Posted October 01, 2018 19:29:18

The Tasmanian Government will demand guarantees as part of the Federal Government’s proposed GST distribution changes.

The demands will be made despite the fact that legislation has already been drafted and Prime Minister Scott Morrison has said states would not be able to reject the plan.

Premier Will Hodgman and Treasurer Peter Gutwein are now insisting on a binding guarantee that Tasmania will not be worse off compared with the current system, and that the additional federal funding will not mean cuts to other grant revenue to the states.

In July, the then-federal treasurer Mr Morrison proposed changing the GST carve-up to peg all smaller states to New South Wales and Victoria, rather than to the average of all states, and add $9 billion dollars of funding to top up the GST pool to ensure no state was worse off.

A meeting between state treasurers and Federal Treasurer Josh Frydenberg to discuss the plan is scheduled for Wednesday, but the Federal Government has revealed that legislation to implement the changes had already been drafted and would be tabled within weeks.

On Monday, the Tasmanian Government was still saying the proposed changes appeared to benefit Tasmania “on face value”, the same way Mr Hodgman and Mr Gutwein described it when the proposal was released in July.

Where do we get $9 billion from?

Independent economist Saul Eslake warned that the $9 billion top-up funding could be pulled from specific purpose payments for services such as schools and hospitals.

“After all, that’s what the Abbott government sought to do in its first budget, and the Hawke Labor government in the second half of the 1980s also sought to put its budget back into surplus by cutting payments to the states,” Mr Eslake said.

On Monday morning Mr Frydenberg would not specify where the $9 billion would come from, but said the Australian economy was strengthening and receipts had improved.

In a joint statement, Mr Hodgman and Mr Gutwien said the Tasmanian Government also wanted a binding and enforceable guarantee that the state would not be worse off under the proposed system, compared to the current system in each year, and reassurance that the state would be at least $112 million better off in the years to 2026-27.

Mr Hodgman and Mr Gutwein said Tasmania had not yet signed up to anything, but the Federal Government has said the states would not be able to reject the changes if they objected to them.

What about another boom?

Mr Eslake said the proposed changes did not take into account the possibility of another mining boom in Western Australia, despite the Federal Government criticising the current GST distribution method because it failed to foresee the iron ore mining boom.

He said another boom could also pose a risk to Tasmania’s GST share.

The Federal Government plans to put a 75 cent floor under West Australia’s share, meaning that is the lowest amount the state would get regardless of the amount it contributed from a boom.

West Australia’s share has in the past fallen as low as 30 cents for every dollar it has contributed to the federal coffers.

“The requirement to put a floor under Western Australia’s share of the GST would in fact be paid by other states in the event of a minerals boom like the last one,” Mr Eslake said.

“It’s possible that in a decade’s time global demand for lithium to go in electric cars could result in Western Australia — which produces half the world’s lithium — experiencing a boom in its revenue from lithium royalties similar to the one its enjoyed from iron ore royalties over the past dozen or so years.

“Now that we’ve just had a mining boom they ought to contemplate the possibility that there could be another one.”

Labor spokeswoman Sarah Lovell said the proposal did not provide any guarantees that Tasmania’s GST share would be protected in the long term, and Labor believed any change from the status quo would leave Tasmania worse off.

Topics: federal—state-issues, government-and-politics, budget, tas

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