Sandy Macdonald (NSW, National Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin, and it goes to the core of our economic wellbeing and an effective and fair tax system. Minister, will you inform the Senate of the benefits to Australia’s state and territory governments from the GST? Are you aware of any proposals to increase the rate of the GST in order to provide additional revenue to those governments? Will you inform the Senate what circumstances would be required in order for the GST to be increased?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Sandy Macdonald for a very timely question. As I was saying, the Labor Party opposes just about every economic reform in this country. There was a time when the Labor Party was against the GST, but of course now, by contrast, the Labor Party has become the GST’s greatest advocate. Indeed, state Labor premiers love it and cannot get enough of it. Why wouldn’t they support the GST, when every state and territory, including Senator Sandy Macdonald’s state of New South Wales, is now reaping far more revenue from the GST than they did from the state taxes that it replaced? This year the states and territories will be a massive $2 billion better off as a result of having the GST.

Today we see that Labor’s love affair with the GST has gone to a new level. It has been reported that the premiers want the GST to be increased so that they can pocket more of the revenue. Today’s Australian reliably reports that the Labor premiers have commissioned a report which argues for a higher rate of GST. That report will be presented to the Labor premiers—just as they sought it—today. Of course, the Labor Party has already embraced that report. Victorian Premier, Steve Bracks, says it debunks the claim that the states are awash with cash. So Premier Bracks is endorsing the report’s central claim that the states need more GST revenue to run their state operations.

The additional revenue now flowing to the states means that they can in fact afford to cut more state taxes, just as was agreed in the original GST agreement, but of course the reality is that the states do love the GST and its ongoing revenue flows. Unfortunately, because the states have shown absolutely no fiscal discipline, they have spent money faster than they have been receiving it from GST income, and that is why every mainland state and territory, other than WA, is now running cash and fiscal deficits in this financial year. While we at a federal level are running a surplus of $11.8 billion this year, the states are on track to run a combined cash deficit of $3 billion and a fiscal deficit of $5 billion. If you include state owned businesses, the states collectively are going to run a $14 billion cash deficit in 2006-07. So, despite the GST and strong economic growth, the states have completely lost control of their budgets.

Senator Sandy Macdonald asked me how the GST might be increased. It is a matter of law that any change to the GST rate requires the unanimous agreement of all states and territories and the federal government—in other words, you have to have like-minded governments in all states and territories and in Canberra. Guess what: that is exactly what you would have if Labor wins the next federal election. We have already seen that Mr Rudd has proven himself a soft touch for the premiers. Mr Rudd is a soft touch for the premiers. He has made expensive new promises in a whole range of areas of state responsibility. He goes around the country promising to bail out all his spendthrift state Labor mates. We have state Labor governments claiming they are running out of money and seeking an increase in the GST, and we have the possibility of wall-to-wall Labor governments. That is definitely a recipe for the greatest threat the Australian people face: a significant increase in the rate of the GST. We know from the Labor Party’s raid on the Future Fund and the sale of Telstra shares that they will throw any of their long-held policies out the door whenever they need the cash. After all, they once opposed the GST and now they literally cannot get enough of it.