South Australia welcomes Productivity Commission’s interim report
The Malinauskas Government has strongly welcomed the Productivity Commission's interim report, which unequivocally recognises the need to address the shortcomings of the current GST distribution arrangements.
The report released today highlights the negative impacts of the current system, which the Morrison Government put in place with the enthusiastic backing of the former Marshall Liberal Government in South Australia.
The Commission notes the current format has created perverse outcomes and reduced transparency, with the 2018 reforms failing to achieve their intent, while costing the Commonwealth Government almost $23 billion, largely due to payments made under the No Worse Off guarantee.
The interim report has also found that while Western Australia was expected to benefit by a cumulative amount of about $3.9 billion by 2024–25, it has instead received the majority of the benefit from the $23 billion spent by the Australian Government – with other states including South Australia only remaining no worse off due to the temporary guarantee.
The interim report’s recommendations strongly align with South Australia's longstanding position that the system should return closer to full Horizontal Fiscal Equalisation, as applied before the 2018 changes, so that GST distribution is fair, and enables all states to have the fiscal capacity to provide broadly comparable public services.
Quotes
Attributable to Tom Koutsantonis
The 2018 GST distribution reforms imposed by the Morrison Government with the enthusiastic backing of Steven Marshall and Rob Lucas, have created only one winner - Western Australia.
Far from making all states ‘better off’, the 2018 reforms have only materially benefited WA, vastly improving its fiscal position relative to the other jurisdictions.
The South Australian Government strongly supports the Productivity Commission’s interim report’s conclusions that recommend returning to the pre-2018 GST distribution system, and is open to considering options to address dominant-state effects where they arise.
The existing system has imposed a significant ongoing cost on the Commonwealth Government, while realising minimal efficiency gains – frankly, it’s a dog of a deal.
No wonder economist Saul Eslake called it “the Worst Public Policy Decision of the 21st Century to date”.
Servicing the No Worse Off guarantee is forecast to cost the Commonwealth Government $6 billion for 2025-26 alone, and could reach $12 billion – a cost that would shift to states if the guarantee is allowed to expire.
A fair GST distribution system is essential to ensuring all jurisdictions have the fiscal capacity to deliver comparable services to their communities.
The Malinauskas Government will engage constructively with the Commonwealth, the Productivity Commission and other jurisdictions as the final report is developed, with a focus on securing an outcome that supports fairness across the federation.
We do not want to disadvantage Western Australia, but neither do we want one state to have an unfair advantage relative to all others. We agree with the Productivity Commission about what a genuinely fairer system might look like.
This interim report is detailed and substantial, and we will work through its findings and recommendations carefully in coming weeks, including the implications for South Australia and the broader federation.