Premier Hodgman and the GST, a true baptism of fire

One can only wish our new Premier fortitude as he flies to Sydney this Sunday, to attend a crisis meeting of first ministers convened by Queensland Premier Campbell Newman as the chairperson.

The emergency meeting of the State and Territory governments was hurriedly arranged to counter the Federal Government’s dumping of schools and hospital funding from the Commonwealth to the states that was not announced by Treasurer Hockey last Tuesday, but buried in the small print of the 2014 Federal Budget.

By this harsh measure, Prime Minister Tony Abbott has broken asunder the convention of cooperation within the Coalition of Australian Governments (COAG).

Hodgman was not reckoning on having to deal with – what is for Tasmania – the mother of all hand grenades so soon after becoming Premier. That is, the issue of the current arrangement for the Goods and Services Tax (GST) that benefits Tasmania as a small and poor state.

Caught between a rock and a hard place, Hodgman will have (excuse the pun) a taxing time in protecting Tasmania’s fiscal interests, as Abbott seeks to force the states to take the blame for increasing GST in order to cover the $80 billion black hole brought upon by the federal (another pun!) hospital pass to the other COAG members.

Will Hodgman has few allies in COAG, as the larger states clamour for a larger share of the GST pie at the expense of Tasmania. Western Australia Premier Colin Barnett has been critical of this current arrangement, castigating Tasmania as a mendicant state. Worse still, when Opposition Leader, Tony Abbott agreed with the WA Premier. This will be our Premier’s largest hurdle to overcome.

Raising the GST is another unpleasant prospect for Tasmania, which has the highest proportion of citizens on government welfare in the nation. Tasmanians will expect their Premier to defend their interests, as they take big hits from the Hockey budget on cost of living increases as a result of the fuel indexation, medical co-payments, and much tougher eligibility criteria on age and disability pensions and the dole, and other measures in the federal budget.

An increase in GST could push into the abyss the aged, the sick, struggling families, the currently unemployed, and the list goes on.

Ironically Hodgman’s strongest ally is the South Australian Labor Premier Jay Weatherill, who has previously criticised Abbott and Barnett for wanting to change the current GST formula.

Will has no choice but to support Jay in fighting to maintain the status quo. Now that the Canberra is about to plunge into recession as a result of the massive blood-letting of public servants there, another ally might be the ACT Labor Chief Minister Katy Gallagher. Strange political bedfellows.

Abbott has also left a few other nasties for Hodgman. But these are time-bombs yet to explode, left by the Prime Minister’s Commission of Audit on issues such as the Bass Strait Subsidies.

Good luck, Will, Tasmania needs it!

Postscript: There are fast developing issues that Hodgman needs to be aware of; that could very well be to the detriment of Tasmania.

The Queensland Premier is reported to have flagged: “a push for all the states to receive half of the income tax that comes from their residents, which would go to schools and hospitals. Mr Abbott said he was happy the premiers were thinking about proposals they could put to the Federal Government, particularly on tax reform and improving the federation.” ( http://www.smh.com.au/federal-politics/political-news/states-pushing-ahead-with-emergency-meeting-on-budget-cuts-despite-efforts-from-tony-abbott-to-calm-anger )

While I don’t suggest a conspiracy theory, Campbell Newman’s proposal comes straight out of the Commission of Audit, and is equivalent to what the WA Premier was arguing for. In other words, the larger states recoup a larger share of the GST at the expense of Tasmania under the current allocation system.

Will Hodgman, beware.

Phil na Champassak owns The Madsen Boutique Hotel in Penguin and is a founding board member of the Cradle Coast Innovation Inc fostering enterprise facilitation. He is also a board member of the Cradle Coast Tourism Executive, the regional tourism organisation for NW Tasmania. Formerly a diplomat and DFAT policy analyst, Phil has worked on trade, aid, public diplomacy, consular, international security, and bilateral relations with PNG, the US, and NZ, and was most recently DFAT State Director for Tasmania. Prior to that Phil worked for the UN Development Programme in New York, West Africa and PNG. Phil also served as election monitor to the first elections in Cambodia (1992) and South Africa (1994) and was a peace monitor in Bougainville (2002). He has contributed to publications on human rights, election monitoring, and UN issues. Awarded in 2003 a Australian Service Medal. Phil was a guest of ABC Radio Richard Fidler’s ‘Conversations’ in November 2013.