Labor’s GST red herring
THE Commonwealth Grant Commission’s GST calculations are complex to say the least.
Note the extract from the Commission’s Report: Differences in state fiscal capacities have decreased in this update, resulting in a decline in the proportion of GST revenue redistributed away from EPC to the states with below average fiscal capacities.
The proportion of GST revenue redistributed in this update fell from 10.4 per cent ($6.9 billion) to 9.5 per cent ($6.5 billion).
The magnitude of the improvement in the fiscal capacity of Queensland is such that, even taking into account growth in the GST pool, its recommended GST entitlement is lower in 2019-20 than in 2018-19.
The commission’s aim is to give more GST funding to the “underperforming” states and less to the better performing states (per $1 of each state’s GST). The commission takes into account a state’s “potential” to raise revenue etc. (This is “fiscal capacity”). The modelling also takes into account assets of all the individual states. The reasoning is the more assets a state owns, the more “fiscal capacity” the state has.
Queensland wanting to exclude all federal funded state assets would reduce “fiscal capacity”and therefore increase its GST share. This claim is a red herring issue to delay the delivery of the pipeline funding.
If such assets were excluded for Queensland they would have to be excluded for all states. No federal government, other states or The Commonwealth Grants Commission are going to agree to such fundamental changes to the GST funding model.
Queensland’s GST allocation in 2018-19 was $1.09584 per $1 of state GST. In 2019-20, the commission’s GST calculation is $1.05370. In 2019, NSW’S funding was $0.85517 as the state is a stronger performer. To add to the complexities, the calculations are based on threeyear fiscal averages.
In 2019, Qld received
$14,630 million GST. Forecast for 2020 is $14,558 million. This difference of minus $72 million, is much less than the loss of
$156 million claim by Labor.
This decrease is due to fiscal capacity changes and not assets.
This loss of $72 million has nothing to do with the Haughton Water Pipeline funding. The 2018-19 Queensland Audit Report states that the Queensland’s net assets are $191.7 billion. The Stage 2 pipeline is $195 million. That is a 0.102 per cent increase in net assets. Labor’s argument is that, as the $195 million pipeline is federally funded, there is no offsetting state debt, therefore it increases the net assets by
$195 million and that decreases the future GST allocation.
That is very strange economics. On that basis the Queensland Labor Government would not ever seek any federal funding as it increases the state’s net asset position.
The increase in net assets would have an effect but it would be very nominal given the overall factors that go into calculating the GST distribution. Even if it had a full effect, given it is 0.102 per cent, the decrease in the GST allocation would be $15 million.
This is why Labor is running the red-herring case that all federally funded assets must be excluded. No details of what “all assets” are. Given it is a redherring argument, of no merit, for the coming election, there is nothing to be gained by Labor detailing its case.
BARRY LOWE, Kirwan.