Mining and Heavy Industries

GST review good for mining states

Minerals Council of Australia boss Brendan Pearson has praised the Turnbull Government’s move for an inquiry into the distribution of GST revenue across states.

Pearson said the current horizontal fiscal equalisation (HFE) system, which underpins the distribution of GST revenues to the states and territories, was unfair to states who promoted resource developments.

“The current system is not working to support the full realisation of Australia’s economic potential,” Pearson wrote late last week.

Pearson said the purpose and goals of HFE were valid, but the council believes changes to other policies over the last 15 years “have arguably compromised the original intent of the HFE system”.

If left unchanged, Pearson warned, the system could become a “handbrake” on economic growth.

“A priority area for reform is the treatment of revenues from minerals and energy development,” he said.

“Current approaches punish rather than reward state governments that seek to expand their revenue base through the attraction of minerals development.

“Conversely (and perversely), state governments who actively reject minerals development (through the imposition of exploration and production bans) are effectively rewarded through the higher distribution of revenues,” he added.

Pearson said Victoria, which has banned uranium exploration and new gas exploration, and “is phasing out coal gas generation,” has earned more than its fair share of GST revenues, while Western Australia, viewed as one of the most mining-friendly provinces on the planet, has lost out.

The Mining Council boss was responding to an announcement from Federal Treasurer Scott Morrison on April 30.

Morrison ordered a Productivity Commission inquiry into the HFE and GST scheme, which was originally agreed to in 2000.

“I recognise the strong advocacy from Western Australian Coalition MPs and Senators in calling for this review,” Morrison said.

“They have been effective voices for their state in government.”

Prime Minister Malcolm Turnbull was asked about the review on ABC radio in Perth on Tuesday, and said he understood the frustration of Western Australians.

“When Western Australians see they’re getting on a per capita basis 30% … of the GST you can entirely understand why they feel that is unfair,” Turnbull said.

“But what we need to do is to ensure that the Grants Commission system works fairly and effectively and that it enhances productivity. That’s the goal.”

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