State tipped for major GST windfall

Federal Budget forecasts crucial

TASMANIA is set to receive a GST bonanza of about $350 million over the next three years — if forecasts from the latest Federal Budget become a reality.

The State Government will today outline its expected GST revenue over the forward estimates to 2020-21, when it hands down the State Budget.

Compared with figures in the 2016-17 state budget papers, the Federal Budget papers predict Tasmania will receive $56 million more in 2017-18, $150 million more in 2018-19 and $143 million in 2019-20.

Last year, the State Government complained it had been adversely affected by the loss of more than $500 million in GST receipts over the forward estimates. This was due to a change to GST relativities from the 2015 Capital Grants Commission distribution method.

Tasmania’s Treasury adopted its own financial model for the 2015-16 and 2016-17 budgets to forecast GST revenues, saying it incorporated latest assessments by the Capital Grants Commission.

The increased payments to states including Tasmania were underwritten in the 2017 Federal Budget by a GST pool, which is predicted to expand from $59.2 billion in 2016-17 to $67 billion in 2019-20.

The Productivity Commission is inquiring into the sharing of the GST between states after protests from Western Australia about its relatively modest share, with a reporting date of January next year.

GST is critical to the Tasmanian State Budget, making up about 42 per cent of revenue.

Ratings agency Moody’s said, after a Capital Grants Commission review in March this year, which predicted a 5.5 per cent increase, that Tasmania would benefit the most of any state.

“Its deficit will potentially shrink to -0.5 per cent of revenues compared to the state’s -1.7 per cent projection in its fiscal 2018 midyear report,” it said.

Last year’s state budget predicted a $77 million net operat- ing surplus this year, dropping to $7.9 million in 2017-18.

Economist Saul Eslake said it was expected that this year’s State Budget would include an upward revision of forecast GST revenues in 2017-18 but predictions further forward may not eventuate.

“The State Budget may be more cautious about assuming that the increase in Tasmania’s share for 2017-18 will be sustained over the remainder of the forward estimates period,” Mr Eslake said.

“For example, given the decline in iron ore prices the likelihood is that WA’s share will increase a bit in 2018-19 and beyond, which means all else being equal, Tasmania’s will be a bit smaller than this year.

“And then of course there is the Productivity Commission review of the GST sharing formula which is meant to report to Treasurer Scott Morrison at the end of January.”

Mr Eslake said the Tasmanian budget would make allowances for changes in relativities, whereas the Federal Budget assumed a consistent relativity.

The Mercury approached the Treasurer for comment.