Federal government set to boost state’s budget bottom line with massive GST injection

An economics expert says Tasmania is in line for hundreds of millions of dollars extra in GST revenue in this federal budget – just in time to help fund the recent election commitments.

AN extra $475m in GST awaits Tasmania in Tuesday’s federal budget.

Leading economist Saul Eslake also expects no rises in taxes in the budget and says the extra GST will help fund election promises.

“The most important thing for Tasmania – which we know already because it was incorporated into the pre-election fiscal outlook report issued by State Treasury during the election campaign – is that Tasmania will get an additional $475m from its share of the GST,” Mr Eslake said.

“That’s because the overall GST pie has been revised upwards due to stronger-than-expected consumer spending across the Australian economy, and the Grants Commission’s most recent report recommended an increase in Tasmania’s ‘relativity’ – our ‘share’ of the GST pie.

“This upward revision to GST revenues will pay for a fair chunk of the spending promises the Government made during the election campaign.”

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However, Mr Eslake said Tasmania was “vulnerable” to shifts in the amount of GST for reasons “totally beyond our control”.

“Our GST revenue is at risk when the ‘transitional guarantee’ – that no state or territory will be worse off as a result of the changes the Morrison Government made in 2019 to appease greedy Western Australia than they would have been under the ‘old’ system – expires in 2026-27,” he said.

Tasmanian economist Saul Eslake. Picture: LUKE BOWDEN

Mr Eslake said extra spending on aged care for home care packages and child care would not benefit Tasmanians as much as people interstate.

“Tasmania will benefit disproportionately from this simply because we have an above-average proportion of older citizens,” he said.

A widening of the eligibility for subsidised child care places would not have as much impetus in the state.

“I would guess that proportionately fewer Tasmanians would benefit from a relaxation of means tests for access to subsidised child care because we have a higher percentage of lower income families than other states.

“Conversely, we have a smaller proportion of families who are excluded because their incomes are ‘too high’ to qualify under the existing access rules.”

Mr Eslake said the federal government would be keen to emphasise that the huge blow-out in the budget deficit last year because of COVID-19 has passed its peak.

“They also want to highlight that the budget deficit will shrink more rapidly than previously forecast over the next few years without the need for drastic spending cuts or tax increases,” he said.

“Unlike the recent UK or US budgets, I wouldn’t expect there to be any increases in taxes announced in Tuesday’s Australian budget.”

Mr Eslake said Tasmania had performed better than the rest of Australia in rolling out the COVID-19 vaccination.

“That’s probably the most important thing for governments state and federal to be getting right over the next six months or so, because the sooner a large proportion – greater than 70 per cent – of us are vaccinated, the more confident we can all be about getting back to something approximating ‘normal’ without having to worry about either catching the virus or being subject to arbitrary and sudden lockdowns,” he said.