Finance Minister Mathias Cormann has reaffirmed the Federal Government’s pledge to fix the broken GST system before the next election.
Speaking at the CCI budget breakfast on Monday, Cormann said it will then be up to voters to decide whether the Government had come up with the right ‘fix’.
He would not pre-empt what measures the Government would take, saying it would need to go through internal processes and state governments first.
The Productivity Commission’s report into Australia’s system of horizontal fiscal equalisation – which underpins GST distribution – was handed to the Federal Government on May 15.
Cormann said the GST top-up payments of $1.4 billion over the last three years were only ever intended as a short-term fix, after WA’s share started to fall.
“We had a suspicion the GST sharing arrangements did have a negative impact on national productivity and national growth,” he said on Monday on why the Government commissioned the review.
“We have always recognised WA’s share in the GST is unfair and unreasonable. I wasn’t surprised by what it (the commission) showed in its draft report but I won’t pre-empt what may or may not be in the final report.
“By the time we go to the next federal election I understand we will have dealt with this from a Government’s point of view in the appropriate fashion.
“It will be fixed by the time we get to the next election and people will be able to pass judgement on us, whether or not the way it’s been fixed is adequate.”
CCI Chief Economist Rick Newnham said the Productivity Commission backed CCI’s proposal to fix the GST in its draft findings released in October last year.
The draft report acknowledged CCI’s submission, which showed current GST arrangements were holding back the national economy.
Newnham said fixing the GST distribution had never been more important to the national economy than it was today.
“The reason is simple – it is in the national interest,” he said.
“This isn’t about ‘poor WA’. We are just the unfortunate state that has copped the brunt of a broken GST system that has not been updated since it was introduced almost two decades ago.
“The Productivity Commission has made it clear that without a change to the GST formula the national economy will suffer, holding back business investment and job creation for decades to come.
“No other state has ever had its GST share fall below 83 cents, while WA’s fell all the way to 30 cents.
“Long-term reform, as recommended by the Productivity Commission, is the only way to ensure all Australians get a fair go when it comes to GST distribution,” Newnham said.
“Every state should be expected to stand on its own two feet but no state can be left to fall behind, and that is exactly what a change to the GST carve up will ensure.”
While the Government now has access to the Productivity Commission report, WA businesses will have to wait ‘weeks’ until it is publicly released.
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