Albanese’s $3.5b GST sweetener clinches state support for NDIS deal

The federal government will give the states and territories another $3.5 billion a year in greater GST payments in a national cabinet deal that also boosts funding for public hospitals and eases pressure on the National Disability Insurance Scheme.

The agreement extends a costly federal pledge on the GST until at least 2031 by loading more spending onto the federal budget in order to settle angry disputes with the premiers over cuts to state revenue.

The prime minister, the premiers and chief ministers arrive for the press conference after national cabinet. Credit: Alex Ellinghausen

Premiers emerged from the national cabinet meeting in Canberra with confidence their budgets would be better off in net terms after they agreed to spend more on disability care to help people who might not qualify for the NDIS.

Prime Minister Anthony Albanese also promised to fund more “urgent care clinics” as part of a $1.2 billion outlay, saying this would ease pressure on state hospitals because the GP services could help families who would otherwise wait for hours at emergency departments.

Albanese got the NDIS agreement across the line by saying the federal government would pay half the cost of the new “foundational supports” the states and territories would set up for people with disabilities. The federal government will also cap the cost for the states and territories.

While the states and territories will have to pay for some of the disability services – likely to include help at community health centres and schools – they will be better off overall due to the boost in hospital funding and GST payments.

Albanese went to the last election with a promise to work with the states on health but never agreed to scrap the previous government’s 6.5 per cent cap on annual increases in federal outlays on public hospitals.

This changed at the national cabinet meeting on Wednesday morning when Albanese agreed to replace the 6.5 per cent cap with a higher cumulative cap over the five years to 2030 as well as a “catch up” payment in the first year of the new arrangement.

The joint statement after the meeting said this was a “more generous approach” but did not say how much it would cost the federal budget.

Treasurer Jim Chalmer’s office confirmed that the cost of the new hospital agreement would be $13.2 billion over five years from 2025.

When the hospital pledge is added to the $1.2 billion health outlay and the GST promise, the states and territories gain $24.9 billion in total, almost all of it after the next four years of the official budget estimates.

“We are taking immediate action to take pressure off hospitals through further strengthening Medicare, but we are also locking in long-term structural health reform,” Albanese said at a press conference with the premiers and chief ministers in Parliament House.

While the states have argued for years for an increase in federal spending on hospitals to 50 per cent of the cost, the new agreement starts a “glide path” to get the figure to 45 per cent over the decade from 2025.

The additional $1.2 billion injection into health, called a “strengthening Medicare” package, includes more money for the urgent care clinics being set up by the federal government as well as money for the states to deliver health services to people once they leave hospital, helping them to be discharged earlier from wards.

Albanese promised $135 million for the urgent care clinics before the election and said on Wednesday that 58 would be operating by the end of this year.

“It means more clinics,” he said of the national cabinet deal.

The GST agreement extends a “no worse off guarantee” Scott Morrison made as treasurer in 2018 to meet calls from Western Australia for a bigger share of the proceeds, with the original cost forecast at $766 million a year in the first three years.

Albanese confirmed the extension would cost the federal budget $3.5 billion a year in the three years from fiscal 2028 to 2031.

Victorian premier Jacinta Allan said the result on GST delivered more certainty for the state budget to allow more spending on public services.

NSW premier Chris Minns said the deal gave states certainty.

“If you look at the NDIS, the GST, if you look at changes to health reform, I think we have
achieved more in the last two days than many thought would be possible,” he said.

“And it gives the states certainty in relation to the GST and the health system so we can tackle
challenges in the NDIS, and that is a breakthrough that first ministers and previous prime ministers have been aiming for over a decade.”

The national cabinet meeting also agreed to set up a new gun register over the next four years in response to the murder of two police officers and a neighbour at Wieambilla in Queensland last December.

Albanese promised to help the states and territories fund the new register, which will use a “federated model” with the states and territories connecting their systems with a central hub so all jurisdictions can share information “near real-time” about gun ownership.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.