Modia Minotaur

Trawling the airwaves to spare you the agony!

Friday, March 31, 2006

The Battle of GST Spin

You may already have seen one or other of the two competing advertisements currently doing battle on our airwaves (excerpts available here), one funded by the NSW Government and the other by the Federal Government; both putting forward the position of the various parties on the issue of GST revenue.

The division of GST was a favourite topic of former Premier Bob Carr, who tirelessly reiterated the figure that NSW produces 34% of GST revenue but only gets 28% back, and the fact that the NSW Government went quiet on it for some time after Morris Iemma took the reins was fairly surprising. Since Michael Costa has become Treasurer, however, the fight has been resumed in earnest, which is not surprising given the rumoured parlous state of the NSW budget, especially given the expensive but politically expedient concessions on a number of unpopular taxes since Iemma became Premier - most recently, a compromise on the poker machine tax.

There is no doubt that the Commonwealth Grants Scheme formula is out of date. It was formed at a time when Queensland and WA were rural outposts rather than the financial powerhouses of a nation in the grip of a resources boom, and this should be reflected in the division of revenue. This is not to say that needier states should not be subsidised, simply that exactly who the needier states are should be redefined as situations change.

There's also no doubt that, as far as political problems go, this one is almost insolvable. No state is going to agree to a smaller proportion of GST revenue. No Federal Government - even a Labor government - is likely to adjust the formula.

The most amusing aspect of all of this is that the GST is consistently held up by the Federal Government as an unpopular policy that was eventually embraced by the electorate, who have never complained about it since. A similar argument is also been made about the Constitution itself by monarchists - `if it ain't broke, don't fix it'. Such an argument is destroyed every time yet another of these state versus Federal stoushes emerges, and a state is forced to start a petition to beg for legislative change. It's time for an independent body such as the Productivity Commission to step in and end this stoush for once and for all.


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