Press Conference - GST

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

The Hon. Christian Porter MP
Federal Member for Pearce

The Hon. Michael Keenan MP
Minister Human Services
Minister Assisting the Prime Minister for Digital Transformation 
Federal Member for Stirling


Date: Thursday, 5 July 2018


MATHIAS CORMANN: Good morning everyone. It is great to be here with a number of my good friends and colleagues in the Federal Parliament representing the West Australian Liberal Party in our Federal Parliament. 

As WA Liberal Members of Parliament we have long been of the view that the GST sharing arrangements were unfair to Western Australia, unsustainable in a Federation and needed to be fixed. 

This is a problem that has long been in the too hard basket, it is a problem that started under the period of the Gillard Government. It was our Government which first secured additional federal GST top-up payments towards infrastructure projects here in Western Australia in 2015-16, helping to stop the drop in GST at that time. It is this WA Liberal team which has helped secure a better, fairer deal for Western Australia in a way that is good for our country and which is also designed in a way which leaves every other State better off. 

So this is a great day for Western Australia, it is a great day for Australia. 

The alternative proposal, the proposal that Bill Shorten has put forward was essentially just a copy of the top-up methodology that we have been pursuing for a number of years. In recent years, we have been making about $1.4 billion in top-up payments to Western Australia, this will now follow with a further $1.4 billion worth of top-up payments in untied federal funding to Western Australia for two years from 2019-20. 

By 2022-23, we will lock in a new floor of 70 cents in the dollar, having increased WA’s share of the GST to 70 cents in the dollar from 1 July 2019, increasing that floor to 75 cents in the dollar by 2024-25, changing the GST distribution formula to ensure that there is a fairer GST sharing arrangement nationally, including and in particular for Western Australia, while also providing additional federal payments into the GST pool, which ensures that every other State is better off. That was our commitment, to get a better, fairer deal for Western Australia, to get a better deal for our national economy and to do so in a way that was also fair to every other State around Australia, because we do recognise that it is important in a federation for stronger States to provide appropriate levels of support to States that are less fiscally strong. However, the circumstance as we faced in Western Australia, where the share of GST went below 30 cents in the dollar was just not acceptable, was not sustainable and needed to be addressed. Happy to ask Christian Porter as a former WA Treasurer to make some remarks as well as Michael Keenan as a Federal Minister. All WA Liberal Members and Senators have worked very hard to help secure this outcome today, it was a real team effort. Julie Bishop, Michaelia Cash, Christian Porter, Michael Keenan, Ken Wyatt and all of the Liberal Members and Senators representing Western Australia in Canberra have worked very hard to secure this outcome so it is a very satisfying day for us.

CHRISTIAN PORTER: Mathias, thank you and thank you to all my friends and colleagues. I just want to make three very quick points. The first is that this has been a long time coming and in a way, the endurance has been shown mostly by the people of Western Australia. I worked on this for four years in State Government and in six years after that, several years now as a Minister in Cabinet and were it not for the endurance, the faith of the West Australian people that they have had in us as a team and their ability to advocate and campaign, the resolution that we are reaching today never would have happened. I can say I recall times where I thought we were getting close as a State Treasurer. When Julia Gillard unequivocally promised that she had established the Brumby Review to bring a fairer share of distribution to WA and a fairer distribution system, I had genuine faith that that was done in good faith and would produce a result. When the Review came out Julia Gillard’s Government flat out refused to do anything. It was clear that the Review was just another exercise in kicking the can down the road. I recall Kevin Rudd in 2007 promising $100 million a year to WA to compensate for lost GST. We never saw a single cent. I recall Wayne Swan, in 2010 promising a $2 billion infrastructure fund to compensate for lost GST, we never saw a cent. So the first point I would simply like to make is today is the day of resolution. We have actually resolved this incredibly difficult, long-standing problem. It has been exhausting for the people of WA, for all of us, but we are here. So thank you to everyone who has placed faith in us as a Government that we could actually fix this problem. The second thing is that it is an enduring resolution, this is a resolution which can stick because it is fair to each and every State, it is clearly much fairer to WA, but not nearly does it fix a floor for WA and for all States into the future, it is an enduring resolution because it fixes what was broken in the formula. What was broken in the formula, is that we were equalising from time to time, according to the standards of outliers who had experienced extraordinary economic times and what we have done is picked up on a recommendation which was hinted at, though not specifically made by the Productivity Commission, which was to equalise to a slightly less severe standard and we have chosen the highest standard, that is exhibited from time to time by either New South Wales or Victoria. The third point I would like to make is that the people of Western Australia and in every State and Territory now have a clear choice, between the Government that is fixing the GST distribution in a fair and equitable way that sees no State worse off, that sees a fairer share for WA and that fixes a formula which was fundamentally inefficient and restricting the economic prospects of the nation as a whole. That is the enduring fix that we have presented to the Australian people and to West Australians. What have Labor put on the table? They specifically said, when the interim report came out, that they would not ever change the formula. When Chris Bowen was asked this morning whether or not he thought the formula that we have proposed and which will be instituted, which is to equalise to the highest standard of New South Wales or Victoria is fairer, he said he did not know and that he would have to have a better look at it. It has been a long time coming, thanks everyone for their assistance. It is quite an emotional day for all of us. It is an enduring resolution, we have actually managed to solve the most difficult problem in Federal, State financial relations probably in 100 years and the alternative is very clear, which is no resolution.

MICHAEL KEENAN: Well thank you Christian, Mathias, Michaelia, all of my colleagues, it is great to be here for what is a great day for Western Australia. For over a decade, the fact that we have been sending large chunks of our GST outside of the State has been a very significant problem for the budgetary situation here in WA. It has been a very significant problem that everyone I am standing with here today has been working on in Canberra for years to get a result for our State. Now the changes that have been announced by the Federal Government fix a problem with the distribution of the GST, it obviously fixes the very difficult situation that Western Australia has found itself in, but very importantly, it is a national economic reform that will allow States to make sensible decisions about their future economic development and not send the majority of that money outside of their State. Whether that be Western Australia, or whether that be any other part of the country, this will encourage States to make sensible decisions about their financial future. Now a lot of people for a long time have recognised that this has been a very serious problem, but only the people here today have been the ones that have ever delivered anything for WA. We were the ones that made arguments that got the top-up payments flowing back into Western Australia to help us with our Budget, we are the ones who have been making the arguments in Canberra that this is something that just needs to be fixed. I know that there has been a lot of frustration in the community about this, but we have been working away on this for years and now you can see the results of that labour is that Western Australia will now be treated in a much fairer way, we will be keeping a lot more of the GST payments that Western Australians make here in this State, so we can have better schools, better roads and a better lifestyle for everyone in Western Australia. So there is a very clear choice coming up at the Federal Election in May and every Western Australian Labor MP needs to go on the record, do they support Western Australia? Do they support the changes that are being made, that are a fairer system for us but also a fairer system for the nation, or will they continue to squib the argument and not stand up for the state that they represent?

MATHIAS CORMANN: Happy to take questions.

QUESTION: Senator Cormann, there is only so much money in the Federal Budget, you are putting in about a billion dollars a year to top-up all these States to make sure that everyone is happy, no one complains. What do you cut?

MATHIAS CORMANN: This is what you can do when you manage the economy better and you manage the Budget better. When we came into Government after six years of disastrous Labor Government, our economy was weakening, unemployment was rising and the Budget position was deteriorating at a rapid rate. A $3 billion a week deterioration in the Budget bottom line in the 11 weeks from Labor’s last Budget in Government to the pre-election Economic and Fiscal Outlook. If you look at our Budget now, we are projected to return to balance by 2019-20, to get into a larger surplus by 2020-21, to remain in surplus all the way over the medium term, to exceed a surplus of one percent as a share of GDP by 2026-27, to pay off about $30 billion worth of Government net debt over the forward estimates, to pay off about $232 billion worth of Government net debt over the next decade and by 2026-27, when this eight year plan to reform GST sharing arrangements comes into full effect, we are projected to exceed a surplus of one per cent as a share of GDP. So what I say to the people of Australia and what I say to the people of Western Australia is that when you manage the economy better, when you manage the Budget better, you are able to pursue necessary and important reforms like this one. If Labor came back into Government at the next election, they would take us back to a weakening economy, rising unemployment and a rapidly deteriorating Budget position, because they have already said they want to increase taxes in Australia by more than $200 billion over the next decade. Increasing the tax burden on the economy would lead to less investment, would hurt families, would cost jobs, which would lead to a worse Budget position. You know why our Budget is in a stronger position today? You know what one of the key reasons is of our stronger Budget position? It is the fact that we have created more than a million new jobs in the economy, more than 400,000 jobs were created in the economy in 2017. You know what that does? More income tax revenue and less expenditure on welfare payments. That is the reason why our Budget is getting into a stronger position and that is why we are able to pursue important reforms like this one, delivering a fairer GST deal for Western Australia, a better deal for the country in terms of incentivising stronger growth and more job creation and also a deal that leaves every other state better off.

QUESTION: That aside, there is no legislation though, so how do you guarantee that a future Labor Government for example does not undo this?

MATHIAS CORMANN: The first point to make is that this is our plan, we have committed to it, this represents the proposal of the Turnbull Government to all of the States. What we are proposing to do, by way of next steps, is to allow the States to work through the detail. There will be a Treasurers meeting in the next little while and at some point we would like to enshrine all of this into a formal intergovernmental agreement. That will provide the appropriate level of certainty for all of the States that the additional funding that would be available to them through this arrangement would be locked in to a formal agreement between the Commonwealth and all of the States and Territories. So we call on all of the States and Territories, yes, work your way through the detail, but we have put forward a reform proposal which helps to address an inequity for Western Australia, which helps to address it in a way that leaves every other State and Territory better off. When it is all said and done, what we would like to see is that every State and Territory will sign on with the Commonwealth into a formal agreement that locks all of this in.

QUESTION: Will you expect the States to pick up more of the tab for health and education costs now,  given you are giving them this money?

MATHIAS CORMANN: No. The increase in federal payments into the GST pool to ensure that all of the States are better off as we are reforming GST sharing arrangements for Western Australia is in addition, it is not going to be offset by reductions in Federal payments to the States in other areas.

QUESTION: Are you sorry that you allowed WA to be ripped off for so many years while you were in Government?

MATHIAS CORMANN: I completely reject that. The only team that has ever done anything about addressing the unfairness of the GST sharing arrangements for Western Australia is the WA Liberal Party team. As I have said in my introduction, this is a problem that started in earnest in the period of the previous Labor Government. The previous Labor Government initiated a review and then explicitly said they would do nothing. When we came into Government, the situation we inherited was the WA share of the GST heading for less than 30 cents in the dollar. You know what we did? This team? You know what we secured? We secured a top-up payment for Western Australia, towards Western Australian infrastructure from the Federal Government which stopped the drop in GST. Now we always said that that was a short-term interim measure, pending further work on medium to long term reform. We were focused on securing medium to long term reform, where our opponents, the Labor Party, explicitly ruled out a medium to long term reform. All Bill Shorten has ever done in relation to this, he has copied our Federal payment top-up methodology, in his shifty way, he is known for his shifty ways, he tried to rebrand it, starting in 2019-20, when the WA share of the GST would already have been elevated under the current system. He sought to rebrand it into something it was not. He sought to present it as a permanent structural change, which it is not and he explicitly ruled out any changes to the distribution formula. What we are putting on the table now is immediate measures to lift WA’s share of the GST to 70 cents in the dollar from 1 July 2019 through further top-up payments, locking in a floor at 70 cents in the dollar as soon as WA exceeds that level under the revised arrangements, which will be by 2022-23 under our current projections. Lock in a floor of 75 cents in the dollar by 2024-25 and then also change the distribution formula by equalising to the higher of New South Wales or Victoria, rather than to the highest State, which is where the volatility has been coming from in recent years. So we are pursuing genuine reform. This is not easy. This is not easy in the context where you want to ensure that no other State is worse off, wanting to make sure that every other state can be better off. It clearly was always in the too hard basket for the Labor Party either in Government or in Opposition. This team, the team that is standing around me and all of the others that have not been able to make it here today, we have worked very hard to secure this outcome and we are very satisfied for the people of Western Australia that this has been able to be secured.

CHRISTIAN PORTER: Can I just say in answer to that question, that is the equivalent of a journalist waiting at the top of Mount Everest for Sir Edmund Hillary, shoving the microphone in his face and going mate aren’t you upset you were not here a bit earlier. Like if it were that easy, if it were that easy, people would have done it earlier. This was intensely difficult, to find a binding resolution that would make no other State better off, that made our economy stronger nationally and that fixed the unfairness for WA. It has been like climbing Everest and we all probably would have liked to of got there a few weeks, maybe a few months earlier, but I got to tell you it was bloody difficult and that is why no-one else has been able to achieve it. 

QUESTION: There is conflict in who is going to take credit for this. The McGowan Government already put their hand up and said (inaudible).

MATHIAS CORMANN: Well, I have to say, this is a moment to be bipartisan. We have engaged with the McGowan Government. I have personally engaged with the Premier. I have personally engaged with the State Treasurer and I have engaged with Mike Nahan and Dean Nalder from the Opposition. This is an issue where Team Western Australia had to find a way forward and whether you are Labor or the Liberal out of Western Australia nationally, that was not entirely straightforward to sort out to say it softly. What we are saying to the Premier now, what we are saying to the Treasurer here in Western Australia is, you now need to ensure that Bill Shorten and Chris Bowen do the right thing here. We now need to secure this very important reform on a bipartisan foundation. We have done our bit. The Turnbull Government has put forward a proposal that is fair for WA, that is good for the country and is fair to every other State. We now would like to see that Premier McGowan and Treasurer Wyatt will do what they can to help secure the necessary support from State Labor Governments and from the Federal Labor Opposition.

QUESTION: How would you summarise the McGowan Government’s role in getting to this point?

MATHIAS CORMANN: Well look, we are the Australian Government. We engage with the elected Government of the day as we have done on this occasion. That is what the Australian people would expect us to do and that is what we have done. There are a lot of people that have played a role and I should also say that the role played by the Chamber of Commerce and Industry here in Western Australia has been very, very influential. They have done a very good job in helping to put substance behind the policy arguments that helped to inform the work of the Productivity Commission and helped to inform the work that we did as Western Australian Liberal Federal representatives in Canberra. But, in the end, this is something that needed to be resolved for Western Australia as a State. There is a time for fighting each other at elections and then there is a time to get things done. Right now is a time to get things done. We believe that we have put forward a reform proposal on the GST which is very good for WA, which is good for the country and which leaves every other State better off. What I would say in relation to the McGowan Government, work with us to help secure this at a national level by locking in the Federal Opposition.

CHRISTIAN PORTER: You know what Kennedy, John F. Kennedy said that “Success has a thousand fathers and failure is an orphan.” Right. So you will see a thousand, a hundred thousand fathers to this, but we all know what we did. But what was done was for the people of WA. Like this is done for the future of the State, so that we can all play a part in that as something that we are immensely proud of, but it is for Western Australians, for all of us.

QUESTION: And in regards to the timing of today’s announcement and this plan, how much of it had to do with the fact that there is a federal election looming?

MATHIAS CORMANN: Nothing, because when we initiated the Productivity Commission Review, that was always on the timetable where that report was released in the middle of May. When we received the report we thought it was important that we should be able to release the report together with a Government response. If we had not released it when we did, people would have thought we were trying to hide something to try and help ourselves with the by-elections in various parts of Australia, which would not have been the case either. We are making decisions based on what is right and we are announcing them when we are ready to announce them. This was the right time to announce them. When it comes to the next Federal Election I do not think it would surprise anyone that we intend to go to the next Federal Election with our record of achievement when it comes to delivering stronger growth, more jobs and helping to resolve difficult issues like this one. We will be putting our plans forward for the future, for lower taxes, stronger growth, more jobs, higher wages on the back of stronger growth and more jobs, as opposed to the alternative, the Labor alternative, Bill Shorten, who is going to the next election promising higher taxes on families, higher taxes on business, higher taxes on retirees, higher taxes on electricity, higher taxes on everyone and everything that moves, which will hurt the economy, hurt families and cost jobs. So, that will be the contest at the next election and people across Western Australia, people across Australia will have a clear choice. Do you want lower taxes, stronger growth, more jobs and higher wages under us, or do you want higher taxes, less investment, lower growth, fewer jobs, higher unemployment and lower wages under Bill Shorten? That will be the choice for the Australian people. That will be the choice for people across seats here in Western Australia.

QUESTION: Sorry just to follow up to that, can I ask Christian Porter and Michael Keenan, it is no secret that you are both facing a fight at the next election in your electorates. Does this package allow you now some confidence to go and fight the coming Federal Election and hold your seats?

CHRISTIAN PORTER: Sure. I mean, I talk to people, I have talked to people in my electorate since I have been elected about this, to people in WA for four years prior to that. Every West Australian knows the problem, knows the unfairness of the system, knows why it is bad for the national economy. They have wanted to see it fixed, no one has been able to fix it and Michael and I and our team behind us have played a big role in fixing it. What is the alternative to that? A Federal Labor Party who say they will never change the formula and Federal Labor Members here in WA who are too shy to stand up for their State. So, I will go on an election on that type of basis in Pearce every single day of the week.

QUESTION: So you think this package could help you hold your seat?

CHRISTIAN PORTER: I think this package is better for the people who live and vote in my seat and everything else that has ever been on offer and than anything else that Labor would ever offer. Michael.

MICHAEL KEENAN: Well, I won my seat off the Labor Party and I have fought for it hard at every subsequent election and the election next year will be exactly the same. I always expect that I am going to need to fight hard for it, but I am very happy to talk about our position on the GST, what we have delivered for Western Australia, as opposed to the Labor Party that just can identify the problem but does absolutely nothing to achieve the result that we need. So, the battle lines are very clear here and I think this will be a key battle line in Stirling, I think it will be a key battle line in Pearce. I think it will be a key battle line in Canning and Hasluck and everywhere else that will be fighting for our seats, because the policy proposal that we have got is a fix to the pain that Western Australia has been under and the policy approach that Labor has is just to ignore the problem and essentially to campaign on it, that they are not changing the formula in other parts of the country.

MATHIAS CORMANN: Well, just on this point, Labor has the opportunity to follow our lead and come in behind the full proposal that we have put forward and to fight us with their plan for higher taxes, less investment, lower growth, fewer jobs and lower wages instead. So, if Labor wants to come out what today or in the next few days and say that “Yes, we recognise the Turnbull Government plan to fix the GST sharing arrangement will make it fairer for WA, better for the country and in a way that is fair and better for every other State,” if they want to come in and support it then that means it is not an issue at the next election. It means that we can just fight on our respective plans, lower taxes under us, higher taxes under Labor.

QUESTION: This resolution, does it rule out the Coalition Government broadening the GST base or increasing the rate of GST?

MATHIAS CORMANN: There is no such plan. There is no such suggestion on the table. That is not something that we are pursuing.

QUESTION: Christian Porter, you said that this is an emotional day for these people here. There are people in the electorate of Perth that would have only ever marked their ballot for the Liberal Party. What does it say that you are not running in that seat or in Fremantle? What does it say to those people about how much the Liberal Party cares about this State?

CHRISTIAN PORTER: Well, I think that how much we care about this State is evidenced by what we have managed to achieve for this State today and I would simply say to the people in Perth and Fremantle “Hang on for the next election” because we will be there and the choice on the GST will be there. You know, I would say “Hello Perth, hello Cowan,” I would say “Pearce, we did it for you” and that is what Michael will be saying in Stirling.

MATHIAS CORMANN: Alright, thank you very much guys.