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Western Queensland Local Government Association Conference, Blackall, 19 May 1999: address.

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Senator the Hon Ian Macdonald 

Minister for Regional Services, Territories and Local Government


19 May 1999 







Thanks very much Dougal, to you in your capacity as Preside
nt of the Western Queensland Local Government Association and to Cr Les Wheelhouse Mayor of Blackall Shire, my friend and colleague Vaughan Johnson Member for Gregory, Cr Noel Playford representing the Local Government Association of Queensland, to other Mayors, Councillors and distinguished guests, ladies and gentlemen.

Well first of all thanks very much for having me with you. I'm delighted to be here. I'm sorry I couldn't be with you last night, although perhaps it is better for my health that I wasn't, because I hear that some of you had a good time.

It is a pleasure to be in the West again, I don't get here as often as I would like to. But flying in from Ayr this morning cross country, some of the country looks magnificent and if only the prices were as good as the seasons we would be doing marvellously out here.

You would not need a Federal Government at all-except to collect the taxes you would be paying enormously, on huge incomes! But that is not to be just yet anyhow. We live in hope and I do hope things do get better and that the seasons continue as well as they look to have been around this area.

I must sort of explain my appearance. It is not because we had a horrific week in the Senate last week, although we did. I haven't been belted around by that. This is the result of a misspent youth in North Queensland. And having to see the laser surgeon yesterday and get a few more cut out. But I guess that is a common complaint with many of you. I just hope the younger one's amongst you and particularly your children and grandchildren learn lessons that we didn't properly learn when we were younger.

I was interested to hear what Vaughan had to say, and I've had a read Noel Playfords speech and I thought I might elaborate today on some matters, which I guess are foremost in your mind. And that relates to the Federal Governments new taxation reform proposals and Local Governments part in it.

These new arrangements that have been proposed, which we have been working on for some time, represent the biggest change ever in Australia's Taxation System. And they also represents a fairly substantial variation of the funding for Local Government. These proposals were put to the people of Australia in the most comprehensive package ever taken by any political party to the Australian public last October. Our tax reform proposals were well know, they were there in detail. And they included those proposals, some issues some initiatives, that I believe would have been of great benefit to Local Government around Australia.

And those benefits included:

•  A guarantee of continued funding for ever and a day for Local Government;

• They involved a GST system that had no impact on councils themselves and you understand of course that the GST is a consumption tax payable once and once only by the final consumer. And you would understand that Councils are never the final consumers on anything. And so there would be no impact on councils operations themselves;

• Normally there would have been an impact on councils customers, that is ratepayers, people who use your services. But in a deliberate decision we decided that rates, regulatory charges, water and sewage, most of the things that councils do would be GST free, that means your final consumer, your customers for council services would not pay GST at all. And on somewhere between 90 and 95% of the services you provide your customers would not have paid GST on that at all.

But on the other side of the fence Councils would have saved quite substantially. We estimate that around Aus tralia Councils are currently paying some $70 million in hidden indirect wholesale sales taxes. And with the removal of wholesale sales taxes there are saving to councils, which we estimate to be $70 million, which your Councils would have shared in.

As well, I think you are pretty well aware now the reduction in fuel prices, diesel fuel, particularly on trucks over 3.5 tonnes gross vehicle weight. The cost of that fuel would have dropped some 25 cents a litre. The excise coming down from 43 cents a litre to 18 cents a litre.

And for many of the Councils, particularly out this way, with the number of trucks you run and the distances that they run, that would have represented real savings for you. The Local Government Association of Queensland has estimated that Queensland Counc ils would receive savings in the order of $18 million.

The other good thing about the tax reform package was that it gave the States a guaranteed and increasing form of revenue, which then left the States in a better position to deal with the things that State Governments are meant to deal with.

That includes things like roads, which Vaughan spoke about at some length, and the tax reform package would have given the Queensland Government a lot of extra money in it's till with which it could have allocated to roads, amongst other things. But it also gave Local Government the opportunity to negotiate with the Queensland Government with it's new found wealth to put a deal to the Queensland Government. I am very pleased to see and I give credit where credit is due, that Terry Mackenroth and Peter Beattie did come to the party with Local Government and did agree to give Local Government a fixed percentage of the GST revenue which the States would get from the Commonwealth.

And that deal with the current Queensland Government was also supported by Vaughan Johnson and his colleague Howard Hobbs as the Shadow Minister and the Coalition in a bipartisan way.

I think the Local Government Association of Queensland has estimated that Councils in Queensland would have received an additional $35 million out of that deal. That was all possible because of the whole new arrangement for Commonwealth/State Payments, which followed the tax reform package.

I have got to say with some sadness that all those good things for Local Government and the other good things that would flow from this package for Australia and for Australians has all been put in doubt last Friday. A day that I call "Black Friday for Local Government" or as the Sunday Telegraph labels it "A bitter day for democracy" I agree with the Weekend Australian which said and I quote "Senator Harradine is acting against the best interests of Australia."

Ladies and Gentlemen we received a mandate from the Australian people, more than 4 million people voted for us at the last election and voted for tax reform. Many of them said "Well look I don’t think that I am going to do well out of this, I don't think that it is going to benefit me!" They were wrong. But that’s what they thought. But they voted for it on the basis that it was a good package for Australia. It would have taken $10 billion off our businesses, it would have taken $4.5 billion off our export costs, and it would have saved every farmer on average about $7,500 a year in reduced costs.

So it was a great package for Australia. But inspite of getting endorsement of over 4 million people for that package one Senator, who is elected to the Federal Parliament, with less votes than many mayors in Queensland receive, has put that whole package in jeopardy.

It is even sadder for me when I realise that Brian Harradine was elected in1993, and he sits in the Parliament today as a result of the 1993 election because the Senate does not change until the 30 June. But he was elected in 1993 on the preferences of voters in Tasmania who voted 1 for John Hewson's GST Package and 2 for Brian Harradine. So he is only there because of voters who wanted a GST and simarily in the election just gone Brian Harridine struggled to maintain his position in the Senate but he succeeded again on the substantial flow of preferences from Liberal voters who voted 1 for tax reform, 1 for a GST and number 2 for Brian Harridine.

And whilst many of you would agree I suspect that hypocrisy abounds in politics and particularly in Federal politics, but I ask you what can be more hypercritical than this debate over compensation for people who are alleged to be badly affected by the Tax Reform Package.

We have said all along of course that your cost of living would go up, by about 1.9% we estimate, but what we set out to do was recognising that we wanted to make sure you didn't loose, by reducing Income taxes very substantially, by increasing family payments, by increasing pensions by 4% to make up for this estimated 1.9% increase in the cost of living. So we gave the compensation. But you know it is remarkable that some of the opposition parties in the senate are now focusing on the fact that the compensation is not good enough. And there saying that you have to give more compensation for these taxes you are going to put up.

But in a great show of hypocrisy they forget in 1993, after the then government unexpectedly won that election. And you might recall that before the election they actually legislated for income tax cuts. They got back in 1993 and the first thing they did w as reverse that legislation and wipe out those, remember them, the LAW tax cuts. As well as that, they then increased the existing sales taxes, the wholesale sales tax by 2 - 3% across the board 10% went up to 12, 20% went up to 22, and so on.

But would you know they only got the legalisation though the parliament with the support of the Australian Democrats. Would you also know that in that debate not one word was said about compensation for those increased taxes, not one word. So compensation when governments do things seems to be a new phenomena. We acknowledge that, and that is why we did give compensation, but for all the focus on compensation now it never applied in 1993 and what could be more hypercritical.

And I say to you ladies and gentlemen as members of Local Government, you are often rallied against by Federal and State politicians saying there needs to be Local Government reform. Well I think the events of last Friday give the clearest signal yet that reform of the Senate is long overdue.

I do add of course that one senator alone can not block a mandate. It does need the opposition, the Democrats and the minor parties to join in doing that.

But as the Prime Minister has said and said in Longreach again yesterday we're going to pursue tax reform because it is good for Australia. We will persue our mandate and we will pursue that legislation through Parliament.

Perhaps if I could anticipate a question later and answer it now. I don't really don't know where this is going to end up in the immediate term. We still have another 256 amendments to deal with in the committee stage with this legislation before the vote is taken on the third reading of the bill. There is a lot of talking to go on between now and then we will be talking to the Democrats the Independents and to the Labor Party even. To see if we can get this Tax Reform Package through in some form or other.

Now ladies and gentlemen I want to just return if I could to explain to you how the funding was going to be guaranteed to Local Authorities under our Tax Reform Package. Because again I know that is a question that many Local Governments around Australia were asking.

Some of you may have seen the two letters I sent out to every Council in Australia recently. One concerned the introduction into the House Of Representatives the Bill to actually cancel the current Financial Assistance Grants Act . The other letter was about the signing of Intergovernmental Agreement between the Commonwealth Government and all of the States and Territories. I think perhaps it’s worthwhile going over the main outcome that has been achieved by that process.

It was on the 9 th of April that the Intergovernmental Agreement on Reform of Commonwealth/State Financial Arrangements was signed at the Premiers' Conference. It was signed unanimously and enthusiastically by all of the Premiers and Chief Ministers irrespective of their political allegiances.

The agreement is critically important for Local Government because it contains the conditions agreed for the transfer of payment of Local Government Financial Assistance Grants from the Commonwealth to the State.

Appendix D of the Intergovernmental Agreement, spells out the conditions for the payment of Local Government FAGs. It does in fact incorporate the main provisions of the payments of the current existing Financial Assistance Grants Act. And it secures for Local Government the guarantees of maintenance of funding that we promised to you before the election, and it also has the safeguards that Local Government sought in relation to the ongoing payment of Financial Assistance Grants.

But I want to just take a moment if I can, to be a little bit more specific, and I would like to run through the main provisions that we have put in place in that Intergovernmental Agreement.

•  First of all the level of the grants which the States will pay the Local Government had to be maintained in real per capita terms on an ongoing basis. So you wouldn't get less than the Commonwealth is currently paying, about $1.25 billion, and that would increase every year at least with an escalation factor for population increase and for the CPI;

•  The grants were to remain untied in the hands of Councils - that is of course you can with them what you will they are freely available for any purpose that you wanted as they now are;

• Road funding was to remain separately identified but otherwise untied;

• The current principles for distribution of grants were to be retained. That is Horizontal Fiscal Equalisation, as defined in the current Act, continues as the main criterion for the distribution for general purpose grants, and

• The existing role of the States Grants Commissions in allocating the grants will be retained.

In addition, these conditions will all have legislative backing as the States and the Northern Territory as part of this Agreement agreed they would enact legislation to give effe ct to them and that Agreement will also become part of the Federal legislation.

As I mentioned earlier in Queenslands case, Queensland has led the way and has been able to negotiate an even better deal from a State Government who was very happy with the money it got.

Perhaps I should pause here to congratulate your executive of the Local Government Association of Queensland, your own representative, the other members of the executive and the very very professional staff that you are fortunate indeed to have in Queensland for the Local Government Association.

You have been able to deal with the Queensland Government as you have with us, and you have done that very professionally and you have done very well as a result of that. I have had a lot of dealings with the LGAQ with both Tom Pyne and his Executive and with Greg Hallam and his team. And we haven't always agreed but we have always talked and they have explained to me things that I didn't quite understand and we have jointly been able to get a better deal for Local Government.

Ladies and Gentlemen that Intergovernmental Agreement that I was talking about does establish a Ministerial Council and one of its roles will be to monitor compliance by the States and the Northern Territory with the governing condition about the payment of Local Government assistance. The Council will meet annually and it will review the effectiveness of funding arrangements and Local Government will be part of that review.

Put simply, what we are saying to the States is you get all the GST revenue, the Commonwealth gets none of it. That’s why we can guarantee that it wont go up beyond 10%. States get all of it. But on the condition that they pay the Local Government at least what you're getting now, and there are mechanisms in place to ensure the State Government abides by that agreement. If they break that agreement then of course the Commonwealth has the opportunity of then dealing with the funds that should have gone to the particular State in another way. One of the ways would be in making sure that the correct amount went to Local Government.

So it is certainly my belief that the Agreement we negotiated with the States and Territories is a very positive one for Local Government. I am satisfied that it will protect and enhance Local Governments access to funding and provide you with the certainty you need to plan ahead and carry out your functions and responsibilities.

These new financing arrangements if we can get the package through the Senate will come into effect for 1 July 2000. In the meantime of course it is business as usual, with next year's Financial Assistance Grants to Local Government being allocated. They were included in the Federal Budget process last week.

I am pleased to announce that in 1999-2000 Commonwealth Financial Assistance Grants to Local Government will rise by about 3 per cent to around $1,263 million. That amount is about $36 million more than it was last year.

Of this amount some $840 million will go to the 580 or so Councils in Rural and Regional Australia. So about two-thirds of the funds which the Federal Government allocates goes to Country Councils.

I will just briefly want to mention an issue that has been raised with me from time to time. That is "If you are no longer as a Federal government actually handing out the grants what is going to be the Commonwealths relationship with Local Government in the future?"

Well there are a number of things we'll be doing. One of the ways we are cementing our ongoing and very productive relationship with Councils is with a new programme, which was funded in the budget, called "The local Government Incentive Programme."

The Lo cal Government Incentive Programme provides $7 million over the next two years to assist councils to contribute to economic developments in Regional Australia, to improve service delivery and the streamline regulation of business activities.

Funds will be targeted at initially to have a look at ways that we can assist Councils to comply with requirements of the New Tax System. We will also be directing those funds towards streamlining regulatory practices, which would otherwise inhibit economic development. We want to use those funds as well for skill transfer of innovation and best practice projects; and also supporting Local Government's role in regional development and service delivery.

I want to assure you that the Federal Government sees an ongoing strong linkage with Local Government as an essential element in the implementation of some of its policy priorities, particularly in Regional Australia.

Many of our objectives can only be achieved with the support and involvement of Local Government. If you think for a moment of the areas of economic development, social policy and environmental protection that both the Federal Government and the Local Governments are involved in.

All of these are of course legitimate concerns and will remain so between the Federal Government and Local Government. As I have said on many occasions in the past, Local Government is ideally placed to assist the Federal Government in delivering services to local communities.

A recent example of this is the Rural Transaction Centre initiative, which again I have written to all Councils about. This initiative will put back into country Australia the banking services that have been leaving in the past decade or so. I haven't yet really looked at the first lot of applications that have come but we will be doing that in the next week or so. And I am confident that Councils will be participating in getting those applications in and supporting the community to get some basic banking services, Medicare easy claim services, fax and phone services back into smaller regional communities.

There are other steps that have been taken that may be of interest to you in your particular locality. In this regard, I would recommend that you watch out for a booklet put out by the National Office of Local Government is about to put out called CALP, which stands for Commonwealth Assistance for Local Programmes - It is 180 pages of funded programmes and contacts across all portfolios, not just my portfolio, all the programmes that you might be able to apply for are drawn together in one booklet. I know you will find that very interesting, in fact I found it very interesting myself. I hope you will look at that and where appropriate apply for Federal Government Funding. I will be posting that book out to every Council in Australia within the next month or so.

I have also asked the National Office of Local Government to more actively consult with Councils at the grass roots level. Over the next few months NOLG will be conducting regional workshops across the country to showcase leading practice and value in the Local Government arena, particularly in the areas of leadership and innovation.

This will also provide a mechanism through which Local Government officials may pass on directly to Commonwealth representatives their concerns and anticipated future issues. There are 4 workshops in Queensland at Townsville, Dalby, the Sunshine Coast and Longreach all to be held in mid June. I would be interested in your views on those forums, I must say I was only 3/4 convinced by the Department that they were a good idea.

I would appreciate any feedback, some of you may not even have known of them or even get near them, in which case that feed back would be very useful to me as we strive to find a better way of making sure you concerns are not only known to me, and I hope you would always make your concerns known to me, but it is important that some of the very well qualified and very keen bureaucrats who administer many of these programmes do get a feel for some of the problems you have. And as much as those forums are about telling you things, I see their real value is in you telling the bureaucrats about and giving them a feel for some of the pressures you are under.

Ladies and Gentlemen I think I have almost run out of time. There are a few other things that the Federal Government is doing that I could have mentioned to you but I think Mr Chairman I might leave it at that. I reiterate and thank you all and your Distri ct Association, but particularly the LGAQ for the cooperation they have given to me in the time I have been Minister. I do particularly appreciate the advice that they have been able to provide me. I know we will continue to have that very effective working relationship. If I can finish on that note Mr Chairman.

If time permits I would be very happy to answer any questions that there might be about anything I have said and perhaps more importantly some of the things I have not said.

Dougal to you again and to your executive thank you very much for giving me the opportunity of participating in the conference and I wish you all well in the final hour of your Conference and as well in your work in your communities over the next year.

Thank you.





jy  1999-07-28  11:40