Saturday, February 27, 2010

NSW wins more of the GST cake, WA becomes a laughing stock

Winners and losers in 2010-11

NSW + $1070 million
Victoria + 872 million
Queensland + $545 million
South Australia + $357 million
Tasmania + $91 million
Northern Territory + $78 million
ACT - $30 million
Western Australia - $223 million


Grants Commission, 2010 Report on Revenue Sharing relativities

NSW has emerged as the surprise winner of the biggest shakeup in the distribution of funds to the states since the introduction of the GST.

Against expectations that it would cut the share of GST money flowing to Australia's two largest states to fund to the infrastructure needs of Western Australia and Queensland, the Grants Commission instead decided to give NSW an extra $1 billion from next financial year - roughly $150 per head - while Western Australia and the will ACT lose between them $250 million.

The change in approach between last year's draft Grants Commission report and this year's final report has been embraced by the NSW, but caught the biggest loser off guard.

On Thursday one day before the release of the the long--waited report West Australian Treasurer Troy Buswell called on the Commonwealth Government to recognise the independence of the Grants Commission and to implement its recommendations "in full".

After seeing what was in the report Western Australia's Premier Colin Barnett slammed the findings saying they would cost "around $200 for every man, woman and child in this state."

"It's not good for this state but it's not good for Australia. Who in Western Australia is going to vote for Kevin Rudd when he's saying you get just 68 cents in the dollar back."

The Commission has recognised Western Australia as the state most able to fund states in need... followed by Queensland, Victoria and NSW.

NSW Treasurer Eric Roozendaal claimed victory saying "when we work together we can change things for the better. It had looked as if we would lose around $400 million."

The NSW Business Chamber paid tribute to a lobbying campaign that was to include a billboard at Brisbane Airport reading "Welcome to Queensland... Subsidised by the taxpayers of NSW." Although Queensland authorities banned the billboard, chief executive Stephen Cartwright said the resultant publicity and a letter writing campaign to the Commission appeared to pay dividends.

"We will still give away over $1 billion in GST revenue to the other states but this is a victory," he said.

The Grants Commission is charged with dividing up an estimated $45 billion of GST revenue and this time adopted what it said was a "clean slate, top down" approach.

Strongly growing coal and iron ore royalties would mean Western Australia and Queensland needed less of the GST pie than before, essentially allowing them to take over the funding of the special needs of the Northern Territory from NSW and Victoria.

As expected it also recognised the need to fund extra infrastructure in those fast-growing states, but found their revenues were growing so quickly they could do it without extra GST money.

In another decision likely to advantage NSW and Victoria the Commission has decided to conduct future reviews every three years instead of every five because of the rapidly improving positions of the mining states.

Although formally an advisory body, the Commission's findings are always accepted by the Commonwealth and the Council of Australian governments.

Treasurer Wayne Swan had the report tabled "out of session" meaning that it would not be discussed while the parliament is sitting. The Treasurer regards disputed over the carve up of the GST as a matter for the states and so made no comment about the recommendations.

Mr Roozendaal said the extra $1 billion would be "factored into the the NSW Budget process over coming months."


Published in today's SMH

The Sort of Press Release You Wish You Hadn't Sent


Grants Commission 2010 Review



Related Posts

. The carve up

. Tuesday column: Poor little rich state

. Henry: "states could vary the rates of centrally administered taxes"


3 comments:

mOOm said...

Funny how the one state with a Liberal government lost the most and the state most likely to switch to Liberals got the most....

Peter Martin said...

It doesn't work that way. Much rigor is involved, which might be why the outcome was surprising.

I'll post the exec summary.

David Stern said...

Yeah, I read the report. There are so many degrees of freedom in deciding the formula. I can imagine the minister responsible, saying "yes go with that" or objecting to some other formulation. Of course, causation could run the other way too with the economics that drove this decision also driving voters' decisions. The previous government was always giving out grants to politically sensitive areas, supposedly based on some formulae.

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