Doorstop – Jeff Joseph Reserve

Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia






Productivity Commission Review, WA’s share of the GST, Pre-Budget speculation, Adani, Tony Abbott, Khaled Sharrouf

MATHIAS CORMANN: Thank you for coming. The Australian Government recognises that WA’s share of the GST is unacceptably low. Federal Liberal Members and Senators from Western Australia have made strong representations for a number of years now in relation to WA’s unacceptably low share of GST. That is why the Australian Government, the Federal Government, over the last two years has made additional federal payments to Western Australia towards Western Australian infrastructure. $500 million each year of the previous two years, in recognition that WA’s share of the GST was unacceptably low and in effect to maintain WA’s share of the GST at 2014/15 levels as a short term solution, pending further considerations of more medium to long term reforms. 

Now what I can confirm today is firstly, that we will again make an additional payment to Western Australia this financial year and that is consistent with the request of the new State Government. It will be a payment of about $226 million towards WA infrastructure projects, which continues with our commitment over the past two years to maintain WA’s share of the GST effectively at 2014/15 levels. But beyond that we have also announced today that we have asked the Productivity Commission to review the impact of GST sharing arrangements, horizontal fiscal equalisation which underpins the GST sharing arrangements, on national productivity and growth. We want to ensure that all States have the right incentives to grow and develop their economy. We want to ensure that all States have the right incentives to pursue fiscal reforms, budget reforms both on the spending and the revenue side of their budgets. It is very much in the national interest, it is very much in the interest of every Australian, that the system which underpins Commonwealth State financial relations, supports productivity, is efficient and supports growth. Stronger growth nationally, because of the efforts taken in all jurisdictions across Australia, ultimately increases the size of the pie that is available to be distributed among other things through GST sharing arrangements.

Happy to take questions. 

QUESTION: Why is it you didn't mention a floor as part of this review? Is a floor being dropped from the terms of reference? Has that idea been dumped?  

MATHIAS CORMANN: What we have announced today is a Productivity Commission inquiry into the impact of GST sharing arrangements on national productivity and economic growth across Australia and how we can best ensure that all the states have the right incentives to grow and develop their economies and to pursue budget reforms in their jurisdictions. 

The issue of a floor has already been set out. The process on how a floor can be pursued in the future has already been set out by the Prime Minister. We have effectively already established a floor by maintaining through unilateral federal grants the GST share for WA at 2014/15 levels for the time being. 

As you would be aware under the current system WA’s share of the GST is expected to increase in future years. As the Prime Minister has set out and this is a matter that he has said will be further pursued through the Council of Australian Governments, as WA’s share of the GST improves, increases, his proposition is that we would introduce a floor as relevant thresholds have been exceeded. That is quite separate from what we have announced today in relation to the Productivity Commission review. The Productivity Commission review is very specifically to assess the impact of GST sharing arrangements on national productivity and economic growth.

QUESTION: Given that the GST share for Western Australia will increase in future years, what is the point of a Productivity Commission review?

MATHIAS CORMANN: We want to make sure that the system which underpins Commonwealth-State financial relations, supports productivity improvements, supports growth, is efficient. A range of issues have been raised with us in recent times. The arrangements that have been in place, I mean horizontal fiscal equalisation arrangements have been in place since Federation, the specific arrangements in relation to GST sharing arrangements were agreed to by all States and Territories and the Commonwealth back in 2000. This has been in place now for a period. Nobody would have predicted back in 2000 that any State’s share of the GST under the GST sharing arrangements would fall as low as what it has. There are a range of reasons that various stakeholders have pointed to and we agree that it is sensible for the Productivity Commission to review specifically how the current GST sharing arrangements, how the horizontal fiscal equalisation arrangements, impact on national productivity, impact on national growth. Because ultimately it is in our interest as a country and it is in the interest of every Australian that every state maximises their growth opportunities, has the right incentives to pursue productivity and economic growth improvements and we want to ensure that is the case. 

QUESTION: Do you still need the agreement of all States if you want to make any changes to the GST because you are not going to get that are you? I mean Tasmania has already ruled out any changes this morning.

MATHIAS CORMANN: The GST is a State’s tax. It was introduced as a revenue source for the States and Territories and these are matters that are considered through the Council of Australian Governments. What we have announced today is the fact that we have asked the Productivity Commission, the National Productivity Commission to do some very important work in assessing the impact of GST sharing arrangements on national productivity and economic growth. We cannot pre-empt what the findings of that inquiry will be. Subject to the findings of that inquiry there will be further considerations following on from that, which will lead to certain outcomes at that point in time. We cannot pre-empt what the Productivity Commission will find and what the Productivity Commission may ultimately recommend. 

QUESTION: The concerns from WA have been there for some time, what has changed? Has it been the most recent distribution, I mean the fact that the WA share has dropped by so much? 

MATHIAS CORMANN: Well it has actually increased this year. It has increased from 30 cents in the dollar or there abouts to 34 cents in the dollar, though the expectation was that it would have increased to 38 cents in the dollar. The Australian Government, the Federal Government has been on the record for some time as acknowledging that the WA share of the GST is unacceptably low. That is why over the last two financial years we have made so called GST top up payments to Western Australia, supporting specific infrastructure projects here in Western Australia. That is a payment that we will again be making this year. But that was always just a short term initiative, which we always said needed to be complemented by more medium to long term reform efforts. The Productivity Commission work is going to be an important additional input into that consideration. What the Prime Minister has set out here in Western Australia back in August last year is an important part of that process too, exploring with other States and Territories the establishment of a floor, once Western Australia has again exceeded certain levels.

QUESTION: Are we just playing for time here? I mean, it is a nine month inquiry, are we just hoping that the inquiry runs its course and by that time the lag has come around and WA is once again receiving a better share?

MATHIAS CORMANN: I completely reject that proposition. For the Productivity Commission to do this work seriously, it has to take some time. We actually believe that the end of January 2018 is as fast as you can sensibly conduct an inquiry of this nature, and of this magnitude and complexity. Bearing in mind that we are committed to extensive consultation, including with all of the States, including the State of Western Australia. We expect that a lot of stakeholders will want to participate. But the end of January 2018 is not that far away, and it is certainly well before the next Federal Election. So I believe that there will be ample opportunity in the lead up to the next Federal Election to properly flesh these issues out.

QUESTION: Do you think that we could actually see changes before the 2018-19 GST distribution under this review?

MATHIAS CORMANN: The Federal Government has already made a series of changes. We made some adjustments, for example, to the treatment of certain resource royalties and that is a matter of public record. That was one of the first things that we did upon coming into government. We have also committed to more than a billion dollars in top up payments, including $226 million this upcoming financial year. This is the next step in the process. I do not want to pre-empt what the Productivity Commission findings will be. I cannot pre-empt what the Productivity Commission findings will be. A whole series of very credible people have raised a series of concerns with us in terms of how the GST sharing arrangements are seen to be impacting on States’ incentive to grow and develop their economy to their full potential, for example. These are all matters that we believe ought to be properly considered. The Productivity Commission is the best possible body to do this credibly and with great integrity. Ultimately, every Australian will want to know that every State around Australia is making the best possible effort to grow and develop their economy, to pursue sensible and necessary reforms to their budgets on the spending and revenue sides of their budgets. These are all matters that will be fleshed out through this process.

QUESTION: Senator, on another issue, what are your thoughts on allowing first home buyers to direct pre-tax income towards a deposit?

MATHIAS CORMANN: Look, I have seen the latest bit of pre-Budget speculation. The Budget will be delivered on the second Tuesday in May, the ninth of May. Not long to go. Just over a week, so  I will refer you to the Treasurer’s speech at 7.30pm on the ninth of May.

QUESTION: What impact would it have on inflation in the housing market? 

MATHIAS CORMANN: You are asking me to comment on pre-Budget speculation. I will resist the temptation and I refer you to the Treasurer’s Budget speech at 7.30pm on the ninth of May.

QUESTION: On the Adani Project, Labor is backtracking from its support of the project. What is your reaction to this?

MATHIAS CORMANN: Labor, federally, is just completely reckless and irresponsible these days. There is nothing that surprises me when it comes to Bill Shorten’s anti-business, anti-growth, anti-success agenda. It is a very important project for Australia, it is a very important project in the context of our growth and job opportunities into the future. Bill Shorten talks a lot about jobs, but my message to Bill Shorten is that jobs do not grow on trees. Jobs are created by successful, profitable businesses and by businesses that are able to attract investment into Australia. Every time that there is an opportunity to attract more investment, to generate stronger growth, to do more trade with countries in our region, Bill Shorten seems to be against it.

QUESTION: Given the importance of that project, should Australian taxpayers subsidise a rail line?

MATHIAS CORMANN: Again, I am not going to go into these sorts of speculative questions. We are going to have a Budget in ten days, so you will see there the latest instalment of our national economic plan for jobs and growth and I refer you to that.

QUESTION: Is that good debt or bad debt?

MATHIAS CORMANN: You are now asking me to provide commentary on some speculation in relation to some commentary, I refer you to the Budget on the second Tuesday in May.

QUESTION: The $200 million infrastructure top up you are talking up for WA, is that attached to any program or can WA Labor spend that as they wish?

MATHIAS CORMANN: Consistent with what we have done in the past, in relation to these top up payments, there is an engagement between the Commonwealth Government, the Federal Government and the State Government in relation to which projects these top up payments would support. But that is very much done on a consensus basis and I expect that that will be the case in relation to this $226 million contribution.

QUESTION: So would you be open to the idea of WA Labor spending that on their rail program?

MATHIAS CORMANN: I am not going to conduct the discussions between the Federal and State Governments here, through the media, with the greatest of respect.

QUESTION: Is it appropriate for a major bank to refuse finance for a coal project like the Galilee Basin?

MATHIAS CORMANN: Banks make their decisions based on their own reasons, it is a free world. It is disappointing when a major project like this significant project, which is very important for Queensland in particular and nationally important. I understand that the project did not actually seek finance from Westpac, so I do not quite understand where that commentary came from.

QUESTION: Tony Abbott is here this week, to make a speech about the Enlightenment. Are you happy to see Tony here making speeches to members of the WA Liberal Party?

MATHIAS CORMANN: Well, I will sadly miss him. I will be leaving back for Canberra this afternoon. It is the last week before the Budget and the Treasurer and I will be putting our last touches to the Budget. So, I am very sad to miss out on catching up with Tony this week. But Western Australians will, as always, make him feel very welcome I am sure.

QUESTION: So no ‘man to man’ talk?

MATHIAS CORMANN: I have had lots of conversations with Tony over many years and I look forward to having many more with him.

QUESTION: The latest Khaled Sharrouf video, an Australian terrorist fighting for ISIS, shows his son dressed in a suicide vest and wielding a knife and gun. Do you have any thoughts on that? Have you seen it?

MATHIAS CORMANN: It has been brought to my attention. Look, it is obviously shocking. Why any parent would think it is a good idea to take a child from Australia into a warzone is beyond me. You have to feel for the child. We are very empathetic in terms of the circumstances that the child sadly finds itself in, courtesy of decisions made by the parents. But, I just cannot comprehend why any parent would think that it is a good idea to take a child into a warzone.

QUESTION: Sorry, one last question on the GST. Is there going to be an interim report on that and when would that be?

MATHIAS CORMANN: What we have set out in our announcement is that the Productivity Commission is required to provide its final report by the 31st of January 2018. What other arrangements the Productivity Commission might make between now and then is going to be a matter for them.

Alright, thank you very much.


Senator the Hon Mathias Cormann, Minister for Finance, Perth