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Tuesday, 13 October 2015
Page: 7462


Senator WANG (Western Australia) (15:44): I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to this bill.

Leave granted.

Senator WANG: I table an explanatory memorandum, and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Distribution of the Goods and Services Tax (the "GST") has been problematic because it has not been allowed to evolve while the world economic environment is fast changing. Western Australia ("WA") has been a victim of the distribution model's failure to adapt to the new terms of global trading, especially those around the iron ore market. Global iron ore trades shifted to quarterly prices 5 years ago with a lot of iron ore traded on a spot market. The commodity market has its ups and downs but because of this shift commodity prices have become less predictable.

Yes of course, WA being a mining state, has been hit fairly badly by the volatility during recent years. But the Commonwealth Grants Commission still calculates each state or Territory's capacity to raise mining royalty based on data at 3-year intervals. This, frankly is the 20th century way of thinking and it fails to adjust to the way the 21st century world trades.

A bad year is a bad year. It cannot be moderated just because the 2 previous years were better. So the states and territories should be provided with the means to cope with revenue shortfall immediately, not 3 years later.

Using 3 year old mining revenue data has driven a huge reduction in GST distribution to Western Australia at the same time as the actual mining royalties reduced.

The issue of the volatility of mining revenue has been raised in the Commonwealth Grants Commission reviews of the GST distribution process for 10 years now. The issue is of particular importance to the Western Australia Government and, to a lesser extent, the Queensland Government.

WA's share of the GST revenue has been unacceptably low in recent years. Ironically the prices of iron ore have fallen in the same period as WA's share of the GST shrinks.

This Bill instructs the Commonwealth Grants Commission, when considering the capacity of a State or a Territory to raise mining revenue in preparing its annual recommendation on GST distribution, to only take into account the most recent financial year for which data is available.

Some may say that using annual assessments of royalty revenue will disadvantage the mining states when these royalties are increasing. This argument clearly shows a lack of understanding of the current impacts felt by Western Australia. My Bill offers a real buffer to the states against the volatility.

Of course I am putting forward this Bill because the GST distribution has not been fair to my home state. But more importantly, I am doing so because we now know that the distribution model has a problem which is capable of producing undesirable results, as proven in this case by Western Australia's unfair share of the GST. This problem has to be fixed so that it will not haunt another state or territory in the future as the state and territories' economic circumstances and revenue mix change. It could be Queensland, it could be Tasmania, it could be any of my good colleagues' home state should the mining industry become a bigger part of its economy.

I welcome the $500 million Commonwealth compensation to Western Australia this year. But the fundamental problem with the GST distribution remains untouched. We cannot sweep it under the carpet and pretend the job is done. Why is it that my home state has to cry for compensation every now and then like a baby crying for milk? Honestly I do not like the prospect. And dare I say, if it was a bigger state population-wise suffering from this unfair distribution, we would have this problem fixed in no time because there are more House of Representatives seats.

Yes, unanimous agreement by all states and territories is required for the Commonwealth to change the rate of the GST but no such agreement is needed to modify the distribution.

Under my Bill, if legislated, Western Australia would have received $2,395 million additional GST revenue in 2013-14, $3,057 million in 2014-15 and $3,500 million in 2015-16. Queensland would also benefit in the foreseeable future.

I am putting forward this Bill for WA, a state I love, a state I am a representative of here in the Parliament. I make no apology for doing this because WA has been ripped off for too long. But any state or territory could potentially benefit from this long overdue change.

Senator WANG: I seek leave to continue my remarks later.

Leave granted; debate adjourned.