Tony Abbott has distanced himself from a call by his finance minister for the carve-up of the goods and services tax (GST) to be frozen to prevent Western Australia’s share falling below 30% of what is paid by consumers in that state.
Abbott said he had “considerable sympathy for the position of the West Australian government” but the argument had to be sorted out by the states – a stance likely to ensure no change to the current arrangements.
“The states and territories really should sort this out amongst themselves ... Collectively they should make a decision and being the grown-up adult governments that they are. That’s what I expect them to do,” Abbott told reporters in Canberra.
In a weekend article the finance minister, Mathias Cormann, argued that while the broader GST arrangements were being debated, the state-by-state carve-up should be frozen at this year’s level.
“This would mean a GST share of 37.6% for WA instead of just 30 ... and importantly, this would still deliver sizeable increases in GST revenue for every other state and territory this upcoming financial year. Every other state and territory would be better off next year than this year,” Cormann wrote.
The $57bn annual GST receipts are divided as part of a formula to ensure all states can provide equal services, but WA argues no state has previously received back less than 80% of what its consumers pay in GST, whereas under the latest division, revealed last week, WA’s share would drop to just below 30%.
Asked whether he backed Cormann’s plan, Abbott repeatedly said it was for the states to sort out between themselves like adults.
But no state or territory backs WA’s push for a better deal, and alongside their “sympathy” for WA’s position, federal ministers are accusing the state of being a reform laggard.
The treasurer, Joe Hockey, said on Monday that WA needed to consider selling state-owned assets as other states had.
“New South Wales has just gone through a very tough political fight over the sale of poles and wires [but] Western Australia still owns its TAB and still owns its poles and wires, and at the moment has no intention of going down the road of microeconomic reform that other states have taken,” he said.
With the WA premier, Colin Barnett, threatening “economic disengagement” from the rest of Australia, the fight will spill into Friday’s Council of Australian Governments (Coag) meeting.
But the other states are much more concerned about how they are expected to make up for the $80bn in projected forward funding for health and education which the Abbott government cut in its first budget last May.
The South Australian premier, Jay Weatherill, has said he would consider reintroducing a state financial institutions duty – abolished as part of the original GST deal – if the commonwealth did not reinstate the money.
“They know that there’s no state or territory that can withstand the deep cuts they’ve made to our health and education systems. Every state and territory around the nation – including most recently [NSW] premier [Mike] Baird – is saying that this is unacceptable and unsustainable,” he said.
Baird – whose state lost more than $15bn over 10 years from the move – pledged during the recent state election campaign to demand a solution to the issue.
“What happened last federal budget is not sustainable. That was, the ... federal government said, ‘We are going to allocate a large part of the future growth in health costs from ourselves to the state governments.’
“Now I said at the time, and I say it again ... both publicly and privately to the prime minister, that is not sustainable. The states do not have the capacity to meet those health costs on their own. The commonwealth has a critical role to play.”
The federal Labor leader, Bill Shorten, said the $80bn cut was causing the GST fight between the states.
“No wonder there is a noisy argument going on between Western Australia and the eastern coast states,” he said. “It is caused by the fact that they are all desperate for revenue because Tony Abbott and Joe Hockey have cut funding to schools and hospitals.”
WA’s problems are caused by the rapidly falling iron ore price. The commonwealth grants commission calculates the state’s revenue-raising capacities based on a three-year-average of the iron ore price, a much higher figure than if its GST share was calculated on its current ability to raise iron ore royalties.
Abbott wants Coag to focus on a national plan to prevent domestic violence against women.
