Michaelia Cash (WA, Liberal Party, Shadow Parliamentary Secretary for Immigration) Share this | Link to this | Hansard source

As a senator for Western Australia, I rise tonight to address the current outdated and inequitable formula which the Common­wealth Grants Commission continues to use to determine GST-sharing relativities. It is recognised that the current method of calculating GST revenues is flawed and is contributing to suboptimal growth opportu­nities in Western Australia and, as a conse­quence, is creating a negative flow-on effect in both the Western Australian and the national economies. These GST revenue grants represent the most important and indeed the greatest single source of revenue to the states and territories. It is an indisputable fact that Western Australia is a major contributor to the national economy. I have described it in the past as the engine room of the national economy. It is also an indisputable fact that Western Australia's net fiscal contribution to the Commonwealth is rising dramatically.

We have in Western Australia just over 10 per cent of the population yet fiscally we contribute in excess of a net $14 billion to the Commonwealth's budget. This was confirmed with the recent release of Department of Foreign Affairs and Trade figures showing that Western Australia's export revenue grew by more than 30 per cent in the 2010-11 financial year with WA's export income now exceeding $118 billion for the year. This significant increase in Western Australia's exports means that Western Australia now accounts for 40 per cent of all Australian export revenue, up from 35 per cent in the previous year.

Western Australia has been providing a net fiscal contribution to the Commonwealth since the mid-1980s. This contribution has been steadily increasing, yet our share of the distribution of GST as a percentage of our population has been steadily decreasing to the record low we saw in 2010 when Western Australia received just 68c back for every $1 raised in the state. I accept that Western Australia is part of a federation and that the more prosperous states have a responsibility and a role to play in protecting the interests and supporting the reasonable needs of the less financially advantaged states.

The issue I raise is not the quantum of Western Australia's net fiscal contribution to the Commonwealth, but the need for the Commonwealth to recognise that urgent reform is required to ensure that the finan­cially stronger states are treated with greater parity and are encouraged to continue to grow their economies without being penal­ised for their success. The current system unfairly penalises Western Australia for our economic success and is so transpar­ently inequitable that it is unsustainable in the longer term. There are currently no incentives for states to develop their economies and in turn be rewarded for their ability to implement economic reforms.

WA is the host state government to multi-billion dollar mineral resource projects and multi-billion dollar oil and gas resource projects. As such, there is often a need for the WA government to provide massive infrastructure to enable the resource companies to produce and export their respective commodities. This infrastructure is often required to be put in place months and, in some cases, years before the first shipments of the mineral commodities are exported to overseas markets and well before any mineral royalty is paid to the state.

We say that both the federal government and the Commonwealth Grants Commission fail to understand and recognise the signifi­cant economic burden that is placed on Western Australia and on Queensland, as major minerals commodity exporters, in providing and maintaining the infrastructure that is needed to support these projects. This infrastructure can be in the form of massive investment in road, rail and port facilities along with infrastructure to support housing, water and power, all of which are required to support the establishment of major export projects.

I do not come to the parliament cap in hand seeking a greater share of GST funding for the sake of increasing WA's share of the GST just because we are net financial contributors to the federal government's coffers. I come to the parliament with a business proposition, which will pay hand­some long-term dividends to the Common­wealth and the Australian community. WA is asking for the Commonwealth Grants Commission to recognise the significant upfront financial outlays required to be met by the state to encourage and support some of the biggest mineral developments in Australia. In return for this support, Western Australia will be able to continue to provide the infrastructure required to encourage the development of additional export projects.

As a Western Australian senator, I support the views of the WA government in its repeated calls for the federal government to recognise the inequitable distribution of GST funding to WA and the need for the federal government to understand and identify with the cost pressures being placed on the WA government in providing infrastructure to support our massive mineral export projects.

What is good for Western Australia is good for Australia. When you stimulate the WA economy, you stimulate the national economy and that has a flow-on benefit for all Australians. Based on the current distri­bution of the GST, Western Australia is set to lose $12.3 billion over the next five years. That is money that we in WA need to build infrastructure to support industries that ultimately contribute to the wealth of our great nation. According to recent figures from the ABS state accounts 2011, released last November, if Western Australia were a country in its own right, it would be the third richest in the world based on GDP per capita. The Western Australian Department of Treasury and Finance estimates that in 2009-10:

… the Commonwealth derived $39.7 billion from Western Australia, while expenditure for the benefit of the State (less the State's share of the deficit) totalled only $26 billion, a difference of $13.7 billion.

The complex methodology used to calculate the share of GST for each state is reviewed by the Commonwealth Grants Commission every few years and updates are provided each year to include the latest demographic, economic and social data. This means that the GST revenue for states changes from year to year. This creates an enormous amount of uncertainly for state governments.

A cut in GST revenue invariably leads to a cut in infrastructure investment. It is this investment, particularly in the resources sector, that the nation relies upon to deliver economic certainty to Australia as a nation, at a time when the world's leading economies continue to be fragile due to the ongoing impact of the global financial crisis. The variable nature and current uncertainty of the GST distribution due to changes in the distribution formula can cause significant fluctuations in potential distribution amounts to a respective state or territory and can have a major impact on their budgets and forward planning.

This is one of the reasons that the Premier of Western Australia, Colin Barnett, welcomed the current review into federal-state funding arrangements. Premier Barnett has recommended several changes to the current system to ensure greater transparency and to give the states renewed confidence in the equalisation process. The primary recommendation is that a 75 per cent floor be applied under any state's GST relativity—that is, a state's relativity cannot drop below 75 per cent of its population share. You can see what an important reform this would be for Western Australia, with GST revenue projections indicating a drop to 33 per cent by 2014-15. The financial impact of this change alone would result in an estimated $1.8 billion increase to Western Australia's GST grants in 2013-14 and an estimated $2.5 billion in 2014-15.

In announcing the review of GST distribution, the federal government has acknowledged the need for change and the need to provide the incentive for more reform. The distribution arrangements have the potential to be fairer, to be simplified and to provide more certainty to the states. We need a formula that rewards best perform­ance and embraces the principles and concepts of competition and productivity. This is the only way to deliver the national economic and social outcomes required for us to continue to prosper as a nation.