5 July 2018
Transcript - #2018142, 2018

Interview with Leon Compton, ABC Hobart

Subjects: All States and Territories better off from a fairer way to share the GST; Turnbull Government action to put banking consumers first by cracking down on credit card practices

LEON COMPTON:

Treasurer, good morning to you.

TREASURER:

Good morning Leon. Good to be with you.

COMPTON:

Treasurer, you raised the spectre of Tasmania getting $112 million more over 8 years under the deal you're proposing. $112 million more than what?

TREASURER:

Than where they will be under the other system. So, there's two ways to go forward here. We could just leave the system where it is and not change it and that's actually what will happen up until the end of 2020-21. There'll be no actual changes until then and then the year after that, 2021-2022, we start changing to the new system we're proposing and the difference between going with that new proposal and staying where we are, that is $112 million estimated to be better off for Tasmania. The way we achieve that is we make the pool of funds that is distributed to all the states and territories bigger. So it's not just all the GST that is collected. It's all of that plus an additional amount the Commonwealth will put into the pool so it leaves all states and territories better off, including Tasmania.

COMPTON:

People are still asking the question, $112 million more than what, because in your Budget that you handed down only a couple of months ago, there was no forward estimate of what the GST pool would actually look like.

TREASURER:

Well that's what the Productivity Commission has done for us. There has never been before a projection of what all the relativities would be under the existing formula. That has never been done before across all the States and Territories. A key part of the work the Productivity Commission did was to talk to all the States and Territories, including Tasmania, and get all their forecasts on the table and to be able to project forward what would happen in all the states and territories based on the information that we have. So we can compare now what would a new system look like compared to the current system. All of that needs to be properly interrogated again by the States and Territories. In my discussions with Peter Gutwein over the last week and more, that's the obvious issue that he has raised and I agree with him. Let's get everybody's numbers now, again on the table, put them in the middle. But the key thing when you do that is this - they all have to reconcile one with the other. If everyone comes out and says, "oh no, we're getting less, we're getting less, we're getting less", well if that's true then I must be getting more and we're not keeping anything, because all the formulas have to reconcile with all the other States and Territories. That's what the Productivity Commission has done independently. That's how they've come up with their projections and the formula that we're proposing will leave Tasmania $112 million better off.

COMPTON:

Is this effectively the end of the GST in the sense that historically it's been the GST pool that's been distributed, now what you're proposing is the GST plus $6.7 billion extra that the Federal Government will tip into the pool and wash around with that money?

TREASURER:

Well not in any one year. What it does mean is that in the final year, say in 2028-29, you've got a pool which is well over $100 billion and our top up on that will be $1.2 billion. But in 2026-27, I should say, at the end of the transition to the new formula, the pool of funds there will be about $100 billion and we're topping it up by $1 billion, just over that. For the proportion of the total GST revenue, that is obviously not as great an amount but it's enough to ensure that Tasmania is protected. What I'm trying to do here is two things, we have to fix the formula because as you said in your introduction, a state like Western Australia which has ten times the population of the Northern Territory is actually getting less money distributed to it from the GST. Less than 30 cents in the dollar. If Tasmania was getting less than 30 cents in the dollar from the GST there'd be outrage, and rightly so. So we need to fix that. The formula didn't foresee how the effect of the minerals boom would completely turn the formula upside down. So we had to fix that. But I also accept that the fair go principle that ensures that states like Tasmania get supported by the stronger states, that has to be maintained. I'm committed to that.

COMPTON:

Ok, so Treasurer you say now that there will be certainty around this. Tasmania this financial year, the one we've just entered, we'll get $2.488 billion under the distribution as I understand it. What specifically, what amount will Tasmania get in 2020-21 under the scheme that you're proposing?

TREASURER:

Well in 2020-21 it'll be what the current relativities under the current formula will deliver them. So we're not changing anything for the year 2020-21. From 2021-22 onwards, we start transitioning. By the end of that period it's well over $3.5 billion that Tasmania would be getting per year.

COMPTON:

On Mornings around Tasmania, it's an interesting sell that you have at the moment. You say that this system needs to be changed and I think quite a number of people are of that view. But you'll need to convince Tasmanians that they will be better off or they can vote for your opponents who say they'll leave things as they are. With the by-election only weeks away, that is the choice that people have in front of them given how important this issue is.

TREASURER:

I think that's right. What we're giving the assurance of, and demonstrating it by releasing before the by-election what our proposed way forward is, demonstrates that Tasmania will be better off under what we're proposing. The other reason they'll be better off is this, it's not just how much is collected from the GST and what we're projecting and what we top it up with. But if we have a weaker national economy, then that mean the GST that is collected in total will be less. And so, even with our top-ups, if you had a future Labor government, whose policies wouldn't grow the economy as strongly as what our policies do, Tasmania will be getting less money because they'll be getting it out of a smaller pie. Under the Turnbull Government, you're pulling it out of a bigger pie.

COMPTON:

On Mornings around Tasmania, the Treasurer Scott Morrison is our guest this morning. Treasurer, the Tasmanian Government say quote, 'they won't accept this proposal if it's not in Tasmania's best interest'.

TREASURER:

That's fair enough.

COMPTON:

Does Tasmania actually have the power to refuse this deal?

TREASURER:

Well, I'm approaching this on a consultative basis. I've had very good discussions with Will Hodgman and Peter Gutwein. I can assure Tasmanians that they have not taken a backwards step and they have ensured that the model I've outlined today and outlining it in a few minutes here in Canberra, actually is a permanent system. We're not just going to provide support over a six year transition period. This is ongoing, built in, baked in changes to the system which always leaves Tasmania better off.

COMPTON:

I understand that but does any …

TREASURER:

… and Will and Pete delivered that.

COMPTON:

Does any state in Australia actually have the power to say no, we don't accept this deal?

TREASURER:

No, they don't and that would be the case under anyone. But that's what I'm trying to do and what both Pete and Will have argued for and I agree with them.

COMPTON:

Ok, but its …[inaudible]… of them to say they won't accept the proposal if it's not in Tasmania's best interest.

TREASURER:

Well, no. This is why they've proposed, well we've jointly proposed, I want this agreed in an intergovernmental agreement that locks this down. That's what Tasmania wants and I agree with them. I think it's better to have this agreed between all the States and Territories. It's put into a new agreement. Now we don't have to do that, that's what I'm asking to be done and that way that gives Tasmania the certainty. That's what Peter Gutwein and Will Hodgman have insisted on. And they didn't have to insist because I already agreed with them. They had me at hello.

COMPTON:

Treasurer, Scott Morrison is our guest this morning on Mornings around Tasmania. Treasurer, can you promise that you won't claw back the millions of dollars in special purpose payments that Tasmania as a state receives each year on the other side of trying to make up the $6.7 billion that you'll be tipping into this pool?

TREASURER:

Yes, these things are completely unrelated. So this doesn't affect any of those other special purpose payments.

COMPTON:

One prominent economist that I've spoken to this morning suggested it is one of the potential risks around this, that on the other side of this deal the Government might seek to recoup some of the $6.7 billion that they'll tip into this.

TREASURER:

No, they're separate discussions. The two are not related.

COMPTON:

Can you guarantee that there won't be a reduction in special purpose payments over time?

TREASURER:

There will be no changes to special purpose payments to provide the funding that is needed for this arrangement.

COMPTON:

When do you need to have this signed off on?

TREASURER:

Well, the sooner the better. But you have to take the time and the next step is for all the States and Territories to work with us to basically redo the work the Productivity Commission has done so we can all agree on what all the underlying information is that underpins what I've presented to the States and Territories. That's particularly what Tasmania has asked for, but so has New South Wales by the way, and other states. And I agree with that. So that's how you've got to work together. You've got to agree on a common data set. We've got an independent data set at the moment from the Productivity Commission. That's what my projections are based on. But we'll work that through with the states. We'll meet in September and let's see how much progress we make then. But I would like to see this all tidied up by the end of the year.

COMPTON:

Did you think about raising the overall GST rate in the long term? That could be another solution to the revenue issue.

TREASURER:

No. We're not increasing any taxes. The only party who's increasing taxes is the Labor party. They're ripping away business tax and cuts for businesses…

COMPTON:

Treasurer, you've done a really good job in the interview of not making it too much about he said, she said.

TREASURER:

You asked me if we're going to increase taxes to do it and I said no. The only party that's doing that is the Labor party.

COMPTON:

On the other side of this, and it was interesting reading the Productivity Commission draft. They make the point that one of the problems that the GST entrenches is that it can act as a disincentive to improve the states to reform [inaudible], to make hard decisions because it's sort of, it rewards mediocrity. And let's be honest, Tasmania has not always led the way in aggressively trying to solve its own problems. Doesn't that continue? Doesn't that disincentive stay to some extent under this deal?

TREASURER:

No, what we're doing here actually also addresses that issue. It doesn't address it in the same way that the Productivity Commission's recommendation did but what ultimately the Productivity Commission recommended I think does undermine the Fair Go principle of, you know, the reason why we have this distribution method. If you were going to do what they were suggesting, well you may as well have gone the whole hog and just gone back to per capita distribution and I don't favour that either. So, that would have been too great a change. It would have impacted states, particularly like Tasmania harshly and I don't agree with that. We're one country. The larger states, I'm from one of those, I'm from New South Wales. New South Wales has subsidised all the other states since Federation, as has Victoria.

COMPTON:

I suppose my point is under this new model, do you think there will be the capacity in there to try and drive state to reform their performance? How?

TREASURER:

Yes, I do. The formula now won't penalise you, particularly when it comes to resources. That's what was happening under the old formula. WA got penalised because it took things out of the ground. Now, the formula cannot and couldn't previously take that into account. The only time the revenues from taking things out of the ground actually kicked into the system was when you put the shovel into the dirt. Now, Victoria has gas reserves. New South Wales has gas reserves. Queensland, South Australia, Northern Territory, they all have resources and I'd like them to utilise them.

COMPTON:

To be honest, Scott Morrison, Tasmania could have gas resources but we don't know because there's just not a moratorium on fracking here but a moratorium on exploration for fracking. Have you told the Liberals here, will you tell any Government here, that they need to think seriously about that ban on fracking and their thoughts on resources?

TREASURER:

We've said that to every State and Territory.

COMPTON:

And you've told Tasmania?

TREASURER:

We've said it to every State and Territory. It's our view that our gas resources have to be utilised. You have to have the appropriate safeguards in place. But if we have more gas in Australia, electricity prices will be cheaper.

COMPTON:

You're on Mornings around Tasmania, Scott Morrison is our guest, the Federal Treasurer. Just briefly, we're about to start talking about credit card debt in Australia. An ASIC report yesterday suggested more than one in six Australians, 1.9 million people, are struggling with credit card debt. Treasurer, are you of a mind to step in and do more to restrict the way that the banks, financial institutions, offer and service credit card debt?

TREASURER:

We already have. We've already taken legislation and regulation through which removes the ability for banks to be sending out unsolicited offers, greater transparency in letting people know what repayments are, not just to meet the minimum repayments but to pay off the whole bill. These are laws I flagged at the beginning of the year and have already gone through.

COMPTON:

Are you troubled by this figure?

TREASURER:

Of course I am. That's why I took the action that I have.

COMPTON:

Would you consider more action given what ASIC has revealed yesterday?

TREASURER:

Yes, if there's more action necessary then I've already demonstrated I'm prepared to do it because I've already done it.

COMPTON:

Good to talk to you this morning. We appreciate you coming on.

TREASURER:

Thanks a lot Leon. Great to be with you.

COMPTON:

Scott Morrison, Federal Treasurer.