Wednesday, 20 March 2024

Public Accounts and Estimates Committee

Report on the 2021–22 and 2022–23 Financial and Performance Outcomes

Michael GALEA (South-Eastern Metropolitan) (17:35): I rise tonight to speak on a joint committee report tabled today, the Public Accounts and Estimates Committee’s financial and performance outcomes report. PAEC has an important role to play in monitoring the state budget, and the state budget is something which rightly is of interest to all members here. It is what leads me to welcome the news from the Commonwealth Grants Commission last week that Victoria will be getting more of a fair share of the GST revenue which this state generates. The horizontal fiscal equalisation model is the process by which the GST rate in wealthier states, such as Victoria and New South Wales, is partially redistributed to poorer states. For almost 100 years the CGC has operated in such a way to distribute funds across the country, a role which expanded upon the implementation of the GST. Currently for every dollar Victoria spends, we receive just 85 cents back. That is a shortfall of more than $4 billion each year that we are subsidising other states, so I welcome the recent determination by the CGC that it will lift up that rate to 97 cents back in the dollar returned for every dollar spent here.

From the start of the millennium to 2018, through the CGC and the GST redistribution Victoria has been a generous benefactor to the tune of $24.132 billion to other states. In that period, this state contributed 24.9 per cent of GST revenue, yet received just 22.4 per cent back from the GST pool. This year will see an extra $3.68 billion, but it is still a shortfall. There are limited ways in which states can raise their own revenue outside of the federal structure, and even less ways they can do so progressively. Victoria is also in a unique situation compared with other states, especially when it comes to mining royalties which states earn, which per person works out to being $48 in Victoria and $1379 nationwide. In light of this determination, New South Wales threw their toys out of the pram, attacking Victoria in the process as a welfare state. This is an assertion that is as bizarre as it is flagrantly wrong, as even under this new determination Victoria is still being short-changed by hundreds of millions of dollars a year compared to the revenue that we bring in. In this determination, Queensland are now switching from being a GST beneficiary to a GST contributor, and this is despite any federal payments towards the Brisbane Olympics being specifically excluded from consideration as per the directives the CGC received ahead of this year’s determination. We know that WA have demanded special treatment, as their share back of GST has plummeted in light of their mining boom, but I do not recall that state complaining all too much throughout the 20th century when they were the beneficiaries of Commonwealth Grants Commission largesse.

The federal government has sought to stopgap this by the no-worse-off guarantee, which this year is pumping $6.2 billion towards WA, a state which is already in a fortuitous situation courtesy of those aforementioned mining royalties. The no-worse-off guarantee is also benefiting Victoria, although it is after all a temporary measure. Federal spending decisions are ultimately a matter for the federal government, and we know that over the past decade Victoria has received well under its share of federal infrastructure funding, largely attributable to the former Morrison government. In the near term, the no-worse-off guarantee needs to be made permanent. Further reform should be considered to ensure that the states that are leading our nation’s economy, such as Victoria, are not penalised for their success. It is time for us to have a discussion about Victoria getting its fair share of GST revenue: not 85 per cent, not 97 per cent, but 100 per cent.