5 July 2018
Transcript - #2018146, 2018

Interview with Jane Marwick, 6PR

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

JANE MARWICK:

The Treasurer is Scott Morrison, he joins me now. Good morning and thank you for your time on such a busy day for you Treasurer.

TREASURER:

Well, it’s very important to be talking to Western Australia. I promised that we’d fix the GST formula and one of the things in your introduction, which is important, I need to add to is we’re not just putting in a floor, we’re changing the formula. The formula is changing from what it currently is, which is it equalises to what is the top fiscal state, which has been Western Australia, and that is the cause of the problem which sent Western Australia down to less than 30 cents. Now we’re changing that so Western Australia will no longer be the benchmark everyone is measured up to, it will be the higher of either New South Wales or Victoria. Now that means Western Australia’s share will increase significantly as a result of that change and then we put a floor underneath them to ensure they can never go down again. So I don’t agree with the fact that this isn’t a fair dinkum formula. It is a fair dinkum formula change. It’s not the one the Productivity Commission recommended because that went too far and would have been too expensive to implement. But this one is a genuine formula change and a change in the game forever for Western Australia. Which is what I promised to do.

MARWICK:

You did indeed and I can see the politics at play here too and I also reckon that most people listening will just go “Good, 75 cents we’re happy with that”. What about states…

TREASURER:

You’ll go above 75 cents. That’s my point. I mean Western Australia, under this new formula they’ll go up to over 80 cents. They’ll actually be on the same level as New South Wales over the period because we’ve changed the formula which means their share will be even higher than what it would be under the current formula.

MARWICK:

And how long will this take to implement?

TREASURER:

Well, we’ll top up WA for the next two years and then in 2021-22 we’ll begin the change to the formula and that goes over six years. But over that period of time Western Australia’s GST will go from about $3.3 billion up to $7.6 billion and in 2019-20 we estimate it will go to $4.2 billion, then $4.7 billion, then $5 billion. All up, Western Australians will benefit to the tune of $4.7 billion over the next eight years.

MARWICK:

Now, when we talk about these billions of dollars and we know that I suppose we loosely call it a pie, don’t we, that $67 billion pie? In giving Western Australia more money, are you going to have to raise taxes? Are you going to take it out of that $67 billion? How’s that going to work?

TREASURER:

No, I’m not going to raise taxes. That’s what the Labor party does. They want to take back your personal income tax cuts and they want to take back your business tax cuts. They’re for putting up taxes, we’re actually legislating to bring them down. But the other point is, the Commonwealth’s Budget goes back into surplus in 2019-20 and then remains there into the future. So, the Commonwealth will be topping up the overall pool of money that comes from GST collections. After eight years, that will be about $1 billion more we’ll put into that pool. It starts at $600 million more at the start of the transition and that means the overall pie is bigger. What that means for all the other states is that where there would possibly be any change negatively to the GST they would otherwise have got under the old formula, that extra money going into the pool more than compensates them. So for example in Tasmania, which is one of the states that WA subsidises like New South Wales and Victoria, they’ll be $112 million better off over that period. Now that’s obviously a lot less than what Western Australia is but Western Australia has had a raw deal. We’ve always understood that and we always knew that you had to fundamentally structurally change the system to fix it. You can’t do top-ups for everyone. I know that’s what Bill Shorten’s suggesting. That doesn’t work, that gives Western Australians no confidence at all. You have to change the formula and that’s what we’re doing.

MARWICK:

So looking at states like Tasmania and Victoria, there’s been a lot of criticism, talking about mining for instance with Victoria versus Western Australia and Tasmania. We understand the Territory, I think the Territory you can always argue is a special case. Is there still a reward for uncompetitive – and what about the ACTU by the way? I mean that’s an extra special case – is uncompetitive behaviour still being rewarded with this new reform, with this new system?

TREASURER:

Well no and certainly less so.

MARWICK:

But still a bit?

TREASURER:

Well, unless you move to full per capita distributions and abolish the fair go principle, then that’s the only way you do that and no one is suggesting that. But what we’ve done is we’ve taken out the incentive or rather the negative incentive for Western Australia not to pull things out of the ground. See the way the formula works now is the second you put the shovel in the dirt to start pulling things out of the ground then that’s when Western Australia gets to, starts to be penalised but by changing the formula to equalising to the better of New South Wales or Victoria, Western Australia can carry on digging and it won’t affect them in the way it did before. So this is a big change and it’s an important economic change. One of the arguments I make on the east coast, is yeah Western Australia did get more royalties when the mining boom was on but hey their companies paid more tax, their citizens paid more tax and income tax because they were earning more and that money was spent on pension payments in Tasmania and in Queensland and South Australia and New South Wales. The company tax revenues were building bridges in regional New South Wales and Victoria and so Western Australia was a huge driver of the national economy and it was doing its bit and to see its GST revenue fall from more than $4 billion down to less than what the Northern Territory was getting was ridiculous. And people on the east coast I think get that.

MARWICK:

I don’t know that they do and I will tell you why, because I happen to do some contributing for Sky News and they just laugh at us all the time, and go “oh it’s someone from Western Australia you’re going to complain about the GST”. I mean it was really interesting looking at how the different newspapers reported this and particularly some of the Fairfax press and saying they were going to be worse off.

TREASURER:

What do you expect from Fairfax, but that doesn’t shock me any more than other news establishments in public ownership that shall remain nameless. But what’s important is that WA gets that they’re a stronger state and they do their bit in supporting the smaller states. I mean I’m from New South Wales, we’ve been doing that since Federation. We’re one country and Western Australians are Australians, as well as Western Australians. They get that, but the idea that you’d be subsidising down to less than getting less than 30 cents per capita share is ridiculous and a lot of people on the eastern states don’t even know that because they obviously don’t talk about it much in the eastern states.

MARWICK:

No, because it doesn’t make news, we know that, we understand that there is still that massive divide.

TREASURER:

So, me talking about it today and explaining this is why we need to do this, when you explain to them that you know WA was getting less than the Northern Territory and it has 10 times the population, they go “oh that’s a bit rough”. So I think as we explain this change in the eastern states it will be understood and I think it will be ultimately accepted and we knew we had to put more money into the tin to make sure that all states and territories were better off and if we didn’t do that well you know how politics works.

MARWICK:

We do know how politics works, and as I said off the top, I think West Australians, it’s almost like something you learn in school now, the GST and horizontal fiscal equalisation. Look the Chamber of Commerce and Industry’s chief economist Rick Newnham has tweeted this this morning Treasurer, he said “to put this GST fix simply: Treasurer Scott Morrison is taking all the states out to lunch, he’s giving them all a bigger piece of a pie, and for once WA doesn’t have to pick up the bill’, is that a fair analysis?

TREASURER:

I think Rick’s pretty spot-on about that, that’s a pretty good way to explain it. At the end of the day the Commonwealth is always fundamentally put in that position if we want to fix something. I’m not whingeing about that but, you know, the choice was not to fix the problem and that was just not tenable.

MARWICK:

Yeah, but the politics of that was no good for you either. You know as you’re going into another election I know the pressure that you’ve been under from West Australian Liberals, of course previously Premier Colin Barnett currently to our Treasurer…

TREASURER:

But not unreasonably. I think that’s been fair enough, you know I pay credit to everyone, Steve Irons there in WA up in Swan has been on my case about this for a long time. I share a flat with Steve in Canberra.

MARWICK:

Do you?

TREASURER:

Yeah I do, and most nights he’s into me about the GST. But you know it’s just not him, it’s all of our colleagues you know Ken Wyatt has been doing the same thing, of course Mathias Cormann, Julie Bishop, Christian Porter, Michaelia Cash, Michael Keenan, sitting in Cabinet they’ve been very strong on this and you know we’ve been working together with the WA state government as well. I think that there’s a big onus on them now to bring their colleagues at state governments along across the line from Queensland and Victoria, and I know Ben and Mark will be working to achieve that. But it’s important that they do that and they’ve got a role to play here to see this thing land. You know we’re working to bring our Liberal state governments together on this in South Australia, Tasmania and New South Wales, so we’re doing our bit there. I’ve spoken to all of the Treasurers around the country about it.

MARWICK:

So that’s one of the things I wanted to ask you and look I know that you could just rubber stamp this, you don’t need legislation do you, you don’t need approval as Treasurer you could just get this through, couldn’t you, this change? But you will, you’re going to seek approval, is that right from territory ministers, chief ministers and premiers?

TREASURER:

I am Jane for this important reason, you’re right I could just do it unilaterally, but that means that someone else could change it unilaterally. What I want to do is ensure that this is locked up for WA and for Tasmania as well and all the states. So what I’m going to seek to do is get that consensus, put this in an intergovernmental agreement which gives everybody the certainty that what Western Australians in particular fought so hard for, you know people like Andrew Hastie down there in Canning, the whole team, that they are delivering a system that now will be there for the future. WA should never have to face what they’ve gone through again and that’s what Malcolm Turnbull and I and Mathias Cormann and the whole team we’ve been working to deliver. I know Western Australians have been enormously patient with me as, when I’ve been on Gareth’s program before, I do appreciate that. We needed the space and time and the work done by the Productivity Commission, that has been very important in coming up with our ultimate proposal now.

MARWICK: Are you happy with this proposal? Do you think it’s, is this, I can see the politics in it and I’m sure Ben Wyatt who’s on next will discuss the politics of it and again our WA state Labor government has lobbied very hard…

TREASURER:

They have.

MARWICK:

…you know what a political hot potato this has been.

TREASURER:

And I’ve worked closely with Ben on this.

MARWICK:

So do you, is this honestly in your bones, is this the best fix or is this the best political fix?

TREASURER:

Look I think it’s the right balance. In politics you’ve got to do things that you can deliver, there’s no good in holding out for the perfect because then nothing gets done. You’ve got to come up with things that you can actually do. We’ve got a window of opportunity here to finally stop kicking this thing down the road and actually deal with it. I mean how many times before have there been reports that said this need to change and this needs to be fixed and then nothing happens. We’re doing something now and it’s something that I believe I can get the whole Federation to support.

MARWICK:

Ok last question because we do need to get to the Treasurer and I know you’ve got a really busy day too Scott Morrison, so how will that look? How does this play out on paper? As we’ve said you could make a unilateral decision and say right this is what we’re going to do. If you get the agreement of chief ministers and the other states’ premiers, how do you solidify that? How do you make sure that this isn’t changed in a couple of years’ time?

TREASURER:

Well it’s called a thing called an intergovernmental agreement, which is the same thing we use for hospital funding and schools funding and housing funding and all these things which are permanent agreements. There’s also one currently around how the GST operates and so we’d have an agreement on that between all the states and territories. The first thing we’ve got to do is, you know Ben and all of his colleagues and Treasurers around the country, we’ve got to all go and put our data in the middle of the table and make sure that what the Productivity Commission has pulled together bares out with what we all understand to be the case. Then from that if we have to tweak the model a bit to get the same outcome then that’s what we’ll have to do. Then I’m hoping we can finalise this before the end of the year and frankly the sooner the better. I think we’ve got a really good process, I think we’ve got some good faith working towards this. I can’t tell you, I mean I suspect all the state and territory treasurers are sick of arguing about this too. I’m certain that Western Australians are. We’ve got to put the politics aside, I think we’ve got a real plan to now agree. I want to thank Ben and Mike Nahan before him for working with the Commonwealth to try and solve this issue, they’ve been good to deal with and hopefully between Ben and I and the Prime Minister and Mark McGowan we can get this thing done.

MARWICK:

Why do I feel like if the Liberals do well in this by-election, in the Super Saturday on the 28th of July we might be going to an early election. Don’t answer that Scott Morrison, I’ve got to go to a break.

TREASURER:

It’ll be next year but people should be asking Bill Shorten between now and the by‑election why aren’t you supporting the Government’s plan that finally fixes the GST for WA?

MARWICK:

Scott Morrison thanks for your time today.