5 April 2018
Transcript - #2018037, 2018

Interview with David Speers, Sky News

Subjects: Council on Federal Financial Relations meeting; Commonwealth Grants Commission 2018-19 GST Revenue Sharing Relativities; Productivity Commission inquiry into Horizontal Fiscal Equalisation

DAVID SPEERS:

Thank you very much for joining us this afternoon, appreciate you standing by. So the carve-up today from the Commonwealth Grants Commission…

TREASURER:

No worries, I’m happy to talk to Shervo about the Sharks.

SPEERS:

[laughs] You might have something in common there. Now, we have seen an increase in the pie as you’ve been pointing out so nearly $3.5 billion more GST being collected. As you pointed out, a lot of it has to do with integrity measures that you put in place. But we are also paying more tax here is the bottom line too – isn’t it?

TREASURER:

Well we have put the GST on digital services, we’ve tidied up issues around property transactions, we’ve got the GST applying to low-value goods so that those companies overseas are on the same wicket as our high street retailers. So we’ve done a lot on the GST, $1.9 billion or thereabouts in the current year alone, $5 billion over the forward estimates from the measures we’ve put in place which has increased the size of the GST pool. That means – take New South Wales for example today, New South Wales might have a slightly lower share but their actual revenue that they’re going to receive next year is about half a billion more than this year and it’s about $300 million or thereabouts better than what they were budgeting for. So that is the product of a Commonwealth Government that is ensuring that the GST revenue has integrity and we’re protecting the base of it.

SPEERS:

I want to come to the carve-up more specifically, but given there’s more money, the pie’s bigger, there’s more in the pot, was there any discussion around the table today with the State Treasurers about taking the GST off tampons for example?

TREASURER:

No, there was no discussion of that today at all. What there is an understanding of amongst the Treasurers of the States and Territories is that we’re in the middle of a very detailed and exhaustive process, the Productivity Commission is currently the key part of that process, they’ll hand down a report to me in May but that won’t be the end of it there, there’ll be a lot more work to be done after that considering their recommendations and consulting with the States. So they understand that we’re in a fair dinkum process and that States and Territories have different views on this…

SPEERS:

And I want to come to that Treasurer but a lot of people see that it’s pretty weird that the GST applies to tampons, doesn’t apply to condoms and if you’re not going to take it off tampons, why not put it on condoms? Level the playing field, women and men, you know this debate well. Are you saying that no one in the room raised this today?

TREASURER:

No, it didn’t come up today. We’re talking about it in a $65 billion revenue pool that comes from the GST and ensuring that we have the right process in place for how that’s distributed. We’re dealing with things that are much higher level than that today. But over recent years we have been improving the integrity of the GST base, the States and Territories have had a lot of concerns about that and we’ve been acting on them and the States and Territories - hospitals, schools, law enforcement - all of these things at a State level are the beneficiaries of the work that we’ve done as a Commonwealth Government to improve the integrity of the GST.

SPEERS:

Alright, well, let’s look at this. You did say today these figures show the need for more work when it comes to the GST formula. How do they show that? Which bit of today’s carve-up shows more work is needed? Is there a part of the carve-up you’re not happy with?

TREASURER:

I made particular reference today to what was occurring in the Northern Territory. I mean, the Northern Territory’s a very small jurisdiction but the volatility in what’s been happening with their distribution is not something you can look the other way at. It’s a small Territory and their Budget is not the size of the other States and Territories, they’ve got significant challenges in terms of the remoteness of the state and the many challenges of indigeneity. Now, the formula is currently supposed to recognise that but there’s still doing it pretty tough so I met also with Nicole Manison today and we’ve been meeting now for a little while. We’ll continue to work with the Northern Territory to see what we can do in the short-term there, in the same way that we’ve worked with the Western Australian Government with politicians at both political persuasions. We stopped the drop on the GST in Western Australia, the Labor Government previously did nothing about it, Bill Shorten hasn’t got a solution for it, he just wants to put a Band-Aid on it and kick it down the road. They were the ones who did absolutely nothing about the WA GST as their share was just falling at a rate of knots. Maybe he just doesn’t get how it works, he mustn’t understand it.

SPEERS:

There’s been a lot of debate over the years about how to fix this problem. Yes, there’s some improvement for WA today but longer term, we have seen…

TREASURER:

A billion dollars, yes.

SPEERS:

The Prime Minister talk about a floor under how much a State can get back. I know the Productivity Commission in its interim report in October frowned upon that sort of approach. What does the Government now think about a floor?

TREASURER:

We’re waiting for the Productivity Commission to present us with their final report. I have no doubt that will flag further detail work on the options that they’ve previously presented but what I particularly asked them to do and other Treasurers had asked them to do was to get a lot more work done on transitional arrangements. It’s one thing to suggest how the system might work differently but what matters is how you would potentially implement it and how you would ensure that other States and Territories are not left behind or disadvantaged through that process and how that could be achieved. So there’s an enormous amount of work still to be done. You don’t fix this by just whacking a Band-Aid on as some sort of superficial genuflection to the people of Western Australia. They won’t cop that and that’s why they haven’t copped what Bill Shorten’s sent their way. They know he doesn’t get it and I think they understand that the Government is very seriously trying to solve this very difficult issue.

SPEERS:

Yeah, it’s more than WA of course that is suffering. The Productivity Commission said in that interim report that the way that it’s carved up at the moment – the GST – is holding our national economy back. Is that evidenced in today’s numbers do you think as well – he way that it’s carved up today?

TREASURER:

Look, I think the broader analysis of the GST distribution over a longer period of time is what leads you to those sorts of conclusions and that’s where the Productivity Commission landed. We’re in Victoria today and we’ve been talking about electricity prices very recently, well one thing that could make energy prices cheaper on the eastern seaboard is the availability of gas here in Victoria. It’s locked up, that’s pushing prices higher and will continue to push prices higher so long as Victoria locks up their gas and we’re talking about even conventional gas in Victoria. This just doesn’t make any sense.

SPEERS:

So should they lose some GST revenue if they keep it locked up?

TREASURER:

Again, David, I’m following a very disciplined and professional process here and just doing the work that is needed to evaluate all of these options. What the Productivity Commission recommends is not the Government’s position, it’s what would be the product of their assessment and then it will be for the Government to work with States and Territories to take the work forward from there but we are fair dinkum about addressing the issue. I wouldn’t have started this process with the Productivity Commission if I wasn’t. I am concerned about how the formula has failed to deal with the shocks of the mining investment boom and we need to learn the lessons from that, you just don’t look the other way and cross your fingers. There are any number of economic shocks that can occur, that could similarly put other States – not necessarily Western Australia – in as bad a situation as Western Australia has been and as a responsible Treasurer, I’m just not going to sit there, see how that has impacted without genuinely trying to ensure that we have a better arrangement for all States and Territories in the future.

SPEERS:

And just finally to clarify on this, when you do get the recommendations and you make a Government position on what you’d like to do in terms of changing the formula, do you need all the agreement, all the States and Territories to agree – I mean, how likely is that?

TREASURER:

Well, the Commonwealth does have some fairly specific powers here but the legislation does require that you engage in a very deep consultation with the States and Territories and I have been honouring that and I will continue to honour that and I thank the State and Territory Treasurers today for the way that they have continued to work with us on this. They all have very different views. They know themselves that they could not work it out if the eight of them got in a room, they would never be able to reconcile this amongst themselves. So the Commonwealth has a pretty important role to play here and my focus on this, David, has always been the same, what’s in the best interests of the national economy? What’s in the best interest of guaranteeing the fundamental services that Australians rely on? And having a consistent and dependable and predictable revenue base for States so they can put their Budgets together, pay their nurses, pay their police officers, pay their teachers. That’s what I want to see happen but the sort of wild volatility that we’ve seen and, I’m sure, the unintended but still deeply inequitable outcomes that we saw in Western Australia, that can’t go unnoticed for the same reason that I’m not allowing it to go unnoticed today, the situation that is present for the Northern Territory.

SPEERS:

And you did mention earlier, you need a transition period with any change, give the States fair time to work out their Budgets and so on, so that may take some years but will you make clear before the election due next year, what the Commonwealth wants to happen?

TREASURER:

Yes.

SPEERS:

Very good. Treasurer Scott Morrison, appreciate your time…

TREASURER:

I thought a short answer was the best one, David.

SPEERS:

[laughs] I always agree…

TREASURER:

We know that we need a clear back marker on this, mate.

SPEERS:

Indeed, indeed. Alright, thanks so much for that, we’ll talk soon.