Be afraid, very afraid, of Gillard Government’s GST Distribution Review

Sir Humphrey Appleby, the head of the civil service in the Yes, Prime Minister TV series which is returning as a stage play in Sydney, Melbourne and Canberra early next year, used to advise Prime Minister Jim Hacker that you ‘never commission an inquiry without knowing the outcome’.

Tasmanians should recall Sir Humphrey’s advice when thinking about the ‘GST Distribution Review’ commissioned by the Gillard Government. It’s been asked to consider ‘whether the distribution of the GST [among State and Territory Governments in accordance with the recommendations of the Commonwealth Grants Commission) … will ensure that Australia is best placed to respond to long-term trends and structural change in the economy while maintaining confidence in the financial relationships within the Australian Federation’. It is to provide an Interim Report to Federal Treasurer Wayne Swan by February next year, and a Final Report by August-September 2012.

The composition of the Panel which has been asked to undertake the Review makes it pretty clear what outcome the Federal Government expects. The Panel comprises two experienced political players – former New South Wales Liberal Premier Nick Greiner, and former Victorian Labor Premier John Brumby – and Bruce Carter, an accountant from Adelaide. I’ve no reason to doubt the integrity or professionalism of any of these three men. But Nick Greiner and John Brumby are, as one would expect, both on the record as favouring changes in the way revenues are carved up among the States and Territories that would favour New South Wales and Victoria: and even if Bruce Carter is in favour of retaining the present system (as one might expect a South Australian to be, although I have no knowledge of what his views are), he’s probably not going to be successful in persuading Nick Greiner and John Brumby to alter their long-established views.

Moreover, now that Queensland and Western Australia have now become what New South Wales and Victorian Premiers and Treasurers have long called ‘donor States’ – that is, States which get less by way of a share of the revenues from the GST than they would if it were distributed on an equal per capita basis – there’s now as many States in favour of changing the system as there are against it, and far more votes to be had in those States than in the States and Territories who would prefer to retain the existing system. Western Australian Treasurer Christian Porter last week regaled those attending the ‘Tax Forum’ in Canberra with demands for a larger share of the GST revenues, despite the fact that his State now has a per capita income 45% higher than the national average, a wider margin than at any other time in at least 35 years, and probably since Federation.

Peter Costello, as Treasurer, used to say that he would happily agree to implement any changes to the way in which the GST revenues are carved up among the States and Territories that they agreed among themselves – knowing that there was less chance of that happening than of Andrew Demetriou agreeing to letting a Tasmanian team play in the AFL. But Wayne Swan has never said that he would require unanimity among the States and Territories before making changes.

This should be an especially worrying prospect for Tasmania, given that we get a larger share of the GST pie, relative to our population, than any other jurisdiction except the Northern Territory, and that our share of the GST accounts for a larger proportion of the Tasmanian Government’s revenue than that of any other State. An adverse outcome from the GST Distribution Review would compound the budgetary pressures with which the current State Government is having to contend.

First published in The Examiner today.