By widespread agreement, Tony Abbott should be intervening to resolve the dispute between Western Australia and the rest of the states over the allocation of GST revenue. WA Premier Colin Barnett wants the Commonwealth, not the states, to sort it out. “The legislation around the GST makes it clear that it’s the Federal Government to do it,” Barnett said.

Opposition Leader Bill Shorten says the Commonwealth should consider bringing forward infrastructure spending in the west, or hand over a kind of ex gratia payment of $300 million to tide Barnett over. NSW Premier Mike Baird, in his previous role as state treasurer, had suggested expanding the GST to provide more revenue, which would require Commonwealth action. Even Treasurer Joe Hockey and Finance Minister Mathias Cormann, who hails from the west, are said to support an adjustment to the GST allocation formula to help WA. And some commentators have been bagging Tony Abbott for his failure of leadership on the issue.

But Abbott’s “failure” to intervene is a rare smart call by the Prime Minister. He may think WA has a case, but he’s not sufficiently persuaded of it to do anything about it. By failing to intervene, Abbott is, in effect, siding with the rest of the states; it might be leadership by not leading, but it’s the sensible approach. There are no wins in intervention for Abbott: he’ll either upset WA, or upset the rest of the states, or come up with a compromise that no one’s happy with, or which — as per Shorten — costs Commonwealth taxpayers money. And Abbott is smart enough to understand that changing the Commonwealth Grants Commission formula risks creating more problems down the track for the sake of addressing a one-off problem facing Western Australia. Abbott is already politically toxic in South Australia and Victoria without giving their respective governments further reason to target him.

In any event, much of Barnett’s whining rhetoric is that of a politician in deep trouble who, having mismanaged a boom, is now looking for excuses to offer voters as to why things are so crook with the WA government budget — which has been overseen by former Institute of Public Affairs functionary Mike Nahan since Troy Buswell’s umpteenth scandal saw the chairsniffer quit.

As Mike Baird correctly says, WA’s GST problems are a sideshow at today’s COAG meeting compared to the Commonwealth’s cuts to health and education funding, which both Labor and the states say is $80 billion over 10 years. The government insists there is no such $80 billion cut, which is a bit of a problem when its own budget documents refer to how “sensible indexation arrangements for schools from 2018, and hospitals from 2017-18 … will achieve cumulative savings of over $80 billion by 2024-25”. Like the proposed pension indexation changes, the fight is over different rates of indexation — the government wants to confine health and education funding indexation to CPI, thereby abandoning the reform agreements signed between the Commonwealth and the states and territories by the Gillard government — which were the best part of the deal, rather than the funding — to deliver more efficient and targeted hospitals and schools funding.

The fight hasn’t got traction with voters yet — they’ve had plenty of other things to dislike Abbott and Hockey for, and the savings don’t need legislation, so the Senate can’t block them. But, in effect, they return Commonwealth-state relations on health to the Howard era, when the constant blame-shifting between Howard and state and territory leaders over hospital funding and performance — Howard and Costello significantly cut the Commonwealth’s contribution to hospital funding — infuriated voters and opened the door to Kevin Rudd to pretend to have a solution.

Eventually, the $80 billion savings might come to seem similar to a lot of the other half-smart savings that were shoehorned into the 2014-15 budget with little thought for either their political or policy impact. And Abbott can’t rise above the fray on this one.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey