Ms THEOPHANOUS (Northcote): I too will today rise to speak on the inquiry into commonwealth support for Victoria, which was referred to the Legislative Assembly’s Economy and Infrastructure Committee. At the outset I want to express my thanks to our committee chair, the member for Lara. I have had the honour of sitting on this committee since its inception. It has been an exceptionally well run and professional committee, and that is in no small part due to our chair’s steady leadership. I also want to acknowledge our co-chair, the member for Narracan, as well as the other members and of course our exemplary committee secretariat, who put in countless hours organising and coordinating the work of the committee as well as researching and coalescing the findings from the many submissions and hearings that we had. In particular I would like to acknowledge Kerryn Riseley, our committee manager, and research officer Dr Marianna Stylianou, who is one of the most impressive researchers we have ever worked with. Sadly she is leaving our committee, but we wish her all the best and thank her for her work.

This is a very significant inquiry. Over several months our committee have examined the adequacy of commonwealth support for Victoria, specifically the commonwealth government’s distribution of GST revenue in Victoria. What we found was shocking. The committee, which is a bipartisan committee, found that Victoria is set to be swindled out of billions of dollars by the commonwealth government as a result of changes to GST distribution. GST and its distribution have always been contentious, but what we found is that the changes introduced by the federal government in 2018 are undermining the very foundations of the redistribution system. The redistribution of GST revenue is supposed to be about fairness through a principle called horizontal fiscal equalisation. Essentially it is the principle that no matter what state or territory that you live in you should have access to the same level of services and infrastructure as everyone else. The process of redistribution evens out the differences between a state or territory’s ability to raise revenue and the cost of delivering the services and infrastructure that their population needs. This means that jurisdictions which have the capacity to raise large amounts of revenue have typically subsidised other states through the GST redistribution. It is worth noting that Victoria is the only state to have subsidised other jurisdictions every year since the GST’s introduction.

So what has changed and why the inquiry? Well, in 2018, at the urging of Western Australia, the commonwealth introduced changes to the GST distribution, which came into effect in 2021–22. Critically the changes introduced a relativity floor, which sets a limit below which a state’s GST share cannot fall. Western Australia is the only state likely to trigger this floor, and when it does the GST share of other states and territories drop to compensate for it. States and territories are currently protected from the impacts of these reforms by a no-worse-off guarantee, which ensures that we receive revenue based on the better of the old or the new system, but the guarantee is only in place until 2026–27, after which Victoria is set to lose billions. This loss in revenue will have a devastating impact on our state. The Department of Treasury and Finance has estimated losses of between $87 million and $1.2 billion in 2027–28 alone. This is enough to fund up to 9000 teachers, 9200 police officers or more than 10 000 nurses. With no changes to the arrangements our potential disadvantage is expected to reach $3 billion over the subsequent four years.

We cannot accept this kind of setback and disadvantage. That is infrastructure that will never be built. It is services that will never roll out. It is jobs that will never be created. It is not acceptable, and that is why our committee has called for the GST changes to be reversed. At the very least, the no-worse-off guarantee should be maintained past 2026, until the equity of the new system can be assured.

We also recommended that the legislated review of the new arrangements currently slated for 2026 should be brought forward and that the states and territories should have a meaningful say in the terms of reference. As the member for Lara, our chair, stated in his opening remarks of the report:

It is time for the government and all Victorians to stand up and demand a fair go for our state and it is time for the Australian Government to fairly support Victoria’s growth and prosperity.

The evidence that we received showed that the only state which is set to benefit substantially from these new arrangements is Western Australia.

I want to thank all of the state and territory governments, the Commonwealth Grants Commission and the many senior economists, municipal organisations and businesses who contributed to this inquiry.