Lucy Gichuhi (SA, Independent) Share this | Link to this | Hansard source

My question is to the Minister for Finance, Senator Cormann. The Productivity Commission's October draft report, Horizontal Fiscal Equalisation, HFE, has considered a new GST distribution model. This would give Western Australia an additional $3.24 billion per annum. Every other state in our federation loses as follows: New South Wales, $1.17 billion; Victoria, $920 million; Queensland, $729 million; South Australia, $256 million; Tasmania, $77 million; ACT, $60 million; Northern Territory, $36 million. Given that HFE aims to give each of the states and territories an approximate level of service to their citizens, can the minister explain whether a different model has been considered to help Western Australia adjust its volatile— (Time expired)

Scott Ryan (President, Special Minister of State) Share this | Link to this | Hansard source

Order! Senator Gichuhi, the time has expired to ask the question. I'll ask the minister to answer as much of the question as he heard.

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

I thank Senator Gichuhi for that question. The first point I would make is that the Productivity Commission, under its legislation, has to conduct its inquiries—and this inquiry focuses on the Australian community as a whole—which it is doing. Horizontal fiscal equalisation is a fundamental part of Australia's federation architecture and affects all states. It's important for all states and for the country as a whole that horizontal fiscal equalisation works effectively and supports our national economy appropriately. The terms of reference issued to the Productivity Commission specifically task it with considering the effect of horizontal fiscal equalisation on productivity, economic growth and budget management for all states and for Australia as a whole.

In relation to the way GST-sharing arrangements impact on Western Australia, it's a matter of public record that the Australian government considers that Western Australia's share of the GST, which was below 30 cents in the dollar at some point, is inappropriately low. This is why the Australian government has provided one-off top-up payments for three years in a row now to ensure that the effective share of GST doesn't drop below the 2014-15 level. The federal government has invested about $1.2 billion in additional funding in Western Australian infrastructure in that context.

But we've also said there is a need for a longer-term structural solution. The Prime Minister has suggested that, through COAG, at the right time in the future, a floor be considered. We've also initiated this inquiry through the PC. The report you mention is a draft report. There is no government position on it. The final report is due to come out in the new year, and the government will consider any findings and recommendations at that time and make decisions at that point. At this point, there is no government position in relation to a draft report.

Scott Ryan (President, Special Minister of State) Share this | Link to this | Hansard source

A supplementary question, Senator Gichuhi.

Lucy Gichuhi (SA, Independent) Share this | Link to this | Hansard source

South Australia continues to suffer from challenging socioeconomic issues such as a high unemployment rate, a low workforce participation rate, an ageing population, high costs and strain for business, the lowest overall NAPLAN results and a brain drain, among other things. What measures would be put in place to cushion my state against a possible impact of the proposed change?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

Firstly, there is no government proposal for change. Secondly, in relation to South Australia, the unemployment rate in South Australia today is lower than it was when we came into government, and indeed it's materially lower than where it was headed. The unemployment rate in September 2013 in South Australia was six per cent. It's now 5.8 per cent. And, as I say, in September 2013 the trajectory was up. We're now working to bring it down. The best way to continue to support strong growth and jobs and opportunity in South Australia is to continue to implement the Turnbull government's plan for jobs and growth, which includes lower business taxes, a commitment to more free trade and a massive investment in our defence industry capability, which, very significantly, is going to be built and developed by South Australian business. The Turnbull government's approach when it comes to strengthening growth and strengthening job opportunities in South Australia is very strong, and there is, of course, more work to be done. (Time expired)

Scott Ryan (President, Special Minister of State) Share this | Link to this | Hansard source

Senator Gichuhi, a final supplementary question.

Lucy Gichuhi (SA, Independent) Share this | Link to this | Hansard source

The report also finds that HFE now embodies an undeliverable ideal to give states the same financial capacity to provide reasonable levels of service. In the context of South Australia, which is one of the poorest states in the Federation, how would the Commonwealth Grants Commission effectively determine these levels of service?

Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Link to this | Hansard source

As I've indicated, the report that Senator Gichuhi is referencing is a draft report. The Productivity Commission is currently consulting on its draft report and will refine its recommendations and consider appropriate options for any transitional arrangements for its final report. I'm advised that the Productivity Commission work will include further consideration of what constitutes a reasonable level of services, and the Commonwealth Grants Commission, of course, is an independent body and I cannot comment or speculate on its internal processes or the outcomes of the final report. As is the normal process with draft reports, we will let the Productivity Commission complete its independent work before considering the final report, its findings and its recommendations, as a government, and at that point in time we will provide a response, which no doubt will be discussed in the Senate at that time.