Squealing may mask a hidden GST agenda

Despite the faux hysterics from state Liberal premiers about the federal Budget, it’s safe to say they’re in on the act, most likely with the goal of revisiting the GST.

Plenty of Australians are suckers for embarrassing overacting in daytime soaps and semi-scripted reality shows. But even those faux drama queens pale into insignificance next to the Liberal state leaders’ unconvincing collective dummy spit in response to the federal Budget this week.

The Budget revealed cuts to health and education funding for the states and territories commencing in four years’ time (which is conveniently after the next federal election).

By 2024-25, the Federal Government plans to be spending $25 billion a year on schools (compared to $30 billion) and $25 billion a year on hospitals (compared to $40 billion). This is an $80 billion cut on the amount previously promised by Labor.

State and territory leaders lined up to express their considerable displeasure at being raided to improve the feds’ bottom line in 10 years’ time.

Queensland LNP Premier Campbell Newman, who’s down in the polls and facing a state election in the first half of next year, says the cuts will not “be taken lying down”.

Victoria’s Liberal Premier Denis Napthine, who has an even more imminent election on November 29 this year, vowed “to absolutely shake the Federal Government from their top to their bottom so that they understand their responsibility to meet their share of public hospital payments”.

And newbie NSW Liberal Premier Mike Baird accused the feds of outsourcing their budget problems to the states. Baird will convene an emergency meeting of the state and territory leaders this weekend to discuss the cuts. Incidentally, his state election is on March 28, 2015.

Tasmania’s Will Hodgman and Western Australia’s Colin Barnett appear much more sanguine about the cuts. This may be a product of their next elections being some way off.

Depending on whether one buys their amateur theatrics, the states are either being wedged by the Federal Government to initiate a national conversation about increasing the rate or coverage of the GST, or the state Liberal governments are in on the act.

The smart money is on the latter explanation. Exactly two weeks ago state and territory leaders were in Canberra for the latest Council of Australian Governments (COAG) meeting with the Prime Minister.

At that meeting the leaders considered the draft terms of reference for a white paper on Reform of the Federation and draft themes for a white paper on taxation reform. Through these processes, Tony Abbott wants to see “sensible adjustments” to funding arrangements, while Joe Hockey wants to “realign” the federation.

This is clearly code for revisiting the GST and perhaps repatriating some other revenue-raising powers back to the states and territories.

It’s not too long a bow to imagine Abbott holding a private meeting with the Liberal premiers – outside of COAG – to advise that they’d take a haircut in the Budget but would be the beneficiaries of federation and taxation reform. That is, play along and you will be rewarded.

The other clue to this being the true state of play is the states protesting that they only want a fairer share of the existing GST pie. This is an unsustainable position if the pie remains static.

For every state that gains more GST revenue there will be another that gets less, so the only way for all states to get more (in actual terms) is for the overall pie to grow. And to do that the GST must be increased or broadened.

The states and territories know this. They also know they must play the reluctant bride if they are to avoid the worst of the opprobrium for requesting that the GST be increased.

Just the right amount of squealing will make everyone look good, even Abbott.

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