Goods and Services Tax

The Hon. R.I. LUCAS (Treasurer) (14:17): I seek leave to make a ministerial statement, entitled SA government welcomes federal GST funding 'no worse off guarantee'.

Leave granted.

The Hon. R.I. LUCAS: The Marshall government has been a longstanding supporter of the current objective of horizontal fiscal equalisation, which is to provide states and territories with the capacity to provide services and the associated infrastructure at the same standard or, in other words, full equalisation. These arrangements have served the nation well for many decades by adjusting transfers to states and territories in response to changing economic conditions and jurisdictional specific circumstances.

In line with these views, the South Australian government's preferred position is that current GST distribution arrangements are retained. Whilst we would prefer to maintain the current GST arrangements, we acknowledge that the federal government and parliament have the ultimate power to change the GST distribution arrangements without the support of the states and territories.

When the federal government announced its intention to change the GST distribution arrangements, commitments were provided that no state or territory would be worse off. Under the assumptions made by the federal government in their modelling of the proposed changes, all states and territories would be better off over the transition period to 2026-27. However, this is only one of a number of many potential future scenarios.

Modelling undertaken by the states and territories shows that under different assumptions jurisdictions could be worse off as a result of the new arrangements, with an overall reduction in GST revenue compared with what would have been delivered under the current arrangements. It was these concerns that prompted the Board of Treasurers to write to the former federal treasurer seeking an explicit no worse off guarantee to be included as part of any proposed changes.

These concerns were reiterated at the October meeting of the Council on Federal Financial Relations. The proposed amendment bill now includes a cumulative no worse off guarantee for the states and territories over the transition period to 2026-27. South Australia welcomes this commitment. However, the potential impact of the changed revenue distribution arrangements are ongoing. The South Australian government's preferred position is that the guarantee should also be ongoing, consistent with the risks to the states and territories.

It is also important that the additional funding to be added to the GST pool and any payments required under the no worse off guarantee are not offset by a decrease in other funding to the states and territories. Yesterday, I provided a submission outlining these points to the Senate Economics Legislation Committee inquiry into the amendment bill currently being considered by the federal parliament and I have written to the federal Treasurer, Mr Josh Frydenberg, reinforcing these points.

There has been an ongoing convention that the GST distribution arrangements would not be changed unless there was support from all states and territories. This has been an important convention, which the South Australian government continues to support because it has served the nation and South Australia well. Given the federal government, on this occasion, has chosen a different course of action, then the inclusion of a no worse off guarantee is an essential element of the amendment bill for the states and territories.