Federal Treasurer Joe Hockey has struck an historic deal with all his state and territory counterparts that could see billions of dollars of new infrastructure built across the nation.
However, a meeting of the nation’s treasurers in Canberra on Friday failed to resolve the long-running saga over the GST on low-value foreign goods, while Mr Hockey said there was the usual “grizzling” about the distribution of GST revenue.
In what Mr Hockey described as an “incredibly productive” meeting, all states and territories agreed to a deal that would see public assets sold off and the profits directed into productive infrastructure projects, like roads, to create jobs and lift economic growth.
“We need to fill an infrastructure hole in the economy and we need to do it fast,” he said.
Infrastructure Australia estimates that at least $100 billion in commercial infrastructure assets are tied up in government balance sheets that could be sold.
Under the deal, the commonwealth will provide an additional 15 per cent of the value of an agreed asset sale back to the states.
The cut-off date for an agreed sale and new project is June 30, 2016, but incentive payments would be available for five years through to June 30, 2019.
The size of the funding pool will be revealed in the May 13 budget, Mr Hockey said.
However, in the event that the proceeds of an agreed sale are used instead to retire state debt or for another purpose, a state would not be eligible to receive the commonwealth initiative.
NSW Premier Barry O’Farrell, who was not at the meeting, said the proposal sounded like what his state had been doing for the past three years.
Mr Hockey said superannuation funds would also be encouraged to invest in these new projects.
The plan has the support of the Financial Services Council.
But University of Queensland economics professor John Quiggin said the privatisation of the Commonwealth Bank in the early 1990s showed the folly of assets sales.
“The Commonwealth Bank public share holding was sold for something like $3 a share, and those shares are now worth more than $60 and they’ve been paying substantial dividends,” he said.
Meanwhile, Mr Hockey said the treasurers had gone away to have another look at lowering the $1000 threshold on foreign goods for the payment of GST.
Australian National Retailers’ Association chief executive Margy Osmond hopes there will be a suitable solution reached soon.
“If the loophole isn’t closed swiftly, it will come with serious economic consequences – such as decreased GDP, jobs losses and reduced GST revenue,” Ms Osmond said in a statement.
Mr Hockey said the meeting also discussed the latest GST distribution recommendations made by the Commonwealth Grants Committee, which will see Western Australia get $236 million less GST revenue in 2014/15 compared to the previous financial year.
It is the only state or territory that will see a fall in GST revenue.
The commission will release a draft report later this year that considers the methodology of how GST will be carved-up in 2015/16.