Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

It's a pleasure to rise in this House today to back the coalition government's plan for a fairer and more sustainable way of distributing GST for all Australians through the bill before us, the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018. That's a mouthful, but I think this is a tremendous piece of legislation. I want to commend the Treasurer for his willingness to listen to the concerns of various colleagues. I know I had discussions with the Treasurer to ensure that Queensland was getting its fair share as well. The important thing about this government is that we are bringing a piece of legislation to this House today, again, that will see every state benefit, including Queensland and my electorate of Forde.

This bill seeks to provide a new solution to the equal distribution of GST across the country. It is a plan that is designed to leave all states and territories better off while guaranteeing that no state's share of GST will fall below 70c in the dollar from 2022-23 and 75c from 2024-25. The way GST is distributed in Australia has not been updated since it was introduced in 2000 by then Prime Minister John Howard and then Treasurer Peter Costello, and since then the revenue has more than doubled. Not only that, but it is also expected to grow another 65 per cent over the next decade. With the conditions introduced in 2000, it's important to reflect in the changed environment that they are no longer conducive to the environment we operate in, leaving the system flawed and, as we all recognise, in need of reform.

The Productivity Commission found that, although the current GST distribution system functions well and achieves higher levels of fiscal equity, it can deliver perverse outcomes when there is a significant shock to the Australian economy, such as the mining boom. Being from Queensland, I readily acknowledge the shortcomings of the system that have resulted in WA receiving only 30c in the dollar. This bill is designed to avoid the situation we've seen in Western Australia's with that record low of 30c in the dollar. This compares to Victoria and New South Wales, who saw more than 90c in the dollar, with smaller states seeing even higher rates. The current system of horizontal fiscal equalisation does not account for those unprecedented shocks or changes. The mining boom exposed vulnerabilities in the system that could not have been anticipated when the GST was introduced. But, importantly, once again it is this government that shows that it seeks to learn from those experiences and make relevant improvements to the system rather than waiting round to see what those opposite would do and see the same errors repeated.

This bill will create a new standard for the GST distribution system to ensure the fiscal capacities of all states and territories are at least the equal of New South Wales or Victoria. The government's interim response was released on 5 July this year. The proposed reforms to the way GST is allocated will leave the states and territories better off and protect the integrity of the system. In essence, the states should have sufficient resources—that is, the fiscal capacity—so that all Australians have equal access to vital government services no matter where they live across the country. Importantly, this can be seen in conjunction with a number of other measures that we are undertaking.

The government's plan will first create a new equalisation benchmark against New South Wales or Victoria, whichever is higher, and all states will transition to this new equalisation standard over six years from 2021-22 to 2026-27. Secondly, it will introduce a permanent in-system relativity floor of 70c from 2022-23, increasing to 75c in the dollar from 2024-25. Thirdly, this bill will see a permanent boost to the GST distribution pool of funds available for all states and territories providing direct Commonwealth cash injections in addition to GST collections each year from 2021-22 onwards. This bill will enable an initial boost of some $600 million in 2021-22 and a further $250 million boost in 2024-25, indexed each year to grow in line with GST.

As part of the fourth stage during the transition period from 2021-22 to 2026-27, the states and territories will be guaranteed the better of the old system or the new system. This means that at the end of the transition period each state and territory will have received the better of the cumulative total over the entire period of either the old system or the updated system. Payments will be verified annually by the Commonwealth Grants Commission over the transition period and any adjustments will be made accordingly.

The fifth stage, to be completed by December 2026, will see the Productivity Commission conduct an inquiry to assess whether the updated system is working efficiently and effectively and operating as intended.

Lastly, we'll separately see short-term top-ups to Western Australia and the Northern Territory to keep their relativities above 70c and $4.66 respectively from 2019-20 to 2021-22. At the end of this period, at 2026-27, Australia will have a horizontal fiscal equalisation system that seeks to protect against economic shocks and provides a more stable source of revenue for all states and territories.

Importantly, in my state of Queensland, over the six years from 2021-22 to 2026-27, Queensland will benefit from a $518 million boost in untied funding. This will see additional funding across the state—and, importantly, in my community—available for schools, hospitals, roads and other essential social support services. Importantly, this is on top of the already record funding we are providing to schools and hospitals, as well as infrastructure, across Queensland.

The horizontal fiscal equalisation fair-go principle changes the way the GST is allocated among the states and territories to benefit all Australians. The government's horizontal fiscal equalisation reforms implemented in this bill continue to uphold this principle so that all Australians are on an equal footing no matter where they reside. This bill will see the Commonwealth injecting an additional $9 billion into the system over the 10 years to 2028-29 to make every jurisdiction better off.

But the states will also benefit over a shorter period in the fact that they will receive additional funds over the next four years, as a result of decisions in this government's 2015-16 budget, from applying GST to online purchases and other compliance matters. Importantly, the additional funding from the Commonwealth will not come at the expense of existing payments to the states and will be provided in perpetuity. The Commonwealth's projections use the Productivity Commission's estimates, based on numbers that the states have provided.

The government has consulted extensively with all the states on its proposal since the release of its interim response. Unlike changes to the rate and base of the GST, changes to the distribution of GST revenue do not require the approval of the states, but, to provide certainty to the Australian people, the Commonwealth is now seeking to legislate these reforms by amending the Commonwealth Grants Commission Act and the Federal Financial Relations Act.

In the end, GST provides an important source of revenue to all states and territories. We have built a system that operates in a changing economy. Once again, this is a demonstration that this coalition government is focused on delivering responsible, forward-thinking economic management for the country and in particular, in this case, with the GST. It is only a coalition government that is delivering strong economic growth, record jobs growth and a stronger economy and only a coalition government that will and can deliver the real benefits for Australians right across this great country. I'm pleased to be speaking in support of this bill and commend this bill, given that it's a responsible GST plan that will benefit all states and therefore all Australians. I commend this bill to the House.

See this speech in context