Senator the Hon Mathias Cormann

CHRIS KENNY: I was joined just a few moments ago by the Finance Minister Mathias Cormann from Canberra.

Mathias Cormann, welcome back to Viewpoint.

MATHIAS CORMANN: Good to be back.

CHRIS KENNY: Look, when the Prime Minister announced his new reforms to the GST, his new plan of GST reform in Perth on the weekend, presumably you were in the room?

MATHIAS CORMANN: I was, yes.

CHRIS KENNY: Was this the first you had heard of this plan?

MATHIAS CORMANN: No. This has been something that has been on the table for some time. The Australian Government has long been of the view that WA’s share of the GST at 30 per cent is inappropriately low. That is why over the past two years in 2015 and in 2016, the Commonwealth has made additional payments to WA in the order of about $499 million and $490 million in those two years, additional investments into WA infrastructure. Effectively to stop the drop in WA’s GST payments at 37 per cent, from falling further down to 30 per cent. Back in ... interrupted

CHRIS KENNY: Exactly but...

MATHIAS CORMANN: Back in 2015 ... interrupted

CHRIS KENNY: That has been going on for a while, was that speech and the Prime Minister’s announcement that he was going to look at some reform in this area now in this Government, was this the first you had heard of this re-elected Government going down this path?

MATHIAS CORMANN: If you let me finish the answer to your first question.

CHRIS KENNY: Okay.

MATHIAS CORMANN: The additional payment by the Commonwealth was always a short term solution. We always said there would need to be a medium to long term structural fix. All the way back in April 2015 the concept of putting in a floor below which an individual state’s share of the GST cannot fall has first been put to the Council of Australian Governments. It was also discussed at their retreat in July 2015. So it is something that has been on the table for a while. The reason this is coming up now is because it is clear now that as a result of continuing lower iron ore prices, the WA share of the GST under the current system and in the ordinary course of events will start to increase again in future years. This is the most appropriate time to pursue a floor, once WA exceeds a particular threshold, putting in a floor below which no state can fall when it comes to their share of the GST, will help ensure that no other state is going to be any worse off, because it would not mean any reductions in projected GST payments to any individual state at that point in time.

CHRIS KENNY: Okay, then since the election, the Cabinet has met and decided to go down this reform path.

MATHIAS CORMANN: I am not going to go through the internal processes of Government. This has been something that has been on the table for a long time. The Prime Minister made a relevant announcement on Saturday. I was well aware of it beforehand. This is something that has been part of an ongoing conversation that the Council of Australian Governments has been involved in.

CHRIS KENNY: But what I am getting at is, as you would be aware, is whether, of course this issue has been around and the need to address it has been around for a long time, certainly proceeding this election and the one before it. But did the Prime Minister just announce this reform out of the blue on Saturday and Cabinet is now, Cabinet, the Treasurer, yourself as Finance Minister and Cabinet got to get its head around how to proceed. 

MATHIAS CORMANN: I have just told you that this is an issue that actually was put by the Australian Government to State and Territory governments in the Council of Australian Governments back in April 2015. It was put back there in July 2015, in the context of the Council of Australian Governments retreat at that time. This is now being pushed ahead. The Prime Minister has picked the appropriate time to push it ahead, because we now know that Western Australia’s share of the GST is going to increase in the ordinary course of events. This is the appropriate time to ensure that what has happened in the Western Australian context is not going to happen to any other state down the track. You have to remember that the GST was put in place as a growth revenue for the State and Territory governments. A reliable growth revenue to help ensure that individual States and Territories have got the necessary resources to sustainably fund health and schools and law and order related services and other important services provided by State and Territory governments. Horizontal fiscal equalisation is a very important principle. It is very appropriate for stronger states to help support those states in need of support. But the question is really a question of balance. When does this level of cross support, cross jurisdictional support go a little bit too far. The Government’s view, the Federal Government’s view is that 30 cents in the dollar is not an appropriate level of return when it comes to the GST for any individual state.

CHRIS KENNY: Yeah, it’s about sharing the tax revenue around more fairly. As you say, Western Australia quite rightly says 30 per cent of the GST raised in their state is not enough. No one really envisaged it going down that low.

MATHIAS CORMANN: Exactly.

CHRIS KENNY: I am told no other state has dropped below 80 per cent.

MATHIAS CORMANN: 80, that is right.

CHRIS KENNY: Other states are already arking up though. Other states are rejecting this. They will try and thwart change. You would have to concede that reform in this area is exceedingly difficult, if not impossible. 

MATHIAS CORMANN: The Prime Minister said on Saturday that he expected this reform will be politically difficult. We are not naive in relation to this. Again, we would just put the question, is it fair for any individual state to get back less than a third of what is raised in that particular state by way of GST. Is it fair for any state to get less than a third back in order to fund, or help fund the important services that state provides, when this was a revenue source that was meant to provide a reliable growth revenue to help fund these services in a sustainable fashion.

CHRIS KENNY: But any boost on the projections to what Western Australia or any other State can keep necessarily means that other States will get less. So obviously those so-called mendicant states, the states that always are subsidised by the other States, particularly South Australia and Tasmania, are going to resist this every inch of the way.

MATHIAS CORMANN: There is no proposal to make any adjustment now and to establish a floor that is above what Western Australia is getting now by way of share of the GST. That is why the Commonwealth at this point, has made unilateral Commonwealth grants in order to essentially stop the drop in GST payments to Western Australia. What the proposal here is, is to establish a floor below the threshold that Western Australia is expected to reach in the future, so that what you have just suggested does not happen. At that point in time there will be projected GST revenues for all states. By putting in a floor below WA’s share of the GST at that point in time, when they have exceeded that threshold, it means that no other state will be worse of. No money would be taken away from any other state. As you say, it was never envisaged that any state would ever find themselves in a circumstance where they would get back less than a third of the GST raised in their jurisdiction. That is the situation that Western Australia is in now. It would not be fair for any state to be in that situation.

CHRIS KENNY: No you’re right, it sounds like sensible reform, but you are wrong in that you say no state will be worse off. You are saying that they will still get the projected growth that you are going to budget for, but if you didn’t have that floor, then there would obviously be more money around to share in certain circumstances. So those states are going to be very unwilling to sign off on it.  

MATHIAS CORMANN: You are making an assumption about what is likely to happen to iron ore prices and all sorts of things. This is really just putting in an insurance that should have been in place right from the start. If it had been known at the time that this was a risk that could happen, that one state could end up getting less than a third of their GST back, I suspect that the states would not have signed up to this system then. The States would have said at the time that there should be a floor. Everybody reasonable supports horizontal fiscal equalisation. Everybody reasonable supports the principle of stronger States supporting those states in need of support. The question is, how far can this or should this reasonably go. Is it appropriate for there to be a limit to how low an individual state’s share of the GST can go. The Prime Minister has indicated on Saturday that he will work to ensure that there is an appropriate floor put in place. That will now involve further conversations with State and Territory Premiers and Chief Ministers.    

CHRIS KENNY: If I could just ask you about something outside your portfolio, although it is kind of related. That is the Census this year and the stuff-ups. Are you concerned that with less than half of people so far responding and completing the Census, are you concerned that the whole project could have to be scrapped this year and started again later in the year or next year?  

MATHIAS CORMANN: No, I am not. People still have, depending on whether they fill in their Census online or by paper, until the 18th or the 23rd of September before they need to have completed their Census. There will be some further communications from the relevant Minister in the next little while to keep reminding people of their responsibility to complete the Census by that time. There is a still a few weeks to go. We are quite confident that this will be able to be achieved.  

CHRIS KENNY: There must be a point though, at which the data is useless. If you only get 50 per cent of households responding, obviously it would worth much chop. There must be a target, whether it’s 80 per cent, 90 per cent, 99 per cent, there must be a point at which the Census won’t deliver to the Government the value that you expect.

MATHIAS CORMANN: This is, as you say, a question outside of my portfolio. It is also a hypothetical question. From where we sit, we are confident that this Census will be completed in the appropriate fashion. People have until the 18th or the 23rd of September depending on whether they will fill it in online or by paper. We would ask everyone that has not yet completed their Census to do so at the earliest opportunity.  

CHRIS KENNY: Alright then, I am not going to ask you about the Banking Royal Commission. We know you don’t want to see that. You have got this committee process in place. Let me ask you about one other issue that has come up today, slightly out of left field. Little bit of toilet humour involved here, but Pauline Hanson is upset that the Australian Tax Office in one of their buildings is putting in squat toilets. She says that we are surrendering, I suppose, to overseas cultures rather than forcing people to adopt the lavatory style we tend to use. Does she have a point, or is the sort of distraction you don’t want to hear and you are going to be forced to listen to as long as she is in the Senate?  

MATHIAS CORMANN: I have got to admit, I had not turned my mind to the lavatory arrangements of the Australian Taxation Office. I am pretty relaxed. If this responds to a need within the Australian Taxation Office, I understand that they have a very diverse workforce. I am pretty relaxed about it.  

CHRIS KENNY: Pretty relaxed. I just don’t know where we are going to go the next couple of years. Mathias Cormann it is the last thing I expected to be talking to the Finance Minister about, but thanks for joining us again on Viewpoint.

MATHIAS CORMANN: Always good to talk to you.