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Cautious approach to new GST system

State premiers are taking a cautious approach to the federal government’s offer of a bigger GST pie and new way of carving it up.

Treasurer Scott Morrison will put to his state and territory counterparts in September a new deal which would iron out some of the wrinkles in the GST revenue distribution system.

Western Australia has long complained about its share dropping during the mining boom due to the way the existing system, known as horizontal fiscal equalisation, is benchmarked.

That benchmark will shift over eight years to a new standard that will ensure the fiscal capacity of all states and territories is at least the equal of NSW or Victoria (whichever is higher), evening out the impact of extreme events such as the WA mining boom.

There will also be a boost to the pool of funds available, as the new standard is set, which over the eight years from mid-2021 will total $7.2 billion.

The federal treasurer described it as investing in the “fair go principle” to deliver the schools, hospitals, nurses, police and roads that Australians want.

NSW Premier Gladys Berejiklian said it would be more or less “status quo” for her state.

Queensland Premier Annastacia Palaszczuk wants to see the fine detail of the plan and details of where the extra money will come from.

Tasmanian Premier Will Hodgman said on face value his state would be better off but didn’t rule out opposing the plan if it left the government in a worse position.

However WA treasurer Ben Wyatt described it as “genuine GST reform” and he hoped the plan would get support across all states and political parties.

The Business Council welcomed the reform as delivering state governments “much needed budget certainty and stability”.

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