Goods and Services Tax

The Hon. F. PANGALLO (16:16): I seek leave to make a brief explanation before asking the Treasurer a question about the GST.

Leave granted.

The Hon. F. PANGALLO: Renowned Australian economist Saul Eslake was quoted in the national broadsheet this morning warning that changes to the GST distribution would risk American-style inequality between states. This was on the back of growing speculation that the Prime Minister will later this week announce a new funding model for distributing the GST between the states. Under the new model all states except Western Australia would lose significant GST funding. In SA's case, we stand to lose a massive $557 million a year in GST funding.

Mr Eslake warned that, while transitional funding was expected to soften the blow, at least in the short to medium term, there was no guarantee that top-up funding would be sustained and that inequalities between Australians, based on where we live, would deepen. Mr Eslake stated:

I have a lot of concern. One is the abandonment on the principle that has been around since 1936: that no matter which state or territory they live in, Australians are entitled to similar standards of public services in exchange for similar levels of state taxation.

This principle is one of the reasons why the gaps in living standards between Tasmania and Western Australia, large though they are, are a lot less than the gaps between Mississippi and Massachusetts.

Mr Eslake went on further to say that, if legislation was required to change the way the Grants Commission distributed the GST, coalition senators from states and territories other than Western Australia should cross the floor to defeat it—a strong test indeed between state allegiances over political leanings. My questions to the Treasurer are:

1. Has the Treasurer sought guarantees from the federal government that South Australia will not lose more than $550 million a year in GST funding?

2. Has the Treasurer been briefed yet on the impact that the new GST funding model will have on the state?

3. What assurances has the state government received that future commonwealth governments will not renege on future GST funding?

4. What impact will this funding deficit have on the state budget?

The Hon. R.I. LUCAS (Treasurer) (16:19): I am delighted to respond to the Hon. Mr Pangallo's question because, clearly, he and I and the government are on exactly the same team: we are on team South Australia in relation to the GST. The Hon. Mr Pangallo can feel very comfortable with the fact that this government, prior to the election and since the election, has publicly and unashamedly put the view that we will put South Australia first in relation to the GST funding deal. We have been long-time supporters of the current arrangements. Indeed, as I have indicated to this house before, many years ago I had the good fortune, together with John Olsen, to sit down at the table with former prime minister John Howard and former treasurer Peter Costello and sign the original GST funding intergovernmental agreement.

It has served South Australia well. We acknowledge the fact that the former Labor government supported the current arrangements, but, as is their wont, they strut the public stage in relation to trying to change the federal government's position on all issues, whether it be this, health funding, or whatever it is. As we have indicated on a number of occasions, we have adopted the grown-up, adult way of going about negotiations and discussions. We have made quite clear both publicly and privately what our position is as a state government. We will not be accepting any deal which takes $557 million or, indeed, any similar sum from South Australia.

South Australians can be assured that the South Australian government will continue to stand up for South Australia. As we have indicated, whether it is a federal Labor government or a federal Liberal government, we will put the interests of South Australia first. In relation to the GST deal, there is a no more important issue for our future financial arrangements in South Australia than to have a good resolution to GST deal.

The only other thing I would say in relation to this is we acknowledge that, thus far, we have had very productive and respectful discussions with our federal colleagues, including between the Prime Minister and the Premier, and I have had discussions with the federal Treasurer. Indeed, we have shared interests with some of our interstate colleagues as well, who hold treasurer positions in other states. There have been ongoing negotiations and discussions in this particular area. Whenever the federal government gives an indication of either its decision or preferred position, we will be in a position to put publicly our position on whatever the federal government might indicate.

The final point I will make is that I would not always believe what I read in the newspapers. With great respect to someone who has a background in journalism and media, whilst often it can have kernels of truth in it, occasionally it is far from the mark, so let's wait and see. As I said, we believe we have had productive discussions, and time will tell when we see a final decision from the federal government.