Senator the Hon Mathias Cormann

PATRICIA KARVELAS: Federal Finance Minister and Senior Western Australian Senator Mathias Cormann joins me now on this issue. Obviously it is the Federal Government that has floated this idea. Senator welcome to the program.

MATHIAS CORMANN: Good evening Patricia.

PATRICIA KARVELAS: What is your response to those comments by the Victorian Treasurer Tim Pallas? Does he have a point?

MATHIAS CORMANN: No he doesn’t have a point. The Treasurer would be well aware that the proposition of a floor below which a state’s share of GST could not fall was first discussed at the Council of Australian Governments back in 2015. The Australian Government has long been of the view that for one individual state to get less than one in every three dollars back from the GST raised in that state is unprecedented, it is not sustainable. The gap between Western Australia with 30 cents of their GST going back to Western Australia, it was not envisaged when the system was first set up, the gap is inappropriately large. The GST is meant to be a growth revenue for State and Territory governments to fund important services they provide in health and education, law and order and so on. It is fair to say that for Western Australia it hasn’t been a growth revenue. Of course it is important that stronger states support those states that are in need of additional support. The principle of horizontal fiscal equalisation is very important. Western Australia has through its success in particular in the context of record prices for iron ore and the increased revenue that royalties from iron ore have generated in Western Australia, Western Australia has contributed significantly through the GST sharing arrangements to other parts of Australia. That is appropriate, but… interrupted

PATRICIA KARVELAS: But Mr Pallas has made a point, that I think it is a worthy point, he has claimed that WA has done little to reform their economy or alter their reliance on mining royalties, I guess making the point that their reduced revenue base is largely because they mismanaged the boom. That they didn’t put away money for the good times for the bad times.

MATHIAS CORMANN: I don’t accept that at all. That is just partisan political rhetoric from a Labor Treasurer, vis-à-vis a Liberal state government. So I would just put that to one side. What I would say though is that Victoria wouldn’t accept if Victorians would only get back 30 cents in the dollar from the GST generated in Victoria. It has never happened for any State jurisdiction anywhere in Australia, to essentially get that low a share of GST, or the preceding payments, back in this sort of formula. Victoria has been a net contributor, as have other States around Australia. Western Australia has been a recipient in years gone by, but no State has ever fallen below 80 cents in the dollar before. Western Australia is down to 30 cents in the dollar. The proposition here is, that as the iron ore price has fallen quite dramatically in recent years, the WA share of the GST will start to increase again under the current formula. That is the opportunity to revisit this proposition of establishing a floor, because that means that no State would actually lose compared to the projected GST revenue that they can currently expect.  

PATRICIA KARVELAS: You might say that, but you just heard the Victorian Treasurer there. There is no appetite from some of these States, even the States that are the same political colour as you Mathias Cormann. There is no appetite for changing this, so how do you do it if you don’t have the support of the States and Territories?  

MATHIAS CORMANN: Let’s see what happens. As I have said, this conversation started in 2015... interrupted

PATRICIA KARVELAS: Do you accept though that you need to get their support? Because there has been a bit of contention around this today.

MATHIAS CORMANN: This has been discussed in the context of the Council of Australian Governments, certainly since 2015. At the Federal Government, because we recognise that WA’s share of the GST is inappropriately low, we did make unilateral grants from the Federal Government, both in 2015 and in 2016 supporting additional investment into WA infrastructure to the tune of about $1 billion. But we always said that would be a short term solution, that there was a need for a more medium to long term structural resolution to this. The appropriate forum for this to be worked through is the Council of Australian Governments. There is an opportunity, because over the next few years WA’s share of the GST will in the ordinary course of events start to increase.

PATRICIA KARVELAS: Okay, but do you accept that you need the support of the States and Territories to make this possible?

MATHIAS CORMANN: What I accept is that this is a discussion for the Council of Australian Governments and that the Prime Minister will be pursuing that conversation in that forum.   

PATRICIA KARVELAS: So he needs to convince them. Doesn’t look like they are convinced.

MATHIAS CORMANN: The Prime Minister will continue to pursue the conversation. He has explained very clearly on Saturday what his intentions are. He also doesn’t underestimate the political challenge associated with this. There will be further conversations. I am very confident that this will ultimately be able to be resolved.

PATRICIA KARVELAS: But it’s not just the states that need to be kept onside, Tasmanian Senator Eric Abetz has said he doesn’t want the GST formula touched if Tasmania is disadvantaged. He is unlikely to be alone in wanting to protect State interests. You have also got an internal battle don’t you?

MATHIAS CORMANN: In the end, this is a conversation about what is fair. Given that the... interrupted

PATRICIA KARVELAS: So what is your message then to Eric Abetz?

MATHIAS CORMANN: Given that the GST was designed to be a growth revenue for State and Territory Governments, to fund their important services, there is a conversation ongoing as to whether 30 cents in every dollar of GST raised in one particular jurisdiction, whether that is a fair contribution. What the Prime Minister has said, as Western Australia’s share will be increasing in future years, this is the opportunity to talk about and to establish a floor to ensure that no State ever ends up in that situation where the distribution away from that State is that disproportionate.

PATRICIA KARVELAS: So what is your message to backbenchers like Eric Abetz who are very nervous about this proposition? They feel like their States might miss out.

MATHIAS CORMANN: My message is that there is some work to be done here to ensure that the system is fair for everyone. The Prime Minister will pursue this through the Council of Australian Governments in the appropriate way.

PATRICIA KARVELAS: I know you have to go but I want to ask you one last question. Over the weekend the same State conference, the WA State Liberal conference, your own Liberal Party branch voted in favour of removing the words ‘insult’ and ‘offend’ from Section 18C from the Racial Discrimination Act. Is that a sign that the Turnbull Government should think twice about its position on 18C and revisit this issue?

MATHIAS CORMANN: The Government’s position is clear. We have said that we would not be revisiting this issue. We have got other priorities. We are focused on implementing our plan for the economy, our plan for jobs and growth and we are… interrupted

PATRICIA KARVELAS: So you are not persuaded by the WA Liberal Branch?

MATHIAS CORMANN: We are focused on implementing the commitments that we took to the last election.

PATRICIA KARVELAS: But I asked you about the WA Liberal Branch passing this motion. What do you make of motions like that?

MATHIAS CORMANN: It is very important for the Liberal party organisation to have robust internal debate and determine policy, but from the Government’s point of view we have made our position very clear as I have tonight on your program.

PATRICIA KARVELAS: So there is no way that that will be revisited? Because it keeps coming up, David Leyonhjelm today. We’re about to discuss that and of course Tony Abbott raised it on the weekend. A number of Senators now, it keeps coming up.

MATHIAS CORMANN: I have made my position very clear. I have made the Government’s position very clear.

PATRICIA KARVELAS: Alright, fair enough, Mathias Cormann thanks for joining me.

MATHIAS CORMANN: Thank you.