The Turnbull Government is delivering on its promise to fix problems in the system used to share the revenue from the GST leaving all states and territories better off.
Importantly this will deliver an additional $4.7 billion in GST payments to Western Australia, money that can be spent on schools, hospitals and roads which are so important in Hasluck.
This will be the first time real changes have been made to fix problems in how the GST is shared since the GST was introduced almost 20 years ago.
“This problem has been kicked down the road for too long and now is the time to get on with fixing it,” Ken Wyatt MP, Member for Hasluck said.
“Western Australians know that the system was not working, and that volatility was undermining the ‘fair go’ objective of sharing GST between the states and ensuring all Australians access essential services.”
“The Turnbull Government has developed a plan that is a real, long-term solution, rather than a political quick fix.”
The proposal will involve transitioning to a new HFE system over eight years from 2019-20 in a way that is fair, reasonable and sustainable, and that will ensure all State or Territories are left financially better off.
To assist with the transition to the new system, the Commonwealth will provide short-term funding over the three years from 2019-20 to 2021-22 to ensure that no State receives less than 70 cents per person per dollar of GST. WA is expected to be the only State with relativity below 0.70 during this time.
“West Australian federal members have been fighting for quite some time to have a better outcome for Western Australia. We know what the impact is; we know that the provision of services, infrastructure, and the daily things that we take for granted delivered by state governments have to be supported,” said Mr Wyatt.
The Turnbull Government will now consult with states and territories to ensure the transition works.
“Western Australians should be congratulated for persisting with the case for reform. I am proud to be part of a Government that has a plan to make the system fair and deliver more funding for essential services for all Australians,” Mr Wyatt said.
“The Turnbull Government promised to fix the GST and give West Australians a fair share, and we’ve delivered,” said Mr Wyatt.
Our preferred model involves moving to a new benchmark that will ensure the fiscal capacity of all States and Territories is at least the equal of NSW or Victoria (whichever is higher). Benchmarking all States and Territories to the economies of the two largest states will remove the effects of extreme circumstances, like the mining boom, from Australia’s GST distribution system.
In addition to moving to a new, more stable equalisation standard, the Government also proposes to commit to put in place a ‘floor’ on the relativity any State can receive. The Government will implement a floor of 70 cents per person, per dollar of GST, below which no State’s relativity can fall, from 2022-23, rising to 75 cents from 2024-25. Given the formula is now based on a more stable benchmark, it is highly unlikely relativities would move below the new floor.
No state will be financially disadvantaged as a result of moving to this new benchmark. A fair and sustainable transition to a new equalisation standard will be ensured, through an additional, direct, and permanent Commonwealth boost to the pool of funds to be distributed among the states.
The Government’s interim response is available at: https://treasury.gov.au/publication/p2018-308096/