Tambor government has introduced a new formula to ensure that each state has at least as much fiscal capacity as the new state or state of Victoria.
On Thursday, the government announced a major reform of the GST (goods and Services tax) allocation formula, promising that no state would get worse and that it would inject an additional $9 billion in federal funds over a decade. To ensure that no state can retain GST taxes below the fixed benchmark.
Currently, the GST allocation is designed to allow wealthier states, such as New and Victoria, to support poorer states such as Tata, and key government services are aligned to the highest standards.
But at the height of the mining boom, the old distribution system led to a fall in Western Australia`s share of GST that it could retain to just 30 percent, as it supported the rest of Australia.
Under sweeping reforms-the biggest since the launch of the GST in 2000-government will lock up 70 percent of the allocation for each state in 2022 and rise to 75 percent by 2024.
Treasury Morison told reporters on Thursday in the Capitol building: "For a long time, everything is downwind. People can predict what`s going on to a great extent. The problem here is when the GST system is built. Never thought about how to deal with the enormous impact of the mining boom."
However, as more money flows back to Western Australia and New York, the move is expected to raise opposition from other states.
To prevent this reaction, the government has promised a permanent federal subsidy that will worsen in no state.
The plan will cost the federal treasury about 9 billion yuan over the first 10 years, while future growth will be linked to the overall increase in GST.
None of this money is tied up, that is, the state government can be used to provide services in the state (including schools, hospitals, roads and railways) in the way they see fit.
Government will now seek agreements with states and territories.
But Morrison said that even without the full cooperation of the states, government will still legislation. "there is no dispute that the Federation can act on its own." He said。
Western Australia is expected to be the only state to retain less than 70% of GST in the next fiscal year.
The GST, which states and territories are expected to receive $67.3 billion in fiscal year 2018 / 19, increased to $112.25 billion in fiscal year 2028 / 29, including federal subsidies.
Since the introduction of GST in 2000, there has been no significant change in the system of sharing GST (called horizontal fiscal equilibrium).
The new benchmark will be transformed into a new standard within eight years, which will ensure that all states and territories have at least the same fiscal capacity as new or Victorian states (whichever is higher).
The government rejected the recommendation of the Productivity Commission`s review to pay "averages" to states to achieve equity, which Morrison said would leave the smaller states behind.
Federal and state finance ministers meet in September and are expected to reach a final agreement by the end of the year.
