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A wing, a prayer and Hope simply is not going to cut it, Mr Morrison
Having just witnessed a press conference held by a group of Liberal ministers from the federal parliament — Mathias Cormann, Christian Porter, Michaelia Cash, Michael Keenan and Ken Wyatt — I am reminded of the meaning of that great phrase, “a bit rich”.
There they were, loudly proclaiming the great benefits of the government’s new reform of the way GST funds were distri¬buted, and which they obviously believed would be a winner for the ¬Coalition at the “Super Saturday” by-elections and the general election — whenever it may be held.
Given that the West Australian Liberals and former premier Colin Barnett squandered the biggest mining windfall in our history, it is ironic that the repair to the WA budget will be made by a Labor government fixing a Liberal government financial mess.
This mob of federal ministers from the party that did its best to send Western Australia into poverty now stand proudly as the saviours of their state. They even failed to mention the Barnett government’s fiscal failures as they took all the credit for the fact the state is now about to receive extra largesse from Scott Morrison’s new ¬reforms.
One of the criticisms that will be used to campaign against this reform -initiative is that the states that perform the worst, that refuse to make the hard decisions on reduc¬ing costs and cutting spending, will be rewarded for poor governance. In the case of Western Australia, this most certainly is the case.
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Essentially the commonwealth works on the basis that the federal government raises the big bucks and the states set about spending them. The biggest element of the money trail from the federal government to the states has been the distribution of funds in the GST pool, and we apparently now have acknowledged that this massive pool is not enough. The Treasurer wants to whack $7.2 billion into that pot to enable all states to be treated with a “fair go”.
Morrison, so often precise, has been extremely vague about just how this huge sum of money can be found. There is not much for the commonwealth to flog because everything that is not nailed down has already been auctioned off.
The Treasurer is keen to assure us that no tax increases will be necessary to fund all this, and the GST rate itself will definitely not head north.
All he can suggest is that the budget will “absorb” this almost $700 million every year for the next decade. “Economic growth”, he says, will see us through.
This is where he lost me. In a country now in debt to the whopping amount of more than a half-trillion dollars, if you could find ¬another $700m a year, why couldn’t you pay off some of that debt? The budget was harshly ¬criticised because the projected growth rates of between 3 per cent and 3.5 per cent were seen as optimistic. There is just no scope to be able to predict with any certainty that this money will somehow turn up. The budget is but two months old: if it were so easy to find this extra $700m this year, why were these figures not given to us on budget night? Sadly, this is all about proceeding on a wing and a prayer backed up by hope. Hoping won’t cut it, Scott.
None of what I have written above should make anyone ¬believe that I do not want reform of the way the GST pool is distributed. It cries out for change but it is arguably the most difficult formula to fiddle with.
Wiping away the hysteria, WA does poorly out of the formula because of the -assumptions the Commonwealth Grants Commission makes about how much the state’s government will take in royalties for all that is dug up from the riches that lie beneath the ground out west.
The problem is the boom and bust cycle applicable to virtually all commodities. Now that the boom is running down, the royalties are down, and the state feels it is being discriminated against by Can¬berra. To counter this argument, though, the Barnett government should have minded the till much better than it did. While no one can blame the McGowan government, we are now going to pass on significant rewards to a state that blew billions on bad policy. East coasters may not like that idea very much.
Meanwhile, in the mendicant states — Tasmania, South Australia and the Northern Territory — where is the incentive to be prudent? The Weatherill government in SA went on a spending spree and ran an energy policy that made its economy something of a wreck. You can’t blame Steven Marshall, the newly elected Premier, yet if SA were to be punished for his predecessor’s profligacy it wouldn’t seem too fair, would it?
I don’t pretend to have the ¬answers but, looking at the Treasurer’s efforts, neither does he. There is a suspicion that this ¬announcement has been rushed out this week as a house cleaning operation before the voters in Braddon and Longman have their say. Queensland most certainly was going to lose hundreds of millions had the Productivity Commission’s recommendations been ¬accepted: that would not have been clever with only three weeks to go before the by-election. Similarly, the Tasmanian Liberals are never really happy anyway and are always ready to whine and whinge.
The Treasurer has just performed like Slick Nick from Jindivick. Having dazzled the press gallery with his humour and ¬seeming candour, he may well get away with it.