Changing the way the GST is carved up among the states and territories is about a “fair go” for all Australians, Treasurer Scott Morrison says.
Mr Morrison will put to his state and territory counterparts in September a new deal which would iron out some of the wrinkles in the GST revenue distribution system which has been in place since 2000.
Western Australia has long complained about its share dropping during the mining boom due to the way the existing system, known as horizontal fiscal equalisation, is benchmarked.
That benchmark will shift over eight years to a new standard that will ensure the fiscal capacity of all states and territories is at least the equal of NSW or Victoria (whichever is higher), evening out the impact of extreme events such as the WA mining boom.
However Mr Morrison said the changes, which would involve a permanent boost to the pool of funds, were not just about WA.
“The Commonwealth is investing in the fair-go principle … which delivers the schools, the hospitals, the nurses, the police and the essential infrastructure,” Mr Morrison told reporters in Canberra on Thursday.
The GST pool will increase by $7.2 billion from 2021/22 to 2028/29.
States and territories are slated to receive $67.3 billion in GST payments in 2018/19, rising to $112.25 billion in 2028/29.
The federal government will put in place the new “floor” of 70 cents per person per dollar of GST, below which no state’s relativity can fall, from 2022/23, rising to 75 cents from 2024/25.
WA will support the changes, with the state’s treasurer Ben Wyatt saying the federal government had taken a pragmatic approach by presenting changes which were likely to be supported.
Tasmanian Premier Will Hodgman said on face value his state would be better off but didn’t rule out opposing the plan if it left them in a worse position.
Queensland Premier Annastacia Palaszczuk wants to see the modelling to determine where the federal money is coming from.
NSW Premier Gladys Berejiklian said it was “pretty much a status quo position” for her state.
Mr Morrison said it would be a “completely reasonable expectation” that other grants to the states would not be cut back and he rejected the idea of broadening the base or raising the rate of the GST.
Asked how the government could afford the extra money, he said the “real kick-in” was when the federal budget was set to be in a surplus of at least one per cent of GDP.
The details of the deal will be set out in a permanent intergovernmental agreement to be signed by year’s end.
Mr Morrison suspected there would be some “disagreement about numbers” but he was confident a deal could be struck.
Labor leader Bill Shorten said he would look at the detail.
“I want to make sure that states are left with certainty that they don’t have to go cap in hand to Canberra whenever they want to fund a school or hospital,” he said.