Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Hansard source

I rise to speak in this debate on Appropriation Bill (No. 1) 2006-2007 and the cognate bills to mention a couple of things, but I would like to begin by talking about the real problem we have in federal-state relations. Let me say at the outset that the real problem is not horizontal fiscal equalisation, as we often hear New South Wales and Victoria bleat about. The real problem is vertical fiscal imbalance, which means, very simply, that the states are spending money which they do not raise.

If I go to that very nice read in the budget papers—Budget Paper No. 3, entitled ‘Federal financial relations 2006-07’—and look at the way in which we calculated, first of all, what we promised the states we would compensate them through and guarantee them as a minimum income as the GST was introduced—and as we know all of the GST is paid to the states—I see that in 2006-07 not one of the states or territories in Australia needs an adjustment payment to be made, because this year all of them have received via the GST more than the guaranteed minimum they were promised when the new tax system came into operation. I think a reading from this splendid document shows just how we arrived at that figure, and it tells just how dependent on Commonwealth money the states have become. It makes you realise that, when they bleat that something has gone wrong in their state and that it is up to the federal government to fix it, we have been fixing them up for a long time and that it is time they took responsibility for the things they are obliged to do under the Constitution.

So let’s have a look at what the compensation formula is. First of all, when the government said that it would pay them the GST, they had to forgo certain payments. The first one was that well-known figure of Financial Assistance Grants, FAGs. And then there were the revenue replacement payments, the financial institutions duty, the debits tax, the marketable securities duty—but you can deduct security needs from that marketable securities duty—and the accommodation taxes, for which they are reimbursed because they are no longer charging it. The cheque duty went out of operation so it is not relevant. Then you add to that the compensation that we pay to the states and territories for the agreement reached with them to reduce their gambling taxes because they would be receiving GST, which was payable by the gambling operators. They could not have a double-dip so they had to reduce the amount of their gambling taxes, and we reimbursed them for that.

We then add additional expenditure, with the First Home Owners Scheme. Although they purport, certainly in New South Wales, that it is somehow their initiative, in fact we pay the money to them and they administer it. Then there are GST administration costs, so they are receiving payment for that. Then we deduct from those promised amounts where there is reduced expenditure, such as for off-road diesel subsidies, savings from tax reform and low-alcohol beer subsidies. We then have the growth dividend from remaining state taxes—that is, as their remaining state taxes go up, that has to be deducted from what we guaranteed them. Then there is compensation for GST deferral, which occurred when we said that small businesses could put in their BAS statements annually instead of quarterly, which meant that there would be a deferral of the GST money and so we compensate them for that. So the total guaranteed minimum amount for 2006-07 was $37,257.4 million. Instead of that, they will actually receive $39,130.0 million. That means that every state has had an increase by receipt of the GST which is above and beyond the calculated guaranteed minimum, which was the share of tax that we used to pay them under the old system, plus all those adjustments. You then have to add to that specific purpose grants. Again if you go to Budget Paper No. 3, you will find that we pay them an additional figure of $59 billion.

If you express the value of Commonwealth grants as a percentage of state or territory revenues, it averages out at 45 per cent of their total. In the case of the Northern Territory, I might add, it is up near 76 per cent or 78 per cent. In the case of Tasmania, it is near 61 per cent. In the case of South Australia, it is about 49 per cent. You can see that the generosity, if you like, of the Commonwealth government in the amount of money that it pays to the state governments means that quite frankly they are awash with money. You can understand how people like me felt when the Premier of New South Wales said that we have to sell the Snowy Mountains hydroelectric scheme because we are short of money and then, when Mr Costa brought down his budget, said: ‘We have to go into deficit because we have not got any money. That terrible Commonwealth does not give us enough.’ We are providing close to half their entire budget. On the figures for this current year, they have a total budget of $41 billion and we the Commonwealth will give them something close to $20 billion.

The problem is that old principle of no taxation without representation. The problem is that the state and territory governments are spending money which they do not raise. When you are spending other people’s money, money that somebody else has raised and for which you are not accountable, you become profligate. The big question that is asked in my state of New South Wales—and I know that it is asked in others—is this: where has all the money gone? Where did all the money go from the one state tax where they do in fact raise a lot of money on their own initiative—stamp duty?

The fact of the matter is that we have had no money for infrastructure spending. I am afraid the rot began with one Neville Wran. It was he who discovered what he called ‘hollow logs’. The hollow logs were the money that utilities had put away for expenditure on upgrading infrastructure over the foreseeable future. That meant things like keeping our pipes for sewerage and water in good shape. Are they in good shape? Of course not. What are we told that we have to do in New South Wales? We have to ration water because we have not got enough: ‘We’re having a drought. It’s not in the catchment area.’ But in fact we lose more water out of leaking pipes every day than we now save by good citizens limiting their own water usage.

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