Don’t rush to sign GST deal

THE devil might well be in the detail, but on face value Treasurer Scott Morrison appears to have found a way through his biggest conundrum — a new distribution model for the GST that all the states and territories will be able to feel they can sign up to.

Treasurer Scott Morrison. Picture Kym Smith

THE devil might well be in the detail, but on face value Treasurer Scott Morrison appears to have found a way through his biggest conundrum — a new distribution model for the GST that all the states and territories will be able to feel they can sign up to.

In Tasmania’s case, the promise is that — thanks to a series of top-up payments — we will receive $112 million more over the next eight years if we agree to ditch the current model that ties each state’s ability to provide services to the level of the best performing state.

GST shake-up to deliver $112 million boost for Tasmania, says Federal Treasurer

The current model works for a state like Tasmania because it means we receive about $1.80 for every dollar raised in GST revenue here. But the same model has been facing calls for change from Western Australia because — thanks to that state’s resources boom which means it can raise large amounts of revenue from mining royalties — it only receives about 30c in the dollar (it’s about 95c in NSW).

Mr Morrison’s compromise is that the payments would now be attached not to the best performing state (West Australia) but to at least the equal of NSW or Victoria — whichever is higher.

The Treasurer says it’s a fair deal because it “removes the outlier” that makes the current system highly vulnerable to shock circumstances, such as WA’s iron ore boom. He says the current formula will continue to apply for the next three years, before the new one is phased in over the following five years — with billions of dollars of extra cash added to the pool from federal consolidated revenue to ensure no state is worse off. That means — if you believe the modelling done by the Federal Treasurer — that Tasmania will be $17 million better off in the first year of the new scheme (2021-22), $14 million in the second ... and so on. Not signing up to the new deal and sticking to the existing formula would leave Tassie $250 million behind, the Treasurer’s office claims.

It all sounds a pretty good offer and a reasonable way through the challenge. But the fact is that in agreeing to this new approach, Premier Will Hodgman and his Treasurer Peter Gutwein would have to abandon the long-held bipartisan Tasmanian position of rejecting any change to the “fiscally strongest” formula under which the GST revenues have traditionally been distributed. This is a big step and the Government would do well to tread cautiously.

The Premier has responded by vowing to “always stand up for our state’s best interests” and to now direct the Tasmanian Treasury to conduct a detailed assessment of the proposal over coming months. He says he will reject it if that analysis suggests we actually won’t be better off. That seems a reasonable approach.

The fact is we live in a federation and no formula for the distribution of the GST will ever make every state happy. The collections are a finite pool of cash and when you give more to one state you have to give less to another. What we as Tasmanians need to do is fight for our share of that pool to ensure every person who lives on our island has the same access to services such as health and education that every other state does. If Mr Morrison has found a way to do that while also heading off a political headache for him in the West, well, all power to him.