3 October 2018
Transcript - #2018028, 2018

Press Conference, CFFR, Melbourne

Subjects: Council on Federal Financial Relations.

JOSH FRYDENBERG:

Good afternoon.

Today, Commonwealth, state and territory treasurers had a very constructive meeting. The meeting occurred against the backdrop of a growing and strong Australian economy. With the National Accounts revealing that growth was at 3.4 per cent through the year, we've recently had our AAA credit rating reaffirmed and our budget is coming back to balance in 2019-20, a year earlier than expected.

We had a very good discussion around the GST, including the GST on feminine hygiene products, the distribution of the GST, following the Productivity Commission’s recommendations, as well as on other issues including health, education and Indigenous remote housing.

The good news for women across Australia is that today, we have agreed to remove the GST from feminine hygiene products. Common sense has prevailed and this reform, led by the Federal Government, is long overdue.

We had a good discussion around the distribution of the GST and in particular, the Commonwealth's plan to legislate so that we put in place a floor of 75 cents in the dollar for any state and that the Commonwealth will add an additional $9 billion to support the states and territories which will leave every state and territory better off. And these additional payments will not come at the expense of existing commitments and payments from the Commonwealth to the states and territories.

And we discussed health and education and we will work at officials level, as quickly as we can, to reach agreement on a schools funding deal. Are there any questions?

JOURNALIST:

The states were outside a moment ago saying that they want this promise you have made that no state is worse off to be put in legislation. Why aren't you doing that?

JOSH FRYDENBERG:

Well, what the states want is for us to run a parallel scheme; the old system and the new system. And we don't want to run a separate set of books. We want to run a new system, which will be bedded down in legislation, providing certainty to the states and territories, which will leave them all better off.

The situation had become unsustainable where Western Australia, following the mining boom, had only received 30 cents in the dollar, whereas Tasmania, with one fifth of the population, and the Northern Territory with one tenth of the population of Western Australia, were receiving more revenue than Western Australia.

This actually threatened the viability and the integrity of the GST system as a whole. So, the Commonwealth can move, via legislation, to change the distribution of the GST and we will do that in a way that leaves no state or territory worse off. And we're using the numbers put together by the Productivity Commission with the support of the states and territories.

JOURNALIST:

Projections can be wrong. So right now, no states or territories are worse off, but projections can be wrong and promises can be broken. Why not put that piece of wording in legislation and then reassure the states that your words will match with the actions?

JOSH FRYDENBERG:

Well, quite clearly, the projections show that every state and territory will be better off. And what's important is, not only is there $9 billion going in over the decade but following that, you've got more than a billion dollars a year going into the states and territories in perpetuity.

The states have never had a more generous partner on the GST than this Coalition Government. And Scott Morrison, then Treasurer, now Prime Minister, has worked very hard to get a deal that is fair and that is sustainable. And that is why it's received the support, for example, of the Western Australian Labor Government, with the Premier of Western Australia saying today that Labor should just get behind it and support it.

And let's not forget that Bill Shorten just a few weeks ago in Western Australia committed to supporting the Coalition's GST reforms and called on us to legislate it where he would support it. So, he can't say one thing in Western Australia and another thing in Melbourne and Sydney. He can't walk both sides of the street.

This is a test for Bill Shorten's credibility. This is his chance to join us in passing legislation that will leave every state and territory better off.

JOURNALIST:

So, why not just agree to this one demand from the states? We’ve got Queensland, New South Wales, Victoria, South Australia, Tasmania all up-front, make this one demand, why not just agree to it?

JOSH FRYDENBERG:

Because under our deal, all states and territories will be better off. That's the clear evidence we've put to the states and the territories; that's based on the Productivity Commission's projections; that is based on the data that they have from the states and territories and we are putting in additional money in perpetuity.

I would like to point out that not only are the states getting this additional $9 billion, but they’ve also got an additional $6.5 billion over the forward estimates as a result of the actions that the Commonwealth have taken to extend the GST to online activities and also our greater compliance activities. This is a good result for the states and it's a good result for the integrity of the GST.

But let's not lose sight of what has been agreed today. What has been agreed today is to remove the GST from feminine hygiene products. That is good news for women right across the country. It's common sense and it's a reform that has been long overdue.

JOURNALIST:

Treasurer, on the tampon tax, why will it take until January to remove the GST on tampons and feminine hygiene products? Supermarkets can change prices at the drop of a hat. Why can't they do it sooner?

JOSH FRYDENBERG:

Well, there’s two stages to it. Firstly, we need to consult with the states and territories, as well as broadly with the public on the definition of feminine hygiene products and we're going to look to do that as quickly as possible. Then you also need to ensure that the system and the transition is smooth.

And so the 1st of January, the tax will be removed and this will be good news for Australian women.

JOURNALIST:

When Scott Morrison was Treasurer, he was saying an intergovernmental agreement would have been enough, but now you’re saying legislation is needed. Why the change there?

JOSH FRYDENBERG:

Well, there are always various options. You can have an intergovernmental agreement or you can have legislation and Scott Morrison and myself and the Government have decided that legislation will give us the greatest certainty. So, this is what the states need. We need to remove the volatility in the system and increase its sustainability and that's what we'll do through the legislation.

TREASURER:

The states are asking for exactly that certainty in knowing that they will never be worse off, so why not include that in any legislation?

JOSH FRYDENBERG:

The states are going to be better off and the numbers from the Productivity Commission show that and the additional $9 billion we are putting to the states and territories is coming out of the Commonwealth Budget on top of another $6.5 billion that they're getting from the extension of the GST to online services.

Let's not forget that the GST has grown significantly since it was first introduced. It's grown by about 175 per cent and it will grow by another 65 per cent in the decade ahead. So, you take Victoria, who are $425 million better off as a result of our GST reform; they get 45 per cent of their revenue today from Commonwealth payments and 25 per cent from the GST. This will grow over time.

JOURNALIST:

Do you need the states’ approval?

JOSH FRYDENBERG:

No, we don't.

JOURNALIST:

And do you agree though, that as the point made outside, do you agree forecasts can be wrong?

JOSH FRYDENBERG:

Well, I agree that the Productivity Commission's forecasts are the best guide for us going forward. And that those forecasts are based on data that the states have provided themselves and state treasurers had an opportunity to go before the Productivity Commission.

And we recognise at a federal level, Scott Morrison, then Treasurer, recognised how important it was to provide a system that was more sustainable into the longer term and that is why we've come up with a solution, which produces better outcomes for all states and territories and we, as a Commonwealth, are putting more in the pool to benefit the states and territories.

JOURNALIST:

Why are your figures for Victoria, what Victoria would get under the GST so different to what Victoria is saying that they will get?

JOSH FRYDENBERG:

You should ask Victoria that. The reality is based on the figures of the Productivity Commission, Victoria was $425 million better off as a result of our GST reforms. This is good news for Victorians.

We're contributing more and more money into Victoria for infrastructure projects like the $5 billion for the airport rail link; the $3 billion that's just sitting there for Daniel Andrews or Matthew Guy to build the East-West Link.

We are contributing billions of dollars into Victoria to strengthen their infrastructure. We're providing 45 per cent of all revenue through Commonwealth payments; we're increasing the funding for hospitals and for schools and we're ensuring that under the GST that we have a fairer system that ensures its viability and integrity into the future. Thanks very much.