12 October 2011
Mr MORRIS (Mornington) — For the information of the house today I wish to raise some matters that arise from part 3 of the report of the Public Accounts and Estimates Committee, which I had the honour of tabling in the house during the last sitting week.
The third volume completes the estimates process for the year, an exhaustive and indeed sometimes exhausting process. This volume includes a review of budget papers, government sector output initiatives, government sector asset investment, a chapter on revenue, a chapter on general government expenditure, a chapter on commonwealth‑state relations and, importantly, a further chapter on responding to environmental challenges, including the number of natural disasters that the state has faced in recent years.
This afternoon I want to speak specifically about revenue aspects of the report and in particular about commonwealth‑state relations. I make the point that none of this subject matter is headline‑grabbing stuff, although fortunately it did get a bit of an airing at the so‑called tax summit last week. I commend the Treasurer for raising the matter in that context.
The ongoing financial viability of the state is linked to our ongoing capacity to deliver services, to provide infrastructure and to cope with population growth. If you do not cope with population growth, do not keep the services going and do not keep up the infrastructure program, that has a direct impact on living standards. All these things depend on a sustainable and growing revenue stream for the state.
We do not of course raise revenue in isolation from the rest of the country; any taxes that might be levied by Victoria could well impact on our competitiveness within the federation. I regard that competitive tension as one of the great strengths of our Australian structure of government, and we certainly need to guard against lessening that competitive strength in the context of Council of Australian Governments (COAG) harmonisation. It would be very easy to move to a situation where competition was lessened and where it effectively became a limitation on the market. We do need to guard against that.
As is the nature of these things, with strengths there are always challenges, not the least of which is the vertical fiscal imbalance which has become institutionalised in the Australian system. While there are imbalances across the system, these are particularly apparent in the broad revenue opportunities available to the commonwealth to meet relatively small demands; in contrast to this are the severely proscribed revenue and rapidly rising demands placed upon the resources of this and every other state in the commonwealth.
The committee report includes some figures at page 139. It identifies the total revenue of the general government sector as standing at some $47.4 billion, but when you look at where that revenue comes from you see that total state taxation accounts for only $15.4 billion, which is less than one‑third of the total.
Almost $8.9 billion comes in the form of specific purpose grants for activities undertaken by the state at the behest of the commonwealth with the intention of delivering policy outcomes sought by the commonwealth. As we know, many of the outcomes that the commonwealth wishes to achieve are consistent with local objectives; however, in a situation where there is a difference of opinion on policy direction, there is a potential for a risk — and I do not paint it as any stronger than that — to the state’s revenue.
The allocation of the GST is an issue in itself, and I think it underlines starkly the difficulties that arise from the state’s dependence on external revenue sources. That applies to all states. As the report identifies, adjustments to the manner in which the GST is allocated will result in a reduction in Victoria’s share of $4.1 billion over five years.
In an era when the commonwealth government has a view that jurisdictional and functional boundaries are mere inconveniences and a government enjoys rapid revenue growth to fund expansion, the very sovereignty of Australian states is at risk. I commend the committee report to the house.
Legislative Assembly 12 October 2011
Printer Friendly Version...