Tony Abbott talks unity but WA's Colin Barnett says he's angry with other states

Tony Abbott’s plea for unity on tax and federation reform has been overshadowed by the West Australian premier’s declaration he was angry at his state and territory colleagues for opposing changes to the GST carve-up.

All state and territory governments except WA were united in their opposition to any immediate freeze or adjustment to the system that determines how revenue from the GST is distributed.

The Council of Australian Governments (Coag) meeting in Canberra on Friday did not support short-term changes, despite the WA premier, Colin Barnett, demanding action to stop the state’s share of GST revenue falling below 30 cents for every dollar it contributed next financial year.

Abbott sympathised with the plight of WA, but confirmed on Friday that the existing formulas would “certainly stand for the next year or two, there’s no doubt about that”.

The prime minister emerged from the Coag meeting saying he would be prepared to consider requests for changes to the system as part of the forthcoming white paper on the reform of the federation.

This could involve introducing a minimum level of distributions to each state. Abbott said one option was a “floor” of 50 cents from each dollar of GST revenue a state contributed.

Abbott revealed that the federal and WA governments were having one-on-one talks about possible assistance – separate from the GST revenue pool – in the meantime. Infrastructure funding is on the table.

But Barnett made his displeasure clear at a joint media conference with Abbott and other state and territory leaders.

“I must have been at a different meeting – not quite my recollection,” Barnett said of the pledges by leaders to work constructively on national reforms.

“The elephant in the room is GST ... Western Australia feels very poorly treated under the recommendations that have been made to the commonwealth government ... That is grossly unfair and what I sought out of this meeting was the situation for Western Australia would get no worse. That’s all I ask for.”

Barnett inflamed tensions with other leaders by saying that he acknowledged WA was willing to support the “weaker economies, particularly Tasmania and South Australia”, but they should understand why he and his citizens were angry about the “dysfunctional” distribution system.

He said he was disappointed in his state counterparts as they had shunned “an opportunity to show some willingness to actually achieve some reform”.

“So I don’t know how we’re going to reform Australia and modernise it when we can’t tackle an issue which is so inequitable and also has the effect of penalising success and rewarding weakness or failure,” Barnett said.

Other leaders defended the process followed by the independent Commonwealth Grants Commission, which examines each state’s capacity to raise revenue and deliver public services of equal quality.

The Tasmanian Liberal premier, Will Hodgman, said tinkering with the fair and equitable system would compromise “the nature of our federation” and no one was served by a “political bun fight”.

The Northern Territory chief minister, Adam Giles, said the territory was a net beneficiary of GST revenue and he was seeking to grow its economy “so that we have a lower receipt rate of the GST” but it would take time.

Barnett questioned the political will for reform just minutes after Abbott summed up the spirit of the meeting by saying leaders were prepared to contribute constructively to reviews of the tax system and state-federal responsibilities.

“I’m very conscious of the fact that for the next 12 months or so, Australia has an election-free zone and that should give us an unusual window of opportunity for significant structural reform if we are prepared to grasp that nettle,” the prime minister said.

“Now that’s a test for us, individually and collectively, and let’s see how we go. But I’ve got to say that I have a strong sense from the discussions that we had last night and today that we all want to give it a go.”

Abbott said he and state and territory leaders would discuss the reform issues at a special Coag retreat – with no officials present – in July. The leaders should “leave partisanship at the door”, he said.

Most of the state and territory leaders broadly backed the sentiment, but reaffirmed their concerns about the impact of $80bn in cuts to long-term projected health and education funding foreshowed in last year’s federal budget.

The official Coag communique acknowledged the states and territories were facing “budgetary pressure” due to “expected growth rates in health and education expenditure and the underlying revenue base over time”.

Leaders agreed to work together to address long-term funding pressures and deliver services as efficiently as possible.

Despite the government’s decision to limit federal funding increases to the consumer price index from 2017, Abbott conceded “that with public hospitals in particular there are a lot of cost pressures” and that health costs generally rose faster than the general rate of inflation.

“What we’ve agreed to do is to have a very holistic look at this, which certainly involves looking at the funding going forward, but it also looks at the structures going forward … so that we ensure that we get the best possible value for our dollar because we’re under pressure,” the prime minister said.

Abbott said further discussions over the next six months would seek “to ensure that we don’t have the health funding crunch that many people fear”.

The opposition leader, Bill Shorten, said it had “taken far too long for Tony Abbott to finally retreat and recognise the impact his cuts will have on schools and hospitals and Australians are suffering as a result”.

The Liberal premier of New South Wales, Mike Baird, said Abbott’s acknowledgement was “a tremendous step” because all governments needed to work together to address the “huge challenge”.

The Labor premier of Queensland, Annastacia Palaszczuk, said health and education would present “huge budgetary impacts” in coming years.

Other outcomes from the Coag meeting included:

• An agreement to press ahead with a national domestic violence order scheme to prevent cross-border evasion;
• An affirmation of the importance of a “continuous naval build strategy” to ensure shipbuilding jobs were not at the whim of “stop-start” project orders;
• A call from states and territories for a “speedy resolution” to the uncertainty over the renewable energy target;
• And an agreement for further talks on two more trial sites for the national disability insurance scheme – one in Queensland and one in a remote Indigenous community in the NT.