Nigel McBride, CEO Business SA
As a proud South Aussie, I wish our state didn’t need the $1.44 the Federal Government returns to our state for every $1 of GST we contribute. I wish the strength of our economy, driven by robust population growth, rising demand, inbound investment and low unemployment meant we could cope without that subsidy. Regrettably, that’s unlikely to change for some time.
While we all aspire for a stronger local economy, I’m not suggesting that South Australia should apologise for receiving our current share of a national funding formula based on long-standing principles of Horizontal Fiscal Equalisation.
The whole point of HFE is to offset differences in revenue-raising capacities between the states and territories, and the costs of providing services. Irrespective of whether you live on Sydney’s northern beaches, in Melbourne’s eastern suburbs or in Mt Gambier, every Australian deserves to have access to a similar level of government services.
The Productivity Commission recently released its draft HFE report, finding several scheme “deficiencies”. Any Western Australian would assure you there were not just deficiencies but massive flaws, given the mining state receives just 34 cents for every dollar it contributes.
And there’s a reason for that. WA swam in the rivers of gold for more than a decade, recording 14 consecutive budget surpluses after mining royalties increased from $600 million per annum to $6 billion. Now that the mining boom has slowed, the state is crying foul because of its precarious financial position, having failed to save for that rainy day.
I reminded a colleague from WA recently that the massive resources extracted from that state belonged to all Australians, not just West Australians. The West Australians are now correctly reminding us of the same thing when it comes to major ship building contracts that may be based in Adelaide but need to create a national supply chain impact.
Like the recognition that success in Australian defence industries must have a national character, HFE represent a workable equity for all states and territories in the long term.
The working system of financially contributing to the states has existed since Federation, with full HFE since 1981. There is nothing wrong with the formula, it just may need a little adjustment to lessen the impact on mining-dependent states when their economies contract suddenly.
Business SA supports the HFE system and wants to ensure South Australia continues to receive fair funding.
South Australia already has high costs of doing business, including power, and the state cannot afford additional indirect taxes which would be inevitably implemented if the HFE system was changed.
We support both the state’s Labor Government and Liberal Opposition’s calls to retain our allocation and encourage all South Australian politicians – both federal and state – to pressure Canberra to retain our fair share of funding.