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Legislative Assembly for the ACT: 2000 Week 6 Hansard (23 May) . . Page.. 1578 ..

government is, once again, being conservative in its forecasts for growth in the economy. We forecast growth in the ACT economy of 3.8 per cent in the next year, and an underlying CPI of 2.5 per cent.

GST

Mr Speaker, this budget is the first which will feature the full effect of the new goods and services tax. The major change in Commonwealth funding arrangements arising from tax reform is that all of the GST revenue will be passed to the states and territories, replacing financial assistance grants as the major component of Commonwealth grants. Not since World War II have the states and territories had access to a tax base which grows in line with growth in the economy. This is a result of the nature of the GST being a growth tax.

However, in the early years of the GST, the total pool of GST revenue to be distributed to the states and territories will not be enough to compensate for the abolished financial assistance grants and taxes plus the additional costs imposed on the states and territories. The Commonwealth will need to make additional payments to abide by the principle that states and territories will be no worse off. The ACT is well prepared for the commencement of the new tax on 1 July.

Mr Speaker, it is a matter of record that the Carnell government has argued persuasively to end the 10 years of funding cuts since self-government. In 1999-2000 general revenue assistance rose by 18 per cent or $57.5 million. As members know, I attended the first meeting of the Ministerial Council for Commonwealth-State Financial Relations on 17 March 2000. I have already reported to the Assembly the successful outcome which saw the ACT gain a further funding allocation for general revenue assistance of $30 million in the current budget year.

Importantly, this outcome represents an increase of $21.3 million in the current budget over that foreshadowed in the draft budget. In the most part, this increase was due to adoption of the Commonwealth Grants Commission's 2000 GST relativities which reflect the ACT's higher costs of service provision and revenue-raising capacity relative to the Australian average. This result emanates from the hard work put in by this government demonstrating to the Commonwealth Grants Commission that, among other things, the ACT's national capital factors warranted an assessment more reflective of the territory's circumstances.

On top of CPI, GST will also add 10 per cent to most non-exempt government fees and charges. As the Commonwealth government is reclaiming the embedded wholesale sales tax savings from the ACT, and states, there is little ability for the government to pass these savings on, for the most part, to consumers as there would be for business. Individual ministers will be issuing statements about the impact of GST on fees and charges soon.

But GST also raises a number of issues for our local community which are not isolated to government. GST will have a real impact on some groups which deliver important services to people in need in this community. The government will help those groups, and I am pleased to confirm that we will top up grants for service provision by the

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