In the 2014 Budget, the Coalition Government ripped some $80 billion of funding from the states’ budgets over the next 10 years: $50 billion out of grants for hospitals and $30 billion out of grants for schools.
In 2016, debate raged over whether to give the states income taxing powers so that they could better fund health services. Nothing happened and the issue largely disappeared into the ether. Instead, the States signed up to the Government’s offer to cover 45% of hospital funding, with growth capped at 6.5% a year.
Now, the issue of hospital funding is back on the agenda, with today’s COAG meeting reportedly set to offer the states a new five-year health deal from 2020 that will supposedly make them $30 billion better off over five years, according to the Turnbull Government. As usual, the Labor-led states are sceptical and might refuse to sign onto the deal. From The ABC:
Several Labor states say they will not sign up to the Government’s $128 billion package, until the billions of dollars cut by the Abbott government are restored.
Federal Health Minister Greg Hunt told AM the Commonwealth’s growth in spending would be capped at 6.5 per cent over five years from 2020.
“Given that health inflation is at 4 per cent, it’s not just a good deal, it’s a deeply profound and generous deal,” Mr Hunt said.
But South Australian Labor Premier Jay Weatherill argued the Coalition had “ripped out billions and billions of dollars” from the health system…
Sources have told AM Victoria and Queensland are unlikely to sign up today, but West Australian Labor Premier Mark McGowan appeared open to negotiation.
Greg Hunt is being disingenuous when he claims that the federal government’s offer is generous because it’s above the 4% health inflation. While this might technically be true, he needs to also take account of population growth (mostly via immigration) as well as the ageing of the population (which increases demand for health services, other things equal).
Indeed, this time last year, the Australian Medical Association (AMA) released a report showing that Australia’s public hospitals are failing to keep up with population growth due to cuts in government funding. We have also seen numerous reports of overcrowding across Australia’s hospital system over the past few years (e.g. here and here).
If the Turnbull Government chooses to maintain its mass immigration ‘Big Australia’ policy, then it must fund the required infrastructure and services.
Because of the vertical fiscal imbalances embedded in Australia’s federal system, the Commonwealth collects 82% of total tax revenue versus the state’s and territories’ 15%, and local government’s 3%. This has left the states critically starved of funds to cope with the population influx hoisted upon them by the federal government because of its mass immigration policy.
