ABC Radio Perth - Mornings

Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia






Productivity Commission review

GEOFF HUTCHISON: There is no doubt that Treasurer Scott Morrison bowing to growing pressure to do something has prepared the terms of reference for a Productivity Commission inquiry into the GST distribution model. To look at the system of horizontal fiscal equalisation where richer states like WA prop up poorer states like Tasmania and South Australia. Here is the Treasurer he was speaking on AM this morning.

SCOTT MORRISON: There are a lot of parochial points of view in this debate. As the Commonwealth Treasurer I have got to take a national point of view and what this inquiry is doing is looking at what are the productivity impacts of the way that we calculate this distribution of GST revenues. How does that affect capital and labour moving between States? What does it mean for what States are doing with their own policies and programs to boost productivity? Whether it is in WA or indeed my home State of NSW where I know they have had some frustrations for some time.

GEOFF HUTCHISON: In my state they have had some frustrations for some time. It is very easy to go poor, poor New South Wales. But other States have already said they are going to fight any change to the GST formula. We have heard from Queensland, we have heard from Tasmania, we have heard from South Australia. So no one says, I will willingly give up my piece of cake so they can have a bigger piece of cake. So the question is, is this a genuine attempt at reform or is it more about being seen to be doing something to alleviate anger here in Western Australia? I am joined by Senator for Western Australia and Finance Minister Mathias Cormann, Good Morning to you.

MATHIAS CORMANN: Good Morning Geoff. Good Morning to your listeners.

GEOFF HUTCHISON: Why do we need another GST review?

MATHIAS CORMANN: The Federal Government has recognised for some time that the WA share of the GST is unacceptably low. That is why by way of short term measures over the last two years we have made additional federal payments to Western Australian to the tune of about half a billion dollars each year over the last two years towards WA infrastructure. We have always said that there was a need for more medium to long term reform in this space and the Prime Minister set out his proposal on how a future floor could be set when it comes to the share of GST that no state should fall below. On top of this, a range of issues have been raised with us in recent months, which we recognise are worthy of exploration. The reason we have asked the Productivity Commission to assess the GST sharing arrangement is because we want to ensure that every State has the appropriate incentives to grow and develop their economy, to pursue Budget reforms on the spending and the revenue sides of their Budgets. Ultimately, we want to ensure that the GST sharing arrangements do not have an inappropriately negative effect on national productivity and growth.

GEOFF HUTCHISON: Tell us why this is not you being seen to be doing something.

MATHIAS CORMANN: We have been doing something in relation to this for some time. When we came into Government in 2013 we inherited a deteriorating trajectory when it comes to WA’s share of the GST. For the 2015/16 financial year the Commonwealth Grants Commission determined that WA’s share of the GST would fall below 30 per cent. We said then that was unacceptable, but this is a space of course the GST being a State’s tax where the Commonwealth has to work with all of the States. Because that was not able to be done in the short term, what the Federal Government did initially as a short term measure was to make additional top up payments to Western Australia. We also made some adjustments to the way certain resource royalties were treated for the purposes of GST sharing arrangements which essentially led to some additional revenue flowing to WA and $1 billion in additional funding for WA infrastructure. Indeed, I have confirmed yesterday that we would again be making a top up payment to WA in 2017/18. But ultimately what we need to do is to continue to explore how these arrangements can be made fairer and more sustainable over the medium to long term.

GEOFF HUTCHISON: Senator Cormann you would know too that you have received a great deal of criticism that Western Australia’s Federal Liberals have received a great deal of criticism. The perception being that not enough has been done. Now, do the jobs of people like Christian Porter and Michael Keenan and Ken Wyatt rest on this succeeding when we get to the next Federal Election? Because the mood will be one of punishing you for not having done enough.

MATHIAS CORMANN: All of us who represent Western Australia in the Federal Parliament on the Liberal side, all Liberal Members and Senators from Western Australia have been making very strong representations in relation to this and any other issue that is important to Western Australia. We made significant progress along the way. But we do recognise that there is more that needs to be done. It was the result of representations of Liberal Members and Senators that led to a billion dollars in additional funding towards Western Australian infrastructure in recognition of the unacceptably low share of GST for Western Australia. We recognise that there is more that needs to be done.

GEOFF HUTCHISON: And you copped some flak I think it was last week, the Sunday Times asked individual Members of Parliament for their response to the GST situation and all they got back was a cut and paste from all of you saying the same thing. Was that criticism fair?

MATHIAS CORMANN: No that criticism was not fair. We all were asked the same question and so we all provided the same answer. The important point here is that all of us Liberals Members and Senators from Western Australia work as a team. We are working as a team to advance the interests of Western Australia. But we are also part of a national Government, so the same way as we are putting forward the perspectives of West Australian Liberal Members and Senators, we are focused on getting the best possible outcome in the context of a Government that has to make judgements in the national interest. If a journalist asks every single one of us the same questions and we have worked together as a team to get the best possible outcome, then of course nobody should be surprised that the answer from all of us individually will be the same.

GEOFF HUTCHISON: A cut and paste response I think was how it was depicted in the paper.

MATHIAS CORMANN: Well, I am not going to comment on commentary. The point I would make is that all of us were asked the same question and all of us provided the same answer on the basis that all of us had worked together on this as a team.

GEOFF HUTCHISON: So we have another review, why do we actually need another review? And it is going to take a long time, so what possibly more do we need to learn about horizontal fiscal equalisation?

MATHIAS CORMANN: The specific focus of the Productivity Commission here is to assess the impact of horizontal fiscal equalisation, which underpins GST sharing arrangements, on national productivity and growth. That is a very specific additional piece of information that we believe will help inform consideration of future reform efforts in this space.

GEOFF HUTCHISON: Already we are seeing though aren’t we, the Queensland Premier Anastasia Palaszczuk has called on the Government to rule out cutting the State’s share of GST revenue. I am extremely worried she said, Western Australia would end up getting more of the GST pool. The South Australian Treasurer said the Federal Government was trying to shore up votes in WA. To those of us who are cynical and that is most of us these days, it sounds like a ‘here we go again’ discussion. What is an end point here? What can we genuinely look forward to here and say something will change?

MATHIAS CORMANN: The important point here from a national point of view is that surely every single every Australian would want to see every State put their best foot forward when it comes to growing and developing their economy. And we want to ensure that the current GST sharing arrangements and that the current horizontal fiscal equalisation arrangements do not provide disincentives for States to put their best foot forward when it comes to growing their economy, developing their economy. Now, the process will take until the end of January 2018. That is when the final report of the Productivity Commission is due and it will from there on forward inform relevant discussions by Treasurers and the Council of Australian Governments.

GEOFF HUTCHISON: The interesting thing of course when you talk about whether or not the manner in which the GST sharing arrangement is done at the moment, whether it creates disincentives for reform. Are we likely to learn that for some States this is easy money and nothing much changes?

MATHIAS CORMANN: I cannot pre-empt what the Productivity Commission findings and recommendations will be…interrupted.

GEOFF HUTCHISON: I would not expect you to name the State either.

MATHIAS CORMANN: There is a process now that is underway, that is getting underway. We believe that this is a very important development. We believe that it is a very important piece of work and we believe that ultimately it will lead to better public policy.

GEOFF HUTCHISON: Do you worry politically that this could cost you dearly if the public are not satisfied?

MATHIAS CORMANN: Geoff I do not think in those terms. What I think about and what all of our West Australian Liberal Members and Senators think about is how we can do the best possible job representing our State and getting the best possible outcomes and the rest will take care of itself.

GEOFF HUTCHISON: Thank you very much for talking to me.

MATHIAS CORMANN: Always good to talk to you.