It is highly possible that the deal signed by Kristina Keneally with Kevin Rudd will provide NSW with more money in the short term and less money in the long term.
We should not forget this Government which has rushed to sign an agreement with the Federal Government has not got a fine record for looking at the fine print.
It is the same Government that signed the Cross City Tunnel contract which is now before the Courts, the Lotteries contract which is being studied by the Auditor General, and the Metro contracts which to date have costed over $500 million.
It’s in the fine print that Kristina Keneally has possibly traded away NSW’s longer term financial position, against a quick truck load of cash.
In agreeing to sign away a future portion of GST revenues, Kristina Keneally has signed away a portion of a tax which will grow as NSW grows. I don’t credit Bob Carr with much, but when he signed the GST Agreement in the late 1990s he recognised that the GST was a tax that could provide greater stability to NSW’s finances. Indeed Carr took on then Federal Labor Kim Beazley over the issue and said ‘it’s better for the states to get that, a growth tax, than to subsist on grants from the Commonwealth that rise only with the CPI, that don’t rise in response to the growth of economic activity.’
Truer words have never been spoken.
The GST is the most reliable, stable and broadest of all state taxes. Unlike stamp duty which is very volatile, and payroll tax which impacts NSW’s economic performance, the GST is a very efficient and stable tax that allows State Governments to budget for the long term. It is a revenue, that grows not with CPI, but with the actual growth of the state itself.
Whilst there is no denial that health costs are surging due to the ageing of the population and that increased federal funding is required to meet what is forecast, the question is should we have given up part of what is the best stream of revenue for NSW?
In simple terms if our economy improves going forward then the upside in GST revenue now goes to Canberra. So despite the rhetoric, a large portion of the increased funding costs for health may in fact be covered by increased revenue from the States’ GST.
In addition as alluded to when economies hit downturns it is the GST which is the most stable and mitigates the impacts we saw in the GFC of falling stamp duty and payroll tax revenue. Under this plan this economic support has been diluted.
It is for these reasons that Brumby and Barnett fought to happily make a contribution to an increased federally funded plan but wanted the GST to remain with their States.
Now the States have come the full circle. We have traded away a stable, growth tax and in so doing, will become even more dependent on the Commonwealth than if a more rational and long-term approach had taken place in these negotiations.
We are yet to see the final details of what has been negotiated but at the very least the Premier should insist that a sunset clause is in place. This would ensure an automatic return to current arrangements should this plan fail to improve patient care or if it proves to be unworkable.
I am not disputing that NSW needs more funds for its health system but, why trade away part of the most important source of taxation revenue for NSW in just a day?
Could it be the coming election ... or could it be that NSW Labor has no confidence in their ability to manage their economy going forward. Could it simply be that Premier Keneally believes the days of NSW’s economic growth are behind us? Or maybe something almost as bad, maybe they didn’t read the fine print once again?
Facebook Recommendations
Read all about it
Punch live
Up to the minute Twitter chatter
Greece makes the final and Ireland gets in on a golden ticket. How awkward and embarrassing. Love it. #sbseurovision
The weird thing about #eurovision is you've got this massive collection of dorks in a room and no one is wearing Spock ears #sbseurovision
Europe has the large hadron collider which is light years ahead of its time and #eurovision, where the eighties never die
Recent posts
The latest and greatest
Eurovision can’t drown out the human rights abuses
Last year, thousands of Azerbaijanis spontaneously took to the streets of Baku shouting and chanting.…
Revenge. It doesn’t get a whole lot better than this
Last month, Katy McCaffrey boarded the Disney Wonder cruiseliner. At some point during the trip, a sneaky…
Friday dilemma: can school bullies grow out of it?
ClubsNSW is set to introduce a fresh new effort to combat schoolyard intimidation, insisting on a principal’s…
Nosebleed Section
choice ringside rantings
From: They must pay for one’s bitter disappointments
Michael S says:
"A teacher at Geelong Grammar had criticised her for using words that were too long, which had left her confused and had made her doubt her ability to write essays. She became ''quite distressed'' when her English marks began to fall." I can sympathise. My scholastic mentors conveyed to me a causal relationship… [read more]From: Welfare for breeders is a bonus for everyone
Change Up! says:
I have no problem paying my taxes. As a single, childless person on a very decent income, I can afford it and not have my life severely altered. Plus I understand that my taxes paying for things like schools, childcare and infrastructure is ultimately a good thing. A better community is better for me… [read more]Gentle jabs to the ribs
They must pay for one’s bitter disappointments
A private school girl’s family is sueing her elite, extremely expensive private school for not… Read more
Most commented