WA Fund was a game changer in ensuring that there was a positive outcome for West Australia. There was a policy vacuum in this area. The government wasn't coming to the party and so it fell to Labor to come forward with a tangible policy response. Mr Shorten and federal Labor came forward with that policy response to a long acknowledged problem.

Contrary to what the coalition subsequently proposed, the Fair Share for WA Fund was structured to ensure that other states and territories would not see any reduction in their GST funding. I'm a senator for Queensland, so, whilst we would like to see Western Australia dealt with fairly, we certainly don't want to see any reduction in funding for Queenslanders, particularly given the fact that Queensland is a decentralised state. Once the coalition came to the party on GST reform, Labor fought for and won a seven-year guarantee that no state or territory would be worse off under the new funding arrangements. This important Labor achievement is one of the key reasons that I will be voting for this bill.

I will now outline, for the benefit of those listening or watching, what this bill is proposing to do. It largely responds to a report from the Productivity Commission inquiry into horizontal fiscal equalisation. The report recommended changes to the method of distribution of the GST, in recognition that the current method of distribution is sometimes disadvantageous, particularly in the case of economic shocks in our economy and particularly in the case of Western Australia in recent times. To change the method of GST distribution, this bill amends the Commonwealth Grants Commission Act 1973 and the Federal Financial Relations Act 2009 to transition our current system of full horizontal fiscal equalisation, or HFE, to a system of reasonable equalisation, which means equalising to the stronger performing state of New South Wales and Victoria. The bill goes on to introduce a minimum GST-revenue-sharing relativity, or GST relativity floor, that may be determined by the Treasurer for any individual state or territory, and it also permanently boosts the GST revenue pool with additional Commonwealth financial assistance.

The bill also provides for measures during the transition period, including payments to be made to any state or territory with a GST revenue-sharing relativity below a relativity factor of 0.7, or 70c in the dollar, later moving to 0.75; payments to be made to the Northern Territory if its GST-revenue-sharing relativity falls below its determined relativity factor for 2017-18; and a guarantee that each state and territory will get the better of the current distribution system or the updated distribution system during the transition period. In addition, the explanatory memorandum to the bill provides that the Productivity Commission will be required to conduct an inquiry at the end of the transition period, and additional Commonwealth funding under the new method of distribution and top-up arrangements will be nearly $9 billion over 10 years.

I would now like to go back and look at the history of GST reform, for the benefit of those listening. The GST was introduced in the year 2000 by the then Prime Minister, Mr Howard—although, as people listening might recall, the following comments were made by Mr Howard in 1995, before he was elected:

There's no way that a GST will ever be part of our policy … Never ever. It's dead.

After being elected, the Liberals changed their tune, with Mr Howard—

Debate interrupted.