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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2021-09-08 Daily Xml
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State Finances

The Hon. D.G.E. HOOD (14:34): My question is to the Treasurer. Can the Treasurer indicate the government's view on the very healthy budget surplus being reported by the Western Australian government today?

The Hon. R.I. LUCAS (Treasurer) (14:34): I thank the member for the question in relation to the important issues of state and federal financial relations and, in particular, the state of finances not just in Western Australia but indeed in all states and territories. There have been a number of claims made over recent weeks and months that in some way either the Premier or I as Treasurer signed up to the new GST deal arrangements. I want to make it quite clear, as I did in the estimates committees, that there was no deal signed by either the Premier or me as Treasurer in relation to the new position adopted by the commonwealth government in 2018 in terms of GST distribution.

At that time, and since then I have adopted a very public position through the Board of Treasurers but also publicly that we strongly supported the retention of the pre-existing GST distribution arrangements between the states and territories. Put simply, what that meant was that if one state like Western Australia enjoyed the enormous benefit of high iron ore prices and therefore massive increases of royalties into their state Treasury, the GST formula, with a lag over a period of time, reduces their share of the GST. So they have massive increases in royalties, the GST, after a lag, reduces: it's a self-correcting or compensating mechanism which allows an even distribution of the GST to counterbalance the fortunate circumstances that a state or territory might find itself in.

Our opposition at the time, and still is, was that a state like Western Australia is enjoying the extra billions of dollars of high iron ore prices and therefore through royalties, and at the same time now has this federally-protected or commonwealth-protected GST position which means that at a time of a global pandemic, when the federal government and every other state and territory government is running massive deficits, and massively increasing their debt, Western Australia is in the fortunate position of reporting huge surpluses and having large amounts of money that they are able to spend on government services. Our position has always been that that was unfair. The original position of the GST distribution was a fair principle and policy and should be continued.

As I said, we did not sign any deal changing it. When the commonwealth government indicated that it intended to proceed with legislation to change the deal, all of us on the Board of Treasurers, with the exception of Western Australia—although, frankly, I think Western Australia in the end agreed because it didn't impact them—pursued a position of trying to get a permanent protection, that if the commonwealth government wanted to give extra funding to Western Australia, there should be a no-disadvantage clause for all the other states and territories.

That was the preferred position of South Australia and the other states and territories. Ultimately, the federal government was only prepared to write into the legislation a protection through to 2026-27, which was much, much better than what was originally contemplated—and certainly subsequent events have demonstrated the merit of that particular position—and a Productivity Commission review in 2026-27 as well.

It is still the state government's view that the pre-existing position for GST distribution should be returned to, but the commonwealth government has indicated that it is unprepared to do that. If the commonwealth government is unprepared to do that, it is South Australia's position, and the other states and territories, that there should be a permanent no-disadvantage clause for the states and territories in terms of the GST distribution funded by the commonwealth government and not funded by the other governments.

The final point I make is that at the time I made public statements opposing this position of the commonwealth. I wrote to every Liberal federal MP. What I will say is that this deal was actually voted and supported by the federal Labor Party through the federal parliament. It was not opposed, it was supported by the federal Labor Party, so there was unanimity between the federal Liberal government and the federal Labor opposition. I certainly do not recall the state Labor Party in South Australia doing as I did, and indicating opposition to the position that the federal Labor Party was adopting on this particular position because of the position of disadvantage it would place other states in, such as South Australia.

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