You can only judge a budget once you’ve seen the whole thing, so let’s take a look at GST and gas instead

You can only judge a budget once you’ve seen the whole thing, so let’s take a look at GST and gas instead
  • PublishedMay 13, 2024

After the premiere of his opera, The Abduction from the Seraglio, Wolfgang Amadeus Mozart famously asked the Austrian Emperor, Joseph II, what he had thought.

As portrayed in the movie Amadeus, his response was: “Your work is ingenious. It’s quality work … there are simply too many notes, that’s all.”

A few days before the 2024-2025 Federal Budget there’s a bit of a “too many notes” feeling to the Albanese government’s current suite of issues in play and, sadly, not all of it is ingenious or quality.

This is not yet a reflection on the budget: while the government has been putting out a steady stream of announcements, you can really only judge a budget once you have seen the whole thing.

It’s more that there’s just a lot going on that has to be dealt with that can be put in the class of “events”.

The government is dealing with some of those better than others, to put it in the mildest terms.

Then there is the often-overlooked dynamics provoked by why politicians come to Canberra in the first place: ambitions to change the country, or at least influence its direction.

Many announcements, spread thin 

The prime minister is surrounded by ministers with lots of ideas and agendas and does not have enough time to address them all.

And, suddenly, here we are 12 months from an election, and there’s a backlog of reviews and proposed reforms — not all involving money — anxiously awaiting their turn in the sun at a time when the communication channels are already clogged and the money is tight as a slowing economy and inflation take their toll.

Treasurer Jim Chalmers says there’s “a lot” in this budget, and certainly the announcements to date have been widely spread (and sometimes thinly funded).

The cost of living, migration and housing, in all their manifestations of social and economic issues, are obviously in the government’s frame.

And there is some “thing” called a Future Made in Australia, which keeps now being referred to as if we all know what it is, when actually we don’t.

Looking to the west 

So let’s reconvene on the budget next week, and instead contemplate two bits of policy that definitely don’t seem to be either ingenious or quality and which have, or will have, a significant cost to the economy and, therefore, the budget in the longer term.

Both of them have a Western Australian connection.

The first relates to the way around (currently) $93 billion of goods and services tax is distributed among the states and territories each year. The second relates to this week’s “future gas” policy.

Veteran economist Saul Eslake has been fighting a noble and often solitary campaign to have the issue of the GST on the table for discussion.

Two men with white hair and wearing suits sit together on a couch on a stage
Former Premier of Western Australia Colin Barnett and Economist Saul Eslake spoke at the National Press Club this week.(AAP: Mick Tsikas)

Eslake calls the deal done by the Morrison government in 2018 — and subsequently taken up by Labor — to give more relative funding to Western Australia, the “worst public policy decision of the 21st Century (thus far)”. 

Remember that the original idea of how funds would be distributed was that it would be done in a way to achieve “horizontal fiscal equalisation”: to allow access to a similar level of government services, wherever Australians lived.

Most economists recognise the cost of the 2018 deal and subsequent tweaks to the federal budget is going to be between $39 billion and $50 billion by the end of the decade.

Many see Eslake’s campaign as positively quixotic, given the federal bipartisanship on the deal and the sense of imminent political death to the party even raising the idea.

The WA Treasurer Rita Saffioti warned as much in February.

“Politically it just would not work … they would basically, I think, lose every seat in WA, so there’s just no way.”

Something has to give

But Eslake’s focus is on influencing the terms of reference for a Productivity Commission inquiry that is legislatively required to be held by the end of 2026.

The sheer volume of money involved, and the widespread understanding that something will have to give, means the issue is not quite the quixotic windmill that some might presume, despite the weakness of politicians.

That the extra money helped produce a huge budget surplus in Western Australia this week will not have gone unnoticed in other places.

This week, Eslake debated the deal at the National Press Club with a key figure involved in its creation: former WA Liberal premier Colin Barnett.

Always a politician who thinks outside the square, Barnett was quite open in saying the deal is “not good policy” but went on to propose an alternative system based on population.

He proposed giving all states and territories 90 per cent of their per-person share of the GST, with the remaining 10 per cent of the pool allocated to smaller and poorer states and territories — TAS, SA, NT and the ACT — on a “needs basis” to deliver public services.

It is certainly an idea seen as having merit within both the federal bureaucracy and that of at least some of the states.

The benefit to the federal budget, for starters, would be that the $5 billion of extra funding it has had to provide to the GST pool to stop other states from being worse off would become a budget saving.

Then there’s gas.

A dishonest bit of parochial toadying

Here’s a quick recap on Australia’s gas market. Victoria has a ban on any gas exploration. New South Wales has an effective ban which has meant the gas field at Narrabri has remained an argument rather than a proposal for the best part of a decade.

Queensland has lots of gas but the pipeline to bring it down the east coast is just not big enough.

Australia exports 80 per cent of its gas while the southern states have built platforms to import the stuff.

In other words, it’s completely ludicrous.

This week the government announced it wanted to see more gas exploration and committed to gas as an important source of energy until 2050 and beyond.

It suggested that this would both help domestic gas shortages and provide a solid base for industries like critical minerals.

What it was really doing was signalling to the Western Australia LNG export market that the federal government would not stand in the way of any future expansion.

It was perhaps the most egregious and dishonest bit of parochial toadying we have seen from this government, done at the cost of undoing a lot of political work persuading voters that it was more serious about both climate change and an energy transition than the Coalition.

It is little wonder it has caused the first, really serious, outbreak of public grumbling from the Labor caucus, as well as anger from the crossbench and Greens.

As former ACCC chair and economist Rod Sims told 7.30, no one needs to suggest we have to kill off gas altogether or straight away, but to flip to a position of effectively promoting gas indefinitely changes all the price signals that the industry receives that promote its own transformation, and investors interest in an industry based on new forms of energy.

Let’s hope there is a little bit more quality and ingeniousness in Tuesday’s budget.


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