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Changes to GST Distribution will mark Tasmania’s doomsday scenario

  • Treasury’s dire warning over worst case scenario playing out
  • Hodgman, Gutwein unable to secure written assurances that GST distribution system would not change
  • Respected economist Eslake warns new arrangement could take Tasmania back to begging bowl status

 

It is becoming clear that Federal Cabinet has adopted the worst case scenario for Tasmania in the GST carve up.

Tasmanians should be alarmed by reports that the Federal Coalition Government will move to radically change the distribution method for the GST.

What’s worse, Cabinet has reportedly adopted what Tasmanian Treasury effectively modelled as its doomsday scenario (equalising to the average) in its Revised Estimates Report only six months ago:

“In its Draft Report released on 9 October 2017, the PC considered alternative equalisation options including to a standard less than the current full HFE. While the PC rejected an equal per capita distribution, there remains a risk that other options being considered by the PC, if accepted, could result in a significant reduction in Tasmania’s share of the GST. The level of reduction in GST will depend on which equalisation method is selected and its impact will depend on when it is implemented and how it is transitioned.”

“The PC estimated in its Draft Report that, if the proposed alternative equalisation methods had been implemented in 2017-18, Tasmania’s share of the GST could fall by $77 million under one scenario (equalising to the second strongest State) or $168 million (equalising to the average fiscal capacity of all states). Over the Forward Estimates to 2020-21, the reduction in GST revenue is $170 million equalising to the second strongest State, and $639 million equalising to the average.”

–         Tasmanian Treasury Revised Estimates Report

 

According to independent economist Saul Eslake the proposed new arrangement returns Tasmania to the status of a ‘claimant state’ for the first time since the 1970s.

Every future Tasmanian Premier and Treasurer will need to go to Canberra and beg for the money Tasmania needs to provide adequate health and education system for its citizens.

Mr Eslake urged the Premier on ABC Mornings to finally start protesting loudly on Tasmania behalf along with other smaller states that stand to lose vast sums of revenue from this new arrangement.

Mr Eslake said the proposed arrangements penalises the poorer states to give more money to the richest states, like Western Australia.

“Labor has been warning Premier Hodgman about this for months,” Labor Leader Rebecca White said.

“Yet he told the Parliament and Tasmanians that he was reassured by a brief conversation with Prime Minister Turnbull about Tasmania’s GST share being secure.

“With a same breathtaking level of naivety, Treasurer Gutwein has relied on a phone call from Treasurer Scott Morrison to decide our GST share is secure.

“Neither the Premier nor Treasurer has received any written assurances.

“Labor was right.

“While it is obvious that Malcolm Turnbull will try and provide a sugar hit of short-term top up payments to Tasmania to try and improve his chances of winning the Federal seat of Braddon, it must be understood that any change to the way the GST is distributed will be disastrous for Tasmania.

“As soon as the sugar hit of top up payments are finished, Tasmania will be structurally worse off.  Tasmanians will be impacted through less police, less nurses, less doctors and less teachers.  There will be less money for roads, for the vital infrastructure our state needs.

“For the first time in decades Tasmania will be exposed to the political whims of Canberra.

“Premier Hodgman and Treasurer Gutwein should not accept a deal like this.  It is fundamentally against Tasmania’s long-term interests.

“I will write today to the Premier to extend an offer to work alongside him to stand up for Tasmania’s fair share of GST.”