Victoria cries foul over GST carve-up

VICTORIA has called for the Commonwealth Grants Commission to be put under the spotlight, saying it will urge a rethink of funding formulas.

VICTORIA has called for the Commonwealth Grants Commission to be put under the spotlight, saying it will urge greater transparency and a rethink of the funding formulas at the next COAG meeting.

Premier Ted Baillieu and Treasurer Kim Wells are outraged over the commission's annual GST carve-up, announced on Friday, which they claim means the state is facing a $2.5 billion cut in GST revenue over the next four years.

The commission cited the state's good fiscal health, strong property market and low wages growth as the reasons behind the reduction, instead returning GST revenue to the mining states of Queensland, Western Australian and the Northern Territory.

Such a cut in Victoria's GST revenue throws into doubt whether the new government can deliver its election promises and a budget surplus, and comes when the state government is in the middle of wage talks with police, teachers, nurses and public servants.

Among the promises made by the Coalition was to make Victorian teachers the highest paid in the nation and add another 1700 police, as well as cutting the state's hefty stamp duty on home purchases.

Mr Wells told The Australian yesterday his government was compiling a case against the commission's decision, which it plans to take to federal Treasury officials by the end of this week.

He says the decision took everyone -- including the state's Treasury officials -- by surprise, and that was one of his main concerns about the process.

"If it was more of a transparent process, state Treasury would be better prepared if we get either a windfall or a big hit," he said.

Mr Wells said he had serious concerns about the formula used to calculate the carve-up of GST revenue, especially since it was updated using revised figures from "a few years ago".

He said the state planned to raise the issue at the next Council of Australian Governments meeting in April, as he believed the current formula disadvantaged Victoria.

Mr Baillieu called on Wayne Swan not to sign-off on the recommendation by the commission, saying it was an unjustified and unfair cut.

"I urge Wayne Swan to think again and Julia Gillard should think again," he said after the announcement on Friday.

The usual practice is for Canberra to take the advice of the commission, but the recommendations are first discussed at a meeting of treasurers from around the country.

A spokesman for the federal Treasurer said the commission was "an independent umpire" and used the same methodology as the previous year, and applied the most recent data.