Will Hodgman

Premier of Tasmania

GST reform tears at fabric of Federation

Will Hodgman

Originally published in The Australian 16/04/15

It is not too long ago that some, chief amongst them West Australians, were calling Tasmania mendicant. It is ironic that in the latest political bun-fight over GST the boot is on the other foot.
The distribution of the GST reflects the very fabric of our Federation. It is about ensuring every Australian, whether they are living on a southern island or in the far west, has the same opportunity to access the same quality services.

It is about being fair.

It should be above an annual political brawl, which is the very reason the Commonwealth Grants Commission exists, to provide the fairest possible model to allocate GST funds - state funds - away from politics.

The system has worked well for nearly 100 years. To mess with it now, as some are suggesting, would tear at the very fabric of our Federation.

If the Federal Government deviates from this year’s independent finding then the system of Horizontal Fiscal Equalisation will be corrupted and there will be no going back.

This includes any of the so called compromises or a “peace plan” such as the ill-conceived notion of freezing relativities at the current level.

All that does is kick the can down the road for a year, and while it gives Western Australia an additional $500 million, it will also give a $500 million windfall to the richest state, New South Wales.

By contrast, Victoria, Queensland, South Australia and Tasmania would collectively lose $1.2 billion. In Tasmania's case that’s more than a $200 million loss, roughly the annual budget for our entire police service.

And, to be fair, Western Australia has done well when it comes to their share of the GST.
When the mining boom began, a surge in mining royalties filled Western Australia’s coffers, and yet the GST it received did not reflect that. This GST windfall was estimated by the Grants Commission to be in excess of $7 billion.

It is worth noting that over the past three years Western Australia’s general government expenditure has increased annually by 6.9 per cent while their revenues were growing at a little over five per cent.

We can all relate to the difficult budgetary challenges that the West Australian Government is facing.

We inherited a massive challenge ourselves just a year ago on coming into government. But the GST distribution should not be used to prop up another state’s budget.
In Tasmania, we are doing our bit. We recognise that some of the past criticisms of our state are valid.

That’s why we have made changes.

We have actively unlocked over 400,000 hectares of our forests to use for future production; we are expanding our pillar industries, like agriculture and aquaculture; we are opening our World Heritage Area and national parks to sensible and sustainable development; and investing more to capitalise on the boom in our tourism industry, the nation’s best.

There have been some tough decisions too. Following our election, we implemented a fiscal plan, reining in spending, which we have contained to just 0.8 per cent this year, and we have reduced the size of the public service.

Tasmania is heading in the right direction.

Since the election, our unemployment rate has dropped by 1.6 per cent, investment is increasing and business confidence along with business conditions have risen to the highest in the nation, according to the latest NAB Business Survey released this week.
We still have a long way to go but, as every state should, we are taking responsibility for our own fiscal future.

We have never expected special treatment. We simply expect to be treated fairly.
Sure, the equalisation system creates swings and roundabouts. But rather than jumping off now when it suits them, Western Australia should ride it out, because even their own December 2014 Mid-Year Financial Projections Report shows that they will be fully compensated through higher GST grants by 2018-19.