GOODS AND SERVICES TAX

Ms THOMPSON (Reynell) (14:35): My question is to the Treasurer. Can the Treasurer update the house on when he last spoke to the GST Distribution Review Panel and what was discussed?

The Hon. J.J. SNELLING (Playford—Treasurer, Minister for Workers Rehabilitation, Minister for Defence Industries, Minister for Veterans' Affairs) (14:35): I would like to thank the member for Reynell for the question and for her abiding interest in the issue of horizontal fiscal equalisation. I had a telepresence meeting with the GST Distribution Review Panel earlier this week to again reinforce how important the current method of GST distribution is to South Australia. The GST Distribution Review interim reports outline several proposals that may lead to inferior results for South Australia and will be inconsistent with the principles of equity and efficiency, so it was important to me to make certain that the state's position was heard by the panel.

In particular, the reports propose to change the objective of horizontal fiscal equalisation to achieve comparable rather than equal fiscal capacities across the states and territories. Although the term 'comparable' isn't clearly defined in the interim report, it's our view that this may imply a watering down of the current HFE system and a significant departure from the full equalisation outcome.

This may ultimately result in the creation of tax havens, and people would be disadvantaged depending on where they live. Consider the Pharmaceutical Benefits Scheme which provides affordable prescription medicine to all Australians irrespective of the state in which they live. Can you imagine a PBS that applies in full to some states and partially to others? This would not be an equitable outcome.

The creation of tax havens would also result in an artificial incentive for households to migrate between states. In the absence of full equalisation, household decisions to move interstate would be influenced by the fiscal capacity of a state rather than its underlying economic opportunities. This type of migration is inefficient and would lead to an overall reduction in living standards.

Also, can I remind the house that South Australia is a beneficiary under the HFE system. Our state receives around 28 per cent—that amounts to about $1 billion—more in GST receipts under the current HFE system, compared to a population share distribution methodology. However, as our mining royalty revenues increase over time with the future mining boom, I will not do what Western Australia is now doing after being a beneficiary state up until just a few years ago. I'd be very happy for South Australia to be in a position where we are a net donor under the HFE.

The principles behind HFE have served our federation well for decades and should continue to do so into the future. For the reasons that I have mentioned, I will continue to argue for the continuation of a fully equalised HFE system in Australia and will continue to make sure that our position is heard by states such as Western Australia, the commonwealth government and the GST Distribution Review Panel.

Ms CHAPMAN: Point of order: the minister was asked a question about what the discussion was, what was presented and what the response was. I didn't hear anything about the response, only what he says he put.

The SPEAKER: There is no point of order. The minister can answer the question as he chooses. Deputy Leader of the Opposition.

Members interjecting:

The SPEAKER: Order! Deputy leader.