GST deal ‘the worst policy decision this century’: Turnbull backbencher

A former member of the Turnbull government has attacked its decision to overhaul the way the $100 billion GST is shared among the states and territories, declaring it the worst public policy decision of this century.

Eric Abetz, who is now the treasurer of Tasmania, on Wednesday used a Productivity Commission hearing into the 2018 GST deal to label it a “classic example” of a government fixing something that was already working perfectly well.

The Productivity Commission is holding public hearings this week in response to its interim report that labelled as a mistake the 2018 deal to alter the annual allocation of the GST between the states and territories to protect WA from a collapse in its share of the tax.

The deal, initially expected to cost less than $5 billion, is now forecast to deliver a $60 billion blow to the federal budget by the end of the decade. While implemented by the Morrison government, the Albanese government has promised its retention despite the Productivity Commission’s findings.

All states and territories except WA want the deal changed, either returning to its pre-2018 operation or through reforms to its current operation.

Abetz, who now oversees the weakest budget in the federation, was a member of the Turnbull government when it announced the GST deal.

He said it had been put in place as a “political fix” rather than to address any economic or fiscal justice issues. The modelling underpinning the proposal had proven flawed, leaving the entire federation in a poor position.

Mirroring previous comments by independent economist Saul Eslake, Abetz was damning in his criticism.

“[It is] the worst public policy decision of the 21st century,” he said.

“If it isn’t broke, don’t fix it. This is a classic case of something that shouldn’t have been fixed.”

Earlier this week, NSW Treasurer Daniel Mookhey warned that without a change to the deal, the living standards for every person in the country bar those in WA would fall.

A key part of the 2018 deal was the creation of so-called “no worse-off guarantee” payments to non-WA administrations to ensure their overall GST funding levels were maintained. That guarantee has been extended to the 2029-30 financial year.

New Victorian Treasurer Colin Brooks noted that all states would have to account for the end of the guarantee in next year’s budgets, potentially punching holes worth billions of dollars in government bottom lines.

Victoria has come under fire from some states, particularly resource-rich jurisdictions, for not developing its local gas reserves, arguing that if it had done so it would be reaping extra revenue and have a stronger domestic economy.

But Brooks said while Victoria had banned onshore fracking, to protect its agricultural areas, it had enabled offshore gas projects and critical mineral exploration.

He said ultimately some states had more natural resources to mine.

“I don’t think it’s fair to criticise us for not having the same mineral opportunities as WA,” he said.

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