Doorstop interview: Productivity Commission Report in to GST

JAY WEATHERILL, PREMIER OF SOUTH AUSTRALIA: Morning everyone and it's great to be here with the Deputy Leader of the Labor Party, hopefully Deputy Prime Minister in time. And also Senator Alex Gallagher and also Nick Champion, the Member for the seat of Wakefield. We're here today to talk about the proposed changes to the system of distribution of GST. This is the system that ensures essentially a fair go for the distribution of resources around the nation. It's really what distinguishes our country from other countries like United States of America. It's the system that means that wherever you live in this nation, you should expect a similar level of services. And it's a critical part of what South Australians and Australians regard as the fair go. What we know is that there've been pushes to change that system of distribution of GST. Changes which would mean that smaller states like South Australia, Victoria and other jurisdictions would be massively disadvantaged. We also know the Productivity Commission has a report which has been published in draft form but we now know is very close to finalisation. And in the draft report, it proposes cuts to South Australian funding in the order of $557 million each year. What that means for South Australia is cuts equivalent to 5,300 public school teachers here in South Australia. Or to put it another way, 5 000 nurses or 4 300 police officers or 2 400 doctors. That's how deep these cuts are. It would put a massive hole in the recurrent resources necessary to fund basic essential services for South Australia. Now the Productivity Commission report was supposed to be released before the March ‘17 election. What we now know is that the Federal Liberal Government have delayed the release of the report to after the state election. Now this is deeply suspicious. And what we call on today is for all South Australian parties to require that the Federal Liberal Government release that report in the lead up to the election. It's a critical opportunity for this to be debated and for the views of the South Australian community to be put in place. In particular, we call upon Steven Marshall to demand that this report be released before the state election so that this can form part of the political discussion that occurs in the lead up to the state election. We're also deeply suspicious of the decision to defer this report. We have a question for Steven Marshall: did he have any discussions? Did his office have any discussions with the Federal Liberal Government about the delay in the release of this report? We know that it is inevitable that the Federal Liberal Government are going to pursue this reform in some form or another. To put maximum pressure on the Federal Liberal Government to abandon this reform, we need to have it as part of the state election campaign. But in any event, it is only the Labor Party that will stand up against these cuts. You can't rely upon the Liberal Party. The Liberal Party here in South Australia is just a branch office of the Federal Liberal Government. You can't rely upon Nick Xenophon. Nick Xenophon, in the Federal Parliament, voted for cuts to the education funding for South Australia. $210 million over the next two years was voted for by Nick Xenophon. The only party that will stand up for South Australia to resist these cuts is the Labor Party of South Australia. I'd now like to invite Tanya Plibersek to say a few words. Tanya has been a powerful advocate for South Australia and for a fair go in the distribution of the nation's resources. Tanya.

TANYA PLIBERSEK: Thanks very much and it is such a pleasure to be here today with my federal colleagues, Nick Champion and Senator Alex Gallagher, and most importantly, my very good friend, the Premier of South Australia, Jay Weatherill. 

Just last week, we heard Scott Morrison try and slide out a very quiet story at a time when he thought everybody would be at the beach not paying attention because it's summer holidays, that the Productivity Commission's final report on the GST redistribution would be delayed until after the South Australian election and after the Tasmanian state election. Now there is only one reason that Scott Morrison and Malcolm Turnbull want to delay the release of the Productivity Commission's final report on GST redistribution and that's because every state and territory, bar WA, will lose, and lose big time under the proposals in the draft report that are likely to go into this final report. Now, the Premier has gone through the impact on South Australia - a $557 million cut in the first year alone. That's the equivalent of thousands of front line public service positions. Thousands of teachers, nurses, police. It's the equivalent - if you look at hip replacements - of 35 000 hip replacements, or 37 000 knee replacements. The sort of money we're talking about would make a huge difference to the lives of South Australians. And the only reason to keep the final report secret until after the state election is because the Federal Liberal Government doesn't want South Australians to know what a huge hit they're facing. Now don't forget, this hit comes on top of $210 million cut from South Australian schools by the Federal Liberals. About $150 million cut from South Australian universities. About $140 million cut from South Australian hospitals by the Federal Government. The extraordinary thing about this is that you've got state Liberals here in South Australia who refuse to stand up for South Australians and demand that the final report be made available so that South Australians can make their minds up about whether they want a Liberal Government here in South Australia to back in the cuts that the Liberal Government's making in Canberra. If people think that Nick Xenophon will protect them from these cuts, they are dead set 100 per cent wrong. Because it was Nick Xenophon who wrote before the last federal election, wrote to teachers saying there's no way that he would support cuts to the education system, and then voted for $210 million of cuts to South Australian schools. So, what you need is a Liberal opposition that's prepared to stand up to Canberra. We know that we don't have that. You need Nick Xenophon to stand up against the cuts and despite what he says before an election, we know from his practice that he won't stand up after an election against cuts to South Australians. The only person that will stand up is Premier Jay Weatherill and the only party that will stand up against Federal Liberal cuts is the Australian Labor Party.

JOURNALIST: Is it not ultimately a moot point anyway because it would require a-

JOURNALIST: Well, I mean either, or both of you, I don’t- Because changes in the system would require an agreement with COAG which the small sector wouldn't agree to, or legislation through the Parliament which a majority of the Senate would block. So, isn't it really a moot point here?

PLIBERSEK: Well that's not clear at all, in fact, it's not clear that other states and territories would have to agree. And that's one of the great problems with this proposal. If the Federal Government rammed through these changes, every state and territory will lose, bar Western Australia. Now, we know that Western Australia does have a genuine problem at the moment and that's why Federal Labor has said that we would put $1.6 billion on the table to invest in job creating infrastructure in Western Australia. We would work with the McGowan Government to make sure that we are investing in infrastructure that improves the quality of life of Western Australians and creates jobs. What the Federal Liberals want to do is tell one story in Western Australia and tell a completely different story here in South Australia. They want to say to Western Australia, we're going to fix the formula so you get more, we're going to take it from the other states and territories and give you more, but they're not prepared to face up to that in South Australia and in the other states and territories that will also lose. They want to tell two different stories. I might let the Premier add to that.

JOURNALIST: ...what is the mechanism...sending a message to WA with no ability to really make any changes?

WEATHERILL: That's right and that's not our advice. Our advice is that this can be actioned outside of the COAG agreement and it's very alarming for us that that provision exists.

JOURNALIST: What is the administratively (inaudible)?

WEATHERILL: The Treasurer has the capacity to deal with this.

JOURNALIST: But if you can acknowledge that there's a problem in WA, as Ms Plibersek did, then can't you also acknowledge that the system needs changing?

WEATHERILL: No. Because we think it's a fair system, and the problems that Western Australia have gotten themselves into are largely a product of the Barnett Government's mismanagement of their finances. I mean they were spending like drunken sailors during the mining boom and then it all came to a crashing halt and they've got themselves into terrible trouble. I mean this is one of the most efficient and fair systems of distribution of resources to equalise various states and territories anywhere in the world. It's been acknowledged as such and we've had our own reports which back that up. In fact it would take us backwards in both equity and efficiency if we were to have a different system. So, in fact if you look at the draft report it largely acknowledges that. It suggests that this is a good system but poor old WA have got themselves into trouble and somehow we should remedy that. Well it's not an adequate or an intellectually rigorous chain of reasoning, so we certainly don't support any - we don't support that analysis that somehow there's a problem with the system.

JOURNALIST: Premier?

WEATHERILL: Yes.

JOURNALIST: Do you think WA does have a legitimate concern?

WEATHERILL: No. Not about the system of GST distribution. What they do have is a legitimate problem, and that's why Federal Labor is having to dig them out of it.

JOURNALIST: When it comes to your position on the size of the GST, are you happy with the GST remaining at 10 per cent?

WEATHERILL: Yes, of course. I mean what I say about the distribution of resources in this country is that it should be on the basis of a fair go. Imagine if there were no states and territories. Would it be seriously contended that you would have a different standard of health care or education services in Western Australia as opposed to South Australia? And that’s effectively what you're talking about here if you permit these changes to occur. You'll have one state with dramatic resources - or because they happen to live close to a big mine - as opposed to another state that doesn't. And that's just not the Australian way. It might work that way in the United States but it doesn't work that way in this country and neither should it.

JOURNALIST: You spoke about that State Opposition’s involvement in this, but surely that's pretty limited given it's a Productivity Commission report and something that's coming out of the Federal Government (inaudible)?

WEATHERILL: Well let's test that. Ask Steven Marshall today. Does he support my call for this report to be published before the state election? And get him to answer this question: what role did he play in the deferral of the release of the report? Because if he was serious about actually having this report or these reforms abandoned, he would plonk it right in the middle of a state election campaign where all parties would train their guns on this proposal and destroy it. What he wants to do is to slide out the back and do some business after the election if he's around.

JOURNALIST: Is this just another case of South Australia being the victim?

WEATHERILL: No it's a case of South Australia standing up for the principle of a fair go in a nation that has a long and proud tradition of a fair go. I mean why should there be a different standard of service in one part of the country as opposed to another. Why should for instance in the Northern Territory that has limited revenue raising and massive expenses dealing with remote Aboriginal communities, not have the support of the rest of the nation to create it? I mean this principle of horizontal fiscal equalisation or the way in which we distribute resources on a fair go basis has been with us since the 1930s in one form or another. It was basically Sydney and Melbourne that bankrolled the whole of the nation, opened up the nation. Western Australia were a net receiver up until only a few years ago. And then they hit the jackpot and all of a sudden they want to keep the resources and not share them around the nation. I mean it's intellectually dishonest for that proposition to be maintained, that somehow this system should be changed. It is one of the bedrocks of what makes Australia. We're all Australians and nobody should be left behind.

JOURNALIST: But getting - is it 33 or 34 cents in the dollar? - couldn't Western Australia make that same argument about fairness as you are that they're not getting a fair go?

WEATHERILL: If you look at the revenue they raise per capita, it's the highest in the nation. And the only reason it's that high is because that they happen to be the beneficiaries of the natural endowments that exist within their state. And I don't think Australians believe that the level of services and support that exist in this nation should be determined by how close you live to a mine. And to show you how intellectually dishonest it is, why does any money travel past the Pilbara? Why doesn't it all stay in the Pilbara? Why does it go down to Perth? If the money is generated there it should stay there by that chain of reasoning. So we just don't accept that argument. And Western Australia have been the beneficiary of being bankrolled for decades when it was a remote and expensive place to run, where the rest of the nation basically kept them going, and if South Australia were to become through some benefit associated with a mining boom, a net receiver of resources, we would gladly share the resources around the country. That's how the system works.

JOURNALIST: Does Federal Labor support any change to the current arrangements for the GST and if not, how do you go about appeasing Western Australia?

PLIBERSEK: Well we've got a very clear plan for Western Australia. It's a $1.6 billion plan that deals with the current issues that they have. I mean the Premier is right to say the previous Western Australian Government mismanaged the State's finances, but we have to deal with the situation that we have now, and we've been working very well with the McGowan Government on the sort of job-creating infrastructure projects that we would invest in to make sure that as the construction phase of the mining boom softens, as more people are looking for work, that we have those infrastructure projects for those people to work on, and we have the added benefit of those projects improving the quality of life for people living in Western Australia as well. We don't think we should take money from other states and territories to meet the need in Western Australia at the moment. We acknowledge that there is a need, we are prepared to put money on the table to meet that need, we can do it cooperatively with the Western Australian Government but not at the expense of South Australia and the other states and territories. That's the key difference between Malcolm Turnbull's plan and Bill Shorten's plan. Bill Shorten's plan addresses the need in Western Australia but not at the expense of other states and territories. Malcolm Turnbull has a secret plan to take money away from every other state and territory and give it to WA.

JOURNALIST: That $1.6 billion though, that's money you could be spending in other states, isn't it?

PLIBERSEK: We acknowledge that Western Australia has a need for this infrastructure investment to keep jobs growth strong, to keep the economy strong. We acknowledge that there is a need there. We don't think that need should be met by ripping money out of South Australian schools and hospitals and TAFEs and universities, out of South Australia's public transport infrastructure and roads to give it to WA.

JOURNALIST: At the mid-year budget review last, oh a fortnight or so ago, the Treasurer said that they would make up for the lack of the bank tax going through by efficiency dividends, so essentially couldn't the same be done here? Isn't it scaremongering to say that there will be all these dramatic cuts to frontline services?

WEATHERILL:  $557 million per annum is just the scale of it. It's enormous. We were talking about there was $370 million over four years. This is $557 every year. I mean the scale of it is absolutely gargantuan. And that's just one proposal in the report, it's not the most alarming - if they went to per capita funding it would be even higher, the cut. So it is a serious proposition that's being advanced in this report and it should be debated because it's incredibly relevant to the state election. I mean, what are we going to do in the context of not having $557 million hanging around.

JOURNALIST: Can I just ask the acting Opposition Leader also, just in terms of the mismanagement that you mentioned in the WA economy from the previous government - can you just provide an example or two – about the most stark examples of mismanagement?

 

PLIBERSEK: I think the Premier's general point was right. The previous conservative government in Western Australia behaved as though the boom would go on forever. They made no provision for the future. They embedded permanent spending into the West Australian budget and Mark McGowan has come in as the construction phase of the mining boom is drawing to an end and is faced with the irresponsibility of the previous government.

 

JOURNALIST: Is the lag problem a bit of an issue with the GST arrangements because in effect, they were getting regular GST with windfall of mining revenues, and then it takes three years for that to wash through. Is that something that should be-

 

WEATHERILL: Can I address that? You know that. The Barnett Government knew that. They knew they had three years. And so what they do is they then wait for the adjustment to occur and then they complain about it - knowing all the time that they should have tucked away some of the windfall they had for three years. They should have a future fund that you couldn't jump over. And then they wouldn't be dealing with this issue. So, I don't think there is a serious criticism - in fact that very idea that you could keep the first three years' windfall was part of the equity, if you like, that jurisdictions like Western Australia would have otherwise been arguing for. They would have said there are some upfront expenses associated with the mining boom, so we should be able to keep the money. But in time, when the benefits start flowing through the economy, as they surely did, we will be able to better cope with the reduction in GST expenditure. The other thing that they do just to try and create the illusion that it is a much more dramatic redistribution of GST is they just look at GST for the question of looking at horizontal fiscal equalisation. The truth is that Western Australia, as all other states, get lots of other resources from the Commonwealth which are provided on a per capita basis. And so the position is not nearly as stark when you roll in all federal funding. It's just the GST is the swing item; it's the work of equalisation that’s done through the GST formula.

JOURNALIST: But so many electoral cycles are over three years and it will always be the impulse of a politician to spend the money they have to try and get re-elected -

 

WEATHERILL: I don't think - 

 

JOURNALIST: - that leaves those communities are in a bit of a problem because they are very likely to have this kind of black hole arrangement.

 

WEATHERILL: Collin Barnett used to come into these meetings, whenever we’d say boom, mining boom, sorry, you're not allowed to use the word boom, this is going on forever. It was delusional and deliberately so, so that they didn't have to grapple with those questions. And now the chickens are coming home to roost. So, we have no sympathy for the criticism of the distribution of GST. What we do have sympathy for is the plight of Western Australians who now find themselves in this difficult position.

 

JOURNALIST: The front page of The Australian today – conversations around people dipping into their superannuation to pay for their bills. Your take on that and is that a concern?

 

PLIBERSEK: Well, it was an extraordinary thing to see reports in the media today that there's been a five-fold increase in people accessing their superannuation for medical expenses over the last 6 years. And there's only one conclusion you can draw from that - the massive cuts to our hospital system, the continued freeze on GP, specialist and allied health services rebates, means that more and more people are reaching deeper and deeper into their own pockets to fund their medical expenses. Many Australians will remember a time when the greatest cause of bankruptcy in Australia was medical expenses. That's the reason, one of the main reasons that Labor introduced Medibank in the first instance, and Medicare because we believe that every Australian should have access to great quality health care no matter what's in their bank account but rather because as citizens of Australia, they are part of our great Medicare system. The fact that we see people reaching deeper and deeper into their superannuation for medical expenses is an indictment on the health funding cuts of the Federal Government.

 

JOURNALIST: So, just to be clear about the GST: Federal Labor's position is that no other state is going to be worse off?

 

PLIBERSEK: That is exactly right. The difference between Malcolm Turnbull's proposal is that every state and territory will be worse off to fix WA's immediate issues. Our position is that Western Australia does have some immediate issues it must contend with and we are prepared to put $1.6 billion on the table to make sure we are investing in job-creating infrastructure, improving the lives of Western Australians. Now, the sneaky thing about Malcolm Turnbull's proposal is he is keeping those cuts secret until after the South Australian state election and after the Tasmanian state election. Now, we know - for certain - that these cuts are coming because just today, Kelly O'Dywer - I think she is Acting Treasurer at the moment - said that the reason for the delay in releasing this report is because we need to work out how other states and territories will transition. Transition? That is code for cut. She needs to give more time for other states and territories to work out how they will be cut. It's an extraordinary admission from Kelly O'Dwyer today. 

 

JOURNALIST: Where would the $1.6 billion come from?

 

PLIBERSEK: Well, we have already identified well over $100 billion of improvements to our budget bottom-line. First of all, let's not proceed with a $65 billion big business tax cut. Let's not proceed with the $19 billion tax cut to people earning more than $180,000 a year. Let's do something about negative gearing and capital gains tax on real estate investments, saving $37 billion a year. We've identified billions of dollars of additional improvements to the budget bottom line through tougher crackdown on multinational tax avoidance, tighter requirements around high-income superannuation concessions - there's a range of improvements we have already identified. We can certainly afford the $1.6 billion that we would invest in supporting jobs and quality of life for Western Australians, not at the expense of South Australians, Tasmanians and citizens of every other state and territory.

 

JOURNALIST: What period is that 1.6 billion over, is it –

PLIBERSEK: It’s from the first year of a Labor budget, from 2019 onwards.

JOURNALIST: On another topic, what’s your reactions to the talks underway between North and South Korea today?

PLIBERSEK: Well of course I think the world is delighted that the North and South Koreans are sitting down together. I don’t think there’s any high expectations that the very large number of issues of contention between the North and the South will be resolved today or any time in the next few days. But it is certainly a positive step forward that talks that have been suspended for a number of years now have resumed. I think the world would breathe a deep sigh of relief if we see progress in the coming months. 

 

JOURNALIST: Premier, how far are you going to go in this fight? Will we see you crash tackle Scott Morrison, figuratively speaking, like you did Josh Frydenberg over energy? How far are you going to take this?

 

WEATHERILL: We will do everything within our power to resist these cuts. We’ve demonstrated that we’ve been prepared to stand up to Canberra in the past – whether it’s renewable energy, whether it’s health care cuts. All of those questions demonstrate that we are the only party that can be relied upon to stand up for South Australia.

 

JOURNALIST: Did you get invited to any weddings today?

 

PLIBERSEK: [laughs] No, but I would say, just a final thing, I am delighted that for many people, this is the first day that they can officially marry. I know that there were a few very early weddings that were given special dispensations on the usual one month waiting period. But there will be a large number of same-sex weddings today. Many of these people have been waiting years or even decades to marry, and of course I wish them the very best.

 

JOURNALIST: Just back on to Medicare, if you don’t mind, and super. What do you propose can be done about that?

 

PLIBERSEK: Well let’s stop the constant cuts and attacks on our health system. This is a government that, in its first budget, cut about $50 billion from our public hospitals system. We’re seeing the results of that in increased waiting times for elective surgery, increased waiting times in emergency departments.

 

On top of the massive cuts to our hospitals system, we see the continued freeze on GP rebates, on specialist rebates, and on allied health rebates. That means it’s more expensive to see a doctor. More people are putting their hand into their own pocket more often to get necessary medical attention.

 

This Government’s also tried to increase the costs of medicines. We were fortunate that we were able to hold back that additional attack on out of pocket health expenses.

 

But you don’t need to be a brain surgeon to work out how to keep costs more reasonable in our health system. Stop the cuts. Stop the attacks on our world-class public health system.

 

JOURNALIST: More subsidisation for services?

 

PLIBERSEK: Well, fewer cuts.