Josh Frydenberg (Kooyong, Liberal Party, Treasurer) Share this | Hansard source

Firstly, I'd like to thank those members who have contributed to this debate, on both sides of the chamber. The bill reforms GST payments to the states and territories by providing a fairer and more sustainable way of distributing GST. It's a plan that leaves all states and territories better off. Since it was introduced in 2000, every dollar of GST raised has been distributed to the states and territories according to the system of horizontal fiscal equalisation. However, in recent years, the mining boom created significant volatility in the distribution of the GST. The government's plan will, first, create a new equalisation benchmark, the stronger of New South Wales or Victoria, whichever is the higher. Second, it will introduce a permanent in-system relativity floor of 0.7 from 2022-23, increasing to 0.75 in 2024-25. Third, it will permanently boost the GST pool of funds available for distribution to the states and territories by providing direct Commonwealth cash injections each year, from 2021-22 onwards. These are in addition to GST collections. Fourth, during the transition period from 2021-22 to 2026-27, states and territories will be guaranteed the better of the old system or the new system. The CGC will annually verify the payments resulting from the guarantee in a way that is consistent with division 1 of part 2 of the Federal Financial Relations Act. The Treasurer must have regard to this advice and consult with each of the states. The Treasurer will maintain his current role under the updated framework, consistent with the existing law and long-established practice. Fifth, by 2026 the Productivity Commission will conduct an inquiry to assess whether the updated system is working efficiently and effectively and operating as intended. Sixth, it will separately provide short-term top-ups to Western Australia and the Northern Territory to keep their relativities above 0.7 and 4.66 respectively from 2019-20 to 2021-22. All states will be better off, with the Commonwealth injecting an additional $9 billion over 10 years to 2028-29. The GST pool from 2026-27 will grow by more than $1 billion each and every year, compared with what would have occurred without these reforms.

We have provided a national solution to a national challenge. That is what leadership is about. Let's bear in mind that, since the GST was introduced, the revenue pool has more than doubled, and it's expected it grow by another 65 per cent over the next decade. However, the GST as is has seen its integrity threatened and its sustainably threatened. We had a situation where Tasmania, with one-fifth of the population of Western Australia, and the Northern Territory, with one-10th of the population of Western Australia, were both getting more of the GST pie than Western Australia themselves. Clearly, that was unsustainable. What we have done is we've come up with a long-term solution, because, when it comes to the GST, we want to ensure that the services provided across the country are at a certain standard. As former Prime Minister John Howard said, 'I'm an Australian, and, as far as I'm concerned, all Australians should be treated equally, no matter where they live.'

If you're in Victoria, you'll be better off as a result of the government's boost to the GST distribution pool by $425 million by 2026-27. If you're in New South Wales, you'll be better off to the tune of $351 million by 2026-27. If you're in Queensland, you'll be better off to the tune of $518 million by 2026-27. If you're in South Australia, you'll be better off by $257 million by 2026-27. If you're in Tasmania, you'll be better off by $112 million by 2026-27. If you're in the ACT, you'll be better off by $46 million by 2026-27. If you're in the Northern Territory, you'll be better off by $189 million by 2026-27. If you're in Western Australia, you'll be better off by over $3.3 billion by 2026-27. These are based on the numbers and the projections put together by Treasury and put together on the basis of the data collected by the Productivity Commission.

This is an important piece of legislation. This is a result of the Commonwealth's leadership. This is a result of the Liberal and National parties taking the hard decisions and coming up with a long-term solution. I commend this bill to the House.

Question agreed to, Mr Wilkie dissenting.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

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