5 July 2018
Transcript - #2018143, 2018

Interview with Brian Carlton, Tasmania Talks

Subject: All States and Territories better off from a fairer way to share the GST

BRIAN CARLTON:

Scott Morrison, good morning, how are you?

TREASURER:

I'm good Brian, yourself?

CARLTON:

Very well, a very busy day for you. Tell me the PM made a pledge that Tassie won't be any worse off, the $112 million top up that's pledged – is that over six or eight? I'm getting confusing messages.

TREASURER:

Well for the first two years there is no change, because we're not changing the formula until year three and then over six years that's $112 million, but it continues beyond that because what we do is permanently increase the size of the pool of money that is distributed amongst the States and Territories and so in 2027-28 Tasmania will also be better off in that year but our projections only go out to 2026-27. So that's how the plan works, you permanently make the pool bigger which can only leave Tasmania better off.

CARLTON:

Was the Productivity Commission report of any value then given that virtually none of its recommendations are likely to be adopted?

TREASURER:

Well that's not right, eight out of the nine recommendations have been adopted.

CARLTON:

Except the big one.

TREASURER:

Well the big one, what they said was that the system should be changed, we agree with that, we don't agree with what they wanted to change it to because we think that would have undermined the fair go principle which benefits Tasmania, but not just Tasmania, all the smaller states and would have left them worse off and in trying to compensate for that the costs would have just been too great. I thought it undermined the fair go principle. But it does need to be fixed, it does need to be changed and what we've outlined today will leave Tasmania better off both now and into the future, permanently, and that means more support for Tasmania for schools and hospitals, up there in Burnie and Devonport and across the north as well. That will be a matter for Will Hodgman and Peter Gutwein on how the money is spent and I have great confidence in how they will do that.

CARLTON:

Now there's a bit of argy bargy around as to whether this will be tied money, will it be in any particular way? As in you must spend it on schools, hospitals et cetera.

TREASURER:

Well you know that's what I assume they would spend it on, or to strengthen their Budget more generally. I think that Peter Gutwein has showed a lot of discipline on those issues and has been running a very, very strong budget and a tight budget and so that's why it gives me the confidence to be able to invest more in those through this solution. But it's not tied, not tied at all.

CARLTON:

The modelling for this plan you put up today, that came out of Treasury did it?

TREASURER:

No the modelling is based on the work done by the Productivity Commission, yes Treasury has also used the numbers that the Productivity Commission came up with. And to answer also your earlier question, the great benefit of what the Productivity Commission has done is that for the first time they've given us a projection of what, if we continued with the same formula, what that would mean for all States and Territories and we can directly compare that with what a change in formula would mean and that enables me to say that on the numbers we have in front of us, which were done independently, that we would leave Tasmania $112 million better off. But the next step, and this is something that Peter and Will were very adamant about and I agree with them, so they had me at hello, is that we now have to have the States and Territories interrogate all that base information. But the way the GST works is, that even with the expanded pool, it's distributed around all the States and Territories, so let's say they all came to me and they said "Treasurer, we're all worse off by more than you say under this proposal", well that's not possible because if one of them is worse off someone else must be better off, that's how the system works…

CARLTON:

So where's the extra money coming from Treasurer? That's the question, where's all this extra coin coming from?

TREASURER:

Well, you've got to put it in perspective. In 2026-27 the GST pool is $100 billion and the top up to the pool is $1 billion so it's about one per cent and we're talking about an overall Commonwealth revenue which will be higher in that year as well. Where's it coming from? It's coming from the Commonwealth, it's coming as a top up, we are getting back into surplus in 2019-20 and as a result of the fiscal repair job we've done as a Government and the stronger economy that we're running, it puts us in a position to fix these types of problems.

CARLTON:

So you're putting the GST on welfare for 10 years?

TREASURER:

What?

CARLTON:

You're putting the GST process on welfare for a decade or so, with the top up payments…

TREASURER:

I didn't quite understand what you meant…

CARLTON:

Well I was thinking about in these sort of terms, the GST system is broken to the extent that the states are now having to get top ups over and above the actual formula, that's on welfare isn't it, a GST system on welfare?

TREASURER:

Well what it's acknowledging is to ensure that no state is worse off it requires you to make the pie bigger…

CARLTON:

No I understand that, but shouldn't the formula reflect what we actually need rather than having to say oh we'll give Tassie a little more this year, and WA a little more.

TREASURER:

The alternative to doing what we're doing puts at risk our states being worse off and I wasn't prepared to do that. I think that is not something that would guarantee essential services that Tasmanians rely on in particular and I wanted to put peoples' minds at rest. But there hasn't been a Treasurer's meeting that I have gone to where the issue of the overall size of the GST pool has not been a matter, because the GST pool does not actually grow as quickly as what income tax revenue does or total tax revenue does. So it hasn't proved to be as strong a growth tax as what was first envisaged and states have raised that for some period of time. So what I'm doing here in part recognises that in saying that we'll make the pie, it's not a lot bigger, but it's big enough to ensure that I can give this guarantee, which I think it's fair enough that Tasmanians would require, it's not tied to anything else, it's not subject to any other payments being cut or anything like that. It's a fair dinkum solution to try and deal with the problems that we've got nationally and both Peter Gutwein and Will Hodgman have been really great in working with us, they've stood up strongly for Tasmania, as Brett Whiteley will up there in Braddon.

CARLTON:

Treasurer, I know you've got limited time, I appreciate what you've given us today, thanks.

TREASURER:

No worries, thanks for your time.