Paul Keating once warned about never getting between state premiers and a bucket of money. Since 1999, that bucket has been the Goods and Services Tax. John Howard and Peter Costello risked all at the 1998 election to make the GST, and the wider tax reform it allowed, a reality.
The GST masterstroke, which underpinned Mr Howard’s and Mr Costello’s political success in passing it through a hostile parliament, was to turn its rivers of gold entirely over to the states and territories. Over the years, however, the problem with the GST is not that it’s a broad-based consumption tax that, thanks to the necessary compromises of 1999, isn’t broad-based enough, but that its distribution among the states is supervised by the Commonwealth Grants Commission using a complex formula. Officially, that formula is called Horizontal Fiscal Equalisation, but its better described in just two words: state socialism.
Joe Hockey once bloviated about lifters and leaners. The CGC presides over a GST distribution that rips money from the economic lifter states and pays off the leaners. Western Australia, for every dollar of GST it produces, currently gets back a mere 30 cents, while mendicant states Tasmania and South Australia get well above what they put in. The biggest beggar of a government, the Northern Territory, pockets a GST share five times its share of the Australian population. Sometimes it pays to govern a large area with a small population dominated by welfare dependency.
Therefore, the reforms proposed by Mr Turnbull and Mr Morrison, benchmarking smaller, poorer states against the economic powerhouses of NSW and Victoria, while ensuring that in future no state will get back less than 70 cents in the GST dollar, are welcome. The adding to the GST pool with billions of dollars of non-GST revenue – effectively adding to overall government debt – is not.
The weakness of the GST settlement is it trusts state and territory governments, whether LNP or Labor, to spend wisely and responsibly. The behaviour patterns of state governments, however, show that even conservative state premiers like to spend like drunken sailors in Portsmouth on pay night. As for states spending wisely on public infrastructure, think again. Mr Morrison talks about more money being spent on schools under his settlement. But when that includes squandering the contributions of hard-working mainstream Australians on trendy social engineering like ‘Safe Schools’ in Victoria, is that how you want your GST payments to work?
Instead of giving the states yet another fiscal free lunch, Mr Morrison would have done better to tighten the screws on their profligacy. It’s instructive that in its dying days, the Gillard government froze public hospital funding increases to Victoria in a bitter indexation dispute. The then Liberal government in Victoria instructed its hospitals to find savings and efficiencies to keep services going while the politicians fought it out. Lo and behold, real efficiencies were found, and the world didn’t end. But when the dispute was resolved, the brakes were removed and it was back to profligate normal. That’s the normal state mentality, and it’s dangerous.
Unfortunately, Mr Morrison prefers to play Father Christmas, spending yet more of a projected tax windfall he doesn’t have. But when the Coalition is no less big government-minded than Labor, what do you expect? And whether his deal saves threatened Coalition seats in WA is itself questionable: 70 cents is still a miserly share of the GST cake.
In praise of Peter Dutton
How the Left wailed when their darling Yassmin Abdel-Magied recently was denied entry to the US because she hadn’t done her paperwork. How readily they believed Ms Abdel-Magied’s blaming of Donald Trump for what was her own stuff-up.
Yet when bureaucrats in the Australian government sought to bar the entry of young Canadian libertarian Lauren Southern, the Left cheered. A Department of Home Affairs spokesperson confirmed that people with ‘controversial views’ were ‘vetted’.
Fortunately, Peter Dutton appears to have stepped in; Ms Southern now has her visa and is touring Australia with fellow conservative Stefan Molyneux.
Ms Southern was initially treated like a potential terrorist, while Ms Abdel-Magied got her own ABC show.
Having crab-walked away from the 18C fight, it’s a relief that this nominally-conservative government showed spine and avoided, for once, kowtowing to the Left on free speech.
Thank you, Peter Dutton.