Mal Washer (Moore, Liberal Party) Share this | Hansard source

I rise to speak on the motion proposed by the member for O'Connor, and I thank him for bringing this important issue before the House. I move:

That the House:

omits paragraph (2) of the motion and substitutes:

(2) calls on the Government to refer the matter of the minimum share of GST allocated to Western Australia to the GST Distribution Review for further consideration and analysis.

The distribution of GST revenue according to the Commonwealth Grants Commission's recommendations are expressed in the form of GST relativities—that is, a state's share of national GST grants divided by its population share. The Commonwealth Grants Commission updates its calculations annually by using the latest data on populations, revenue bases and cost drivers and reviews its methods every five to six years, with the last review having been conducted in 2010. In 2011-12 Western Australia's GST relativity is only 72 per cent. The longer term trend will see Western Australia's grant share decline on the back of its strong economic and revenue base growth relative to other states.

On 30 March 2011, the Prime Minister announced a review of the arrangements for distributing GST revenue grants among the states. This review is being conducted by the Hon. Nick Greiner, the Hon. John Brumby and Mr Bruce Carter with assistance from the Commonwealth Treasury and an advisory committee of state treasuries. A final decision is to be made on new arrangements by the end of 2013.

This review will cover issues of longstanding concern to Western Australia, particularly the disincentives for economic development of states created by the Commonwealth Grants Commission redistribution of revenue gains from economic growth to other states through the GST distribution process. The substantial differences between the Western Australian and Commonwealth budget projections reflect the different projection methodologies for the individual data-year relativities. The GST relativities are a lagged three-year average of these data-year relativities. For example, the 2011-12 GST relativity is based on data-year relativities for 2007-08, 2008-09 and 2009-10.Western Australia models the data-year relativities beyond 2009-10, taking into account many factors, including states' relative capacities to raise mining revenues, payroll tax, land tax and conveyance duty, the states' populations and changes in the GST pool.

The Commonwealth largely assumes that the data-year relativities will not change after 2009-10. Adjustments are made for changes in the GST pool, state population shares and the distribution of National Specific Purpose Payments, but these have relatively minor impacts and ignore the increased estimates of Western Australia's mining revenue capacity, including the impact of the increase in the iron ore fines royalty rate. The forward estimates of WA's GST grants based on projections by the WA Department of Treasury indicate that the 2013-14 relativity will be 44 per cent, falling to 33 per cent by 2014-15. Growth in mining revenues is a major factor driving down Western Australia's GST share.

In acknowledgement of the work already undertaken by the review committee and the Commonwealth and state treasuries, an interim floor of 75 per cent GST relativity is sought pending the outcomes of the review to be presented to COAG by the end of 2013. An interim floor of 75 per cent GST relativity would add an estimated $1.8 billion to Western Australia's GST grants in 2013-14 and an estimated $2.5 billion in 2014-15. Western Australia is being penalised for economic success under the current methodology. Additional funding for Western Australia could be spent across a range of services and infrastructure, including nationally significant projects that would generate substantial personal and company tax income for the Commonwealth.

In finishing, I encourage the government and independents to reconsider raising the GST in discussion for next month's tax forum in Canberra. If this does not happen then the tax system will rely on economically bad income and company taxes. Thank you.

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