KIM LANDERS:
Treasurer, good morning.
TREASURER:
G'day Kim.
LANDERS:
Let's take a look at this promise that no jurisdiction will be worse off. So you're guaranteeing that no-one will be left with less than if they'd stayed with the current model?
TREASURER:
That's right and we achieve that by basically making the pie bigger. I mean if we left the pie at the same size then obviously if there was a slightly smaller slice then people would be worse off, but when you make the pie bigger then obviously that slice is bigger, that's the nature of the change.
LANDERS:
It's a pretty expensive pie though, isn't it? It's a pretty expensive pie because the Government is going to have to chip in about $7 billion to the GST pool.
TREASURER:
Well, we won't be increasing taxes to do that, let me make that point very clear first. But the second point I'd make is this Kim, the system is broken, that's what the Productivity Commission has found. It says that the formula needs to be changed, while we don't agree ultimately with the change that they've recommended. They themselves in the report have said that their preferred option is not unambiguously any better than any of the others. So, it's important to change the system because as you know in Western Australia their share got down to less than 30 cents. Western Australia was actually getting less in actual dollar terms than the Northern Territory or Tasmania and compared to the Northern Territory they have 10 times the population. So we've fixed what needs to be fixed.
LANDERS:
Yes and if the whole idea is to fix it, and you've said you have to chip in $7 billion to grow the pie, you say you're not going to raise taxes in order to do it. So, where is that $7 billion coming from? Is that, for example, going to eat into the Budget surpluses that we're meant to be seeing in the coming years?
TREASURER:
Well, over the Budget medium term we do get into more than one per cent of GDP as a surplus. So the money has to come from the bottom line, there's no doubt about that, but we will have got the Budget well back into surplus…
LANDERS:
So, those Budget surpluses are going to fall?
TREASURER:
Well, what we're talking about is we're talking about $1 billion eight years from now. The pool of the GST eight years from now will be $100 billion. So while it is a significant investment, remember what it's an investment in Kim, this is more money for schools, hospitals, police, essential infrastructure which is delivered by the states. So these are things that we think are good, and this is a way to give the states greater autonomy and a better revenue source to ensure that they can deliver those things.
LANDERS:
So, I'm just trying to be clear, no new taxes but that $7 billion that will erode some of those forecast Budget surpluses?
TREASURER:
Well, it will also come from a stronger economy and if you had a one per cent fall in consumption then the GST pool would be contracted and that's why it's so important to have a stronger economy and that's why it's so important to have lower taxes. If you don't have lower taxes, you'll have weaker economic growth and that means all States and Territories would be worse off, they'd get less in GST, they'd also get less of all their other…
LANDERS:
Any strings attached to this so called top up money?
TREASURER:
No there's not, it's untied revenue to the states. I've been to many meetings with all my colleagues in the States and Territories and one thing they've said is, 'yeah the GST is fine but it doesn't grow as fast as all the other revenues' and so it hasn't turned out to be the big growth revenue that they were supposed to get 20 years ago. So it's timely we've looked at this, it is a very difficult change to make, I think we've come up with a plan that deals with it over the short term and the long term and it's not going to be kicked down the road. No government has touched this seriously in a decade and it's timely to do it.
LANDERS:
While you are doing such a big GST reform any plans to change the rate of 10 per cent?
TREASURER:
No.
LANDERS:
Absolutely none?
TREASURER:
None.
LANDERS:
Do you have to draw up a new agreement to formally get all the States and Territories to agree to this new formula?
TREASURER:
No, not technically but that's what I want to do, because I think what gives everybody the certainty of this new plan is that it would be agreed by all the States and Territories. I think it is as important in Tasmania as it is in Western Australia and that's why I would like to go down the path of working with the States and Territories to get everyone on board. And we still have a lot more work to do. I'm sure the States and Territories will look at these numbers, which I'm inviting them to do and we need to put all of our numbers on the table, all of us, because at the end of the day they all have to reconcile to add up.
LANDERS:
Now changes to the GST are always a pretty toxic political issue, are you confident that this is not going to affect the Coalition's chances in the so called super Saturday of by-elections later this month?
TREASURER:
Why would it? We're putting more money into schools, hospitals and police by providing additional resources to the States and Territories and we're ending what is a broken system that has meant that their hasn't been a fair way of dividing up this GST. This makes it fairer, it ensures that the essential services that Australians rely on whether it's in those parts of the country where they are facing by elections or anywhere else, those essential services are being guaranteed by the proposal we've put forward. But more importantly Kim, they're guaranteed by a government that believes and is doing things to create a stronger economy. That is the biggest guarantee for GST revenue for the states and that's having policies that make the economy stronger.
LANDERS:
Now, a week ago the government was conceding it couldn't get enough votes in the Senate to pass tax cuts for businesses with a turnover of more than $50 million. Could this GST package perhaps help win over One Nation in the Senate?
TREASURER:
Well I don't know, at the end of the day but we haven't walked away from that, we're very committed to ensuring that our businesses have competitive tax rates and the announcement by the Labor Party last week means that every business in the country from the smallest corner store baker, to the largest business in the country – all of them will have higher taxes under the Labor Party. That's not good for growth in the economy, that means people will be getting, states will get less GST revenue than they otherwise would because higher taxes will slow growth in the economy.
LANDERS:
Alright, the Treasurer, thank you very much for talking to AM this morning.
TREASURER:
Thanks very much Kim, great to be with you.