Grattan on Friday: GST and health test Abbott in fractious federation

Prime Minister Tony Abbott is dealing with a very different COAG to the last one he chaired. AAP/Paul Miller

Bitter battles about money hang heavily over the Council of Australian Governments (COAG) meeting, though Tony Abbott wants it to concentrate on the less divisive topics of domestic violence, national security and ice. He says these are the issues that concern the public.

Friday’s COAG table will look significantly different from that in October, the last time first ministers from states and territories gathered. Two new Labor premiers have replaced Liberals from Victoria and Queensland. The state split has gone from five-one in the Liberals’ favour to three-three.

And the mood has become more fractious.

Abbott is furious with Victoria’s Daniel Andrews for refusing to sign up for the East West link project, declaring on Thursday “I think the Andrews government might be dead” – whatever that means.

The prime minister is delighted Mike Baird survived his NSW election, but Baird’s strong win has empowered him in pressing his fierce resistance to the federal attack on the states’ health funding, a common cause for state and territory leaders.

Centrally, there’s the row between Western Australia and the other states over WA’s demand to get a bigger slice of the GST revenue than the Grants Commission has recommended.

Abbott would like COAG to be a body operating at helicopter level, dealing with issues broadly, providing opportunities for plenty of Commonwealth spin. On Thursday he simply tried to ignore the unpleasant reality of the various conflicts currently dominating federal-state relations.

“As far as I’m concerned, the real issues for COAG tomorrow are domestic violence, national security and the ice epidemic,” Abbott said. “I think they’re the things that the public are interested in. They want to be safe in their own homes, they want to be safe and secure in their streets and they want to know that young people in particular are not having their lives absolutely destroyed because of exposure to ice and other illicit drugs. So that’s what I want COAG to focus on.”

If the premiers wanted to raise the GST with him “I’ll certainly give them a polite hearing”, Abbott said. But he again insisted that if they were unhappy about its distribution, they needed to sort the matter out between themselves.

The angry premiers agree – from different perspectives – that this isn’t really a matter for COAG.

Andrews said the independent Grants Commission had made its recommendations and “that’s the end of the matter”. South Australia’s Jay Weatherill thinks the same. In other words, there should be no more discussion.

WA’s Colin Barnett insisted the carve up was a decision for the Commonwealth government alone. The states had no say in this, he said, directly contradicting the prime minister. “The issue here is the goods and services tax revenue is distributed by the federal treasurer – it’s a Commonwealth decision, not a state decision – so [there’s] no point in the states arguing with each other because we don’t have a say.”

Barnett wants a “floor” set at the current share WA gets. This would represent a subsidy of about A$500 million to that state.

Insults flew as the players limbered up. Barnett reminded Victoria that after its Black Saturday bushfires, “Western Australia was the first state and the most generous state to provide financial assistance”. Andrews said the references to the fires in which so many died was disgusting and disgraceful and Barnett should apologise. Barnett said he’d been responding to the “abusive” attack on WA from the Victorian government.

Opposition leader Bill Shorten took the populist route, saying the federal government should give some one-off help to WA. This would mean the other states still got all the recommended money, while the federal budget wore the hit.

The balance of opinion in the federal government is that WA should receive special treatment but it wants the funds to come from the overall GST pool, rather than from its straitened coffers.

The other major money issue is the drastic long-term shift in health funding that last year’s federal budget imposed on the states. The anger still runs red hot.

This was a strong theme of the brief meeting, chaired by Baird, that state leaders had on Thursday in preparation for seeing Abbott over dinner and on Friday. The feeling was that unless the looming funding crisis was explicitly acknowledged in the federalism and tax white paper processes, the states would be reluctant to be engaged in those processes.

The Australian Medical Association, no slouch when it comes to applying political pressure, released its update of Australia’s public hospitals on the eve of COAG, giving the states ammunition.

The timing was highly strategic. AMA president Brian Owler was all over the media, warning that the states are facing a black hole in public hospital funding and accusing the federal government of retreating from its responsibilities.

Abbott, a former health minister, knows how damaging such attacks from the doctors’ union can be. The squeeze on health funding is a slow burn and potentially very electorally damaging – probably moreso than the GST allocation fracas.

Postscript for the technical buffs: Hockey set off a wave of inaccurate descriptions of the Grants Commission’s relativities formula when he referred last week to WA “receiving 30 cents in the dollar from the GST that is contributed by its citizens”.

The Grants Commission pre-emptively warned against such a slip, noting in its report that “some people have misinterpreted a relativity to be the proportion of the GST revenue raised in a state which is returned to that state. This would only be true if the GST collected per person were the same in every state, which given differences among the states is unlikely.”

Whether the difference for WA is big or small we don’t know – there are not figures for individual states.

In fact the Grants Commission calculation is based on a per capita average of the national GST pool. What the Grants Commission recommended is that WA receive about 30% of the per capita average of GST collected nationally (down from about 37%).