PM: [audio break] to update you on some very tragic and sad news for our Defence Force family. I'll turn to the Minister for Defence now. Here we are. MINISTER SMITH: Thanks very much Prime Minister. As you may well be aware just before midnight last night, near HMAS Cerberus in Victoria there was a terrible traffic accident. The traffic accident involved five young trainees at HMAS Cerberus. Cerberus of course is far and away our largest naval training institution.
The five young trainees involved were all marine technical trainees. As a result of the accident very tragically two young navy trainees are dead and we extend our condolences and our sympathies to their families. The other three are in hospital either in a serious or a very serious condition and our thoughts are with them and their families and we of course wish for them a speedy recovery. Navy and the Defence Force will of course cooperate fully with the Victorian Police and the Victorian Coroner in this matter. There will be a coronial inquiry into the two tragic deaths and in the meantime it wouldn't be appropriate for me or for the Navy to be drawn on any of the detail of the circumstances surrounding such a terrible accident. This will be a terrible blow to the navy family, a terrible blow to the men and women at HMAS Cerberus. Earlier today I spoke to the Chief of Navy Russ Crane to get an update from him and in the aftermath of this tragedy again our condolences and thoughts are with the families concerned. Navy have issued a statement and as we speak, the Commanding Officer of HMAS Cerberus, Mark Hill - Captain Mark Hill is giving a press briefing. The families concerned have requested that details of the family - of the - of the five involved in the accident not be released at this stage. Of course we'll respect the wishes of the family but in due course Navy will release full details of the deceased and of the other three seriously injured. Thanks Prime Minister. JOURNALIST: Were they on duty or off duty? MINISTER SMITH: They were, as I understand it, off duty. They had leave until 6.30am in the morning, this morning. Other than indicating that in the circumstances of a terrible accident I wouldn't be proposing to go into any detail. PM: Thank you very much to the Minister for Defence and can I as Prime Minister also offer my condolences and the nation's condolences. There are two families who will be grieving the loss of two young people and our thoughts are with them. Our thought and best wishes are also with the young people injured in that accident and we wish them the best for their recovery. I'm sure this will be weighing very heavily on their Navy colleagues today and our thoughts are also with them. If I could turn now to today's announcement; today here in Western Australia with my Western Australian colleagues, I announce that there will be a full scale review into the distribution of the Goods and Services Tax between States and Territories. I have appointed the Honourable Nick Greiner, the Honourable John Brumby and Mr Bruce Carter to be the review team. Nick Greiner and John Brumby are former premiers and their names I think are well known to Australians. Mr Bruce Carter is a South Australian business person who has also served working on economic development plans in the state of South Australia. This is a high quality review team. The review team will provide an interim report by February 2012 with the final report to be provided by September 2012. Now I have determined to embark upon this course because the current way in which the Goods and Services Tax is distributed between States and Territories is in my view deficient in four regards. First there is a need for greater simplicity and transparency. The current arrangements are very complex, they've very opaque, they're very difficult to understand. I think the federation would be best served by an arrangement that was transparent and could be understood by Australians right around the country. Second I believe there is need for more certainty and predictability in the distribution of the Goods and Services Tax. Under current arrangements it can be possible for the amount that a State or Territory is to receive under the Goods and Services Tax to be unpredictable. States, Territories can get shocks and not realise how much Goods and Services Tax they are going to receive with all of the consequences that can have for their budget. Most recently there was an issue in Victoria when they were quite surprised by the GST distribution to them. So I believe there is a need for more certainty and predictability. Third and very significantly, I think under current arrangements there is not enough incentive for reform. I do not want there to be any road blocks for reform in States and Territories. I want States and Territories to always be reforming and aspiring to having the best quality and most efficient health services, education services and everything else that States and Territories do. Under current arrangements it is possible for States not to feel the full value of having engaged in reform because the benefits of that reform are then redistributed as the Goods and Services Tax is redistributed. In my view states should always have an incentive to be in the economic reform business and they shouldn't be unfairly punished for success. If we have a system that is punishing economic reform and punishing success then it doesn't work for States and it doesn't work for Australia as a nation. Fourth I believe we need to embark upon this course because the current way in which the Goods and Services Tax is distributed has struggled to deal with changing economic conditions. In particular I recognise that the growth in mining is increasing the discrepancy in the amount of revenue raised by States and Territories as well as making it more difficult to anticipate GST distribution between States and territories from year to year. So we need a formula, a system that better copes with growth. Now I would remind of course that GST distribution has been dealt with by an independent body, the Commonwealth Grants Commission, but I believe as Prime Minister it is time to have a review of the formula to deal with the deficiencies in the current system that I have identified. Premiers have for a long period of time called for reform. For example Premier Anna Bligh said our State is being penalised for our economic success. The Victorian Treasurer Kim Wells said and I quote; that there is a long term disincentive to undertake significant economic reform and here in Western Australia Premier Barnett has posed the question: what have we done wrong apart from being successful? So Premiers have been campaigning for reform. I therefore believe today's announcement will be welcomed by premiers and chief ministers. To give just one example of that, here in Western Australia today I have spoken to Premier Barnett. He has welcomed this review and welcomed the identity of the review panel. He has indicated to me in our conversation that he believes that John Brumby, Nick Greiner and Mr Bruce Carter are well picked to do this important task. Can I conclude by saying there is an Australian principle about the way in which we distribute the Goods and Services Tax. That is an Australian principle about helping each other out and making sure that people right around the country get a fair go. There is therefore an obligation on the strongest states to help the weaker states and that obligation must continue. It's the Australian way. But when I've listened to the complaints raised by state premiers, their complaints have not been about supporting weaker States or Territories. For example they do not complain to me about a strong state stepping up to the plate and assisting say, the Northern Territory. But they do believe that there are flaws in the current system and through the review that I've announced today they will be able to have their voices heard about those flaws. When this review is completed its work will come to me, as Prime Minister, to the Federal Government and my Federal Cabinet but it will also go to the Council of Australian Governments, to the treasurers when they meet and then to the leaders when they meet. I think that is appropriate. COAG needs to receive and work through this review as well as it being worked through by the Federal Government and the Federal Cabinet. I think this is the right step to take at this time in our federation's history. I thank Nick Greiner, John Brumby and Mr Carter for indicating their preparedness to serve as this high level review panel and I look forward to the outcomes of their work. I'm very happy to take any questions. JOURNALIST: Prime Minister, the (inaudible) 75 cents in the dollar below which (inaudible) couldn't fall, is that something that would be considered as part of this review? PM: It certainly will be. I've spoken to Premier Barnett today, he's also written to me today and in those conversations he's confirmed to me that he welcomes this review, that he supports the people who are conducting the review, the review panel and that he intends to put before the review his proposal for a floor on GST below which a strong state could not fall. Now that is one reform proposal that the review will consider. There will be other reform proposals put forward I'm sure, but Premier Barnett has specifically said to me he wants that reform proposal considered and it will be. JOURNALIST: Your incentive payments idea that there should be some incentive (inaudible) states, there's been call in WA for port reform for example to be included (inaudible) encapsulate broader reform such as health and ports? PM: No this is a review of the formula and mechanisms for distributing the Goods and Services Tax between States and Territories, so the Government will continue to pursue reform in education, in health, and in other important areas of work which we share with state governments. But in order to have these things together, we've taken an approach for example in education and health that we should have reward payments for states and when they reform, when they get better, those reward payments flow to them. One of the problems with the current Goods and Services Tax redistribution is it doesn't reward reform. So a state can be getting more efficient and stronger and not feel the benefits of that greater efficiency and that greater strength. At the same time a state can be lagging behind, not driving reform, not driving its system efficiently and not feel the full consequences of that lack of reform drive and inefficiency. I'm concerned that when you blunt the message about reform you blunt the appetite for reform. I want there to be a strong appetite for reform and that's one of the reasons that I've determined to take this course and have the (inaudible) reviewed. JOURNALIST: Is there some danger here for example that this reform - review of the GST will sort of endanger the national health reform for example? PM: Oh no, no, they're - absolutely not. The national health reform is a health reform agreement. We're talking about federal funds, not Goods and Services Tax funds, federal funds, are being invested in health in order to get a reformed health system. So the health reform agreement, on track, will be delivered. JOURNALIST: (inaudible) some states to provide, of their own accord, some of their GST to a national pool. Surely there is some - PM: No, no, no. Not under the new health reform arrangements, that's not true. The new health reform arrangements do not require - specifically do not require a state to put Goods and Services Tax money - so the - I'll put that another way. Originally there was a health reform proposal which required us to legislate, and would've enabled the Federal Government to retain some GST. I entered a health reform agreement with Premier Barnett and with premiers and chief ministers around the country earlier this year that is differently constructed. We do not need to re-legislate the GST to have that health reform agreement come to fruition. So that is on a completely different track from this work of the GST distribution. JOURNALIST: But effectively states will be taking from their funding pools, a large chunk of that which is GST, to give to that national health pool. Won't there be - PM: States will source revenues. Yes, the GST is a stream of revenue in a state. They'll source revenues and they'll work collaboratively with us to fund health. This is a different question. The two are not in any way associated. We will conclude the health reform agreement, as I outlined earlier this year, in the middle of this year. Whilst this process goes on, they are not together. JOURNALIST: In terms of the timeline, the earliest any changes will take place is the 2013 - 2014 financial year. Is that soon enough? PM: I believe we need to work through and get this right. We're talking about a federation; a federation which I want to be sustainable and I want Australians right around the federation to have great opportunities to have access to quality services, and I want the system to be fair. Fair so that it rewards reform, fair so that people can feel the benefits of success. Also fair so that states that are inefficient understand the consequences of that inefficiency. So it's worth taking the time to get this right. Remember, we will get the interim report as early as February next year. When we are talking about something that involves a lot of money and getting it right for the long term, we need that amount of time. JOURNALIST: The GST, is by definition, a zero-sum game, is only so much of the pie. So taking some money off others will necessarily penalise some states. Are you envisaging a big fight, particularly say among the three or four premiers, for example, who don't want to necessarily give up their share of GST? PM: You are right to say there's only so much revenue raised from the goods and services tax and what this is about is the fair distribution of it between States and Territories, and consequently between Australians. I am content that this process is starting off in an atmosphere of cooperation, and we've got a high level review panel, people bringing different perspectives but a high degree of skill to the task. I think that's important. Now, I expect premiers and chief ministers around the country - and certainly Premier Barnett has made his view very clear to me - I expect premiers and chief ministers to welcome this review. They've been calling for a review. Now we need the review to work through. I understand that there will be some difficult conversations along the way, but the alternative is to just have current arrangements stay, and current arrangements in my view are not satisfactory. We've got a state like Western Australia, and the current arrangement's not properly dealing with high economic growth here. We've got a lack of simplicity and transparency. We've got a lack of reward for reform. We've got an unpredictability about the amount of money states and territories can budget for out of the GST. I want to get those things fixed, and this is the process to get them fixed. JOURNALIST: What are the goals here to flatten out the impact of the state finances and the distribution of the often quite short-term spikes in commodity prices which mean that royalties flow in very unpredictable ways, is that what the goal of it is, to try and I guess smoothen that impact? PM: Certainly predictability is a goal of this. When you've budgeting for things that inevitably have fixed costs; your education system, your health system, the number of police you employ; you don't need to be a state treasurer, you just need to use a little bit of common sense to know that you can't go - in terms of those fixed costs - from here to here really quickly. People are employed, budgets are committed, things are happening, kids are being taught, patients are being treated, police are walking the beat. So in those circumstances, predictability is very important and it's one of the goals. JOURNALIST: (inaudible) from the time when (inaudible) the Government's coming under attack from the WA Premier over the mining tax and the royalties issues. Is the timing of this in any way related to that, to try to blunt his attack? PM: Not at all related to that, no. I believe the conversation and discussion that's been occurring between the Federal Government and Premier Barnett about the Minerals Resource Rent Tax, questions of state royalties will inevitably continue and I'll be a very active participant in that conversation, making the point to the people of Western Australia that through the Minerals Resource Rent Tax, we will be in a position to give more to Western Australia. More infrastructure, more support for small businesses. There are 200,000 - more than 200,000 small businesses in this state. Indeed, 90 per cent of the businesses in this state are small businesses and we will be able to better support the superannuation of more than 800,000 Western Australians so they have a better retirement income.That's what the Minerals Resource Rent Tax is about. I'll keep pursuing that discussion with Premier Barnett, but that's not related to this. This is related to what I acknowledge is a legitimate concern from Premier Barnett, and indeed from other premiers - I've cited for example Anna Bligh - about the way in which the Goods and Services Tax is currently distributed. JOURNALIST: Can you go and say that after this process, (inaudible) that WA won't actually go backwards? PM: Look, we've got a review team, and I've outlined the aims here. The aims here in terms of predictability, enabling people to enjoy the benefits of success, enabling people to go about reform tasks and making sure they get the benefits of those reforms. So this is the review that - people have called for a review. This is responding to those calls for a review. The terms of reference are right to make sure that the deficiencies that I point to in the current system are addressed by the new system, recommended by the review team. Now of course, we've got to trust the review team to do its work. That's why we've appointed such high level expert individuals, and I'm very pleased to see that they are getting support here in Western Australia and more broadly. JOURNALIST: (inaudible) complaining about the GST cover, Colin Barnett has for a long time been complaining about WA getting an unfair proportion of asylum seekers in our state compared to the other states. Will you review that as well? PM: Look, the issues about detention centres, we've made our announcements on those. There is a facility being developed at Northam and we are working through with the local community. So that policy in terms of location of detention centres has been announced and will be pursued by the Government. JOURNALIST: But there's no hope there in terms of getting less asylum seekers and a fairer deal - you know, and share more equally across the states? PM: We've announced our policies there and they're the same. No change. JOURNALIST: Are you embarrassed by East Timor's rejection of the processing centre? PM: There's an assumption in your question I'm not going to agree with. The Australian Government's been involved in discussion with East Timor about a Regional Processing Centre. As we speak - you're going to some comments from one minister in today's newspaper. But if I can answer your question, then I most certainly will. The Australian Government has been in discussions with East Timor about a regional processing centre. Those discussions will continue. But there is a meeting that is happening as we speak in Bali. That meeting was never about Australia's bilateral discussions with East Timor about a processing centre, those discussions were never about Australia's discussions with East Timor about a Regional Processing Centre. They are bilateral discussions between Australia and East Timor. What's happening in Bali is a large multilateral meeting to talk about regional solutions to what is a regional problem, where Australia will of course be advocating a regional solution and a Regional Protection framework. The two should not be confused. JOURNALIST: I don't think they were going to discuss that issue at the Bali summit. PM: The Bali summit is certainly discussing the regional problem of people smuggling; that's what it's been brought together to do. JOURNALIST: Sorry, just one more thing, from what you say, are you still hopeful that you're going to pull off a processing centre in East Timor? PM: What I'm saying is those discussions are continuing, but people should be looking at today's meeting in Bali for the true purpose for which it has been brought together. It has not been brought together for Australia and East Timor to pursue that bilateral discussion that has been occurring. This is a multilateral forum with a large number of countries talking about a regional approach to the regional problem of people smuggling. JOURNALIST: On Paul Keating's comments overnight about John Robertson saying he has no authority to lead New South Wales Labor and describing him as lead weights (inaudible) PM: Look, whoever leads the team in New South Wales should be selected by New South Wales State MPs. JOURNALIST: Just back to the GST issue, do you find it ironic that one of the key goals you've outlined today is to give some certainty because of fluctuating mining revenues affecting GST applications - do you find it ironic that you're introducing the mining tax that will introduce volatility into the Commonwealth Budget and give you less certainty? PM: I think you may have over-interpreted my remarks. I was asked about fluctuating commodity prices, that's true. But the - what introduces unpredictability into the distribution of the GST is matters relating to the formula that are broader than just the question of commodity prices. We should not say to each other here today that the only thing that introduces unpredictability is commodity prices, because that's simply not true. One of the aims of this review is to give greater predictability, which will require the review team to look far more broadly than fluctuations in commodity prices. JOURNALIST: I'm not sure if you're aware, another detainee has actually tried to take his own life at Curtin today. Given that we've had detainees move from Christmas Island to Curtin recently, have you just shifted the problems? PM: Any incident of self-harm in a detention centre is obviously a sad and tragic incident. We don't want to see anyone in any circumstances engaging in self-harm. So obviously as human beings we're touched by that.But I am a supporter of mandatory detention. I think it's the right policy for this country. I think it's the right thing to do for this country to have a way in which we can clearly assess people's claims for being refugees, people's health status, and people's security status. So as Prime Minister, I am determined that we will have a mandatory detention system. JOURNALIST: Do you support tighter regulation of the electricity generation industry after Professor Garnaut's comments about the increasing power prices? PM: We have a regulator in the Australian electricity market who is charged with dealing with - I suppose charged might have been the wrong word - we'll start that again. We have a regulator in the Australian energy market - the Australian electricity market - who has the responsibility of looking at the kind of questions that Professor Garnaut has raised. And if - that's the last question, can I just conclude by saying, I'm sure I can reflect the views of the team, that we are all wishing the new Australian captain Michael Clarke very well in his endeavours. Over the summer, I had a photo taken with Ricky Ponting. It appeared in the newspapers under the heading: one of these people has the hardest job in Australia and the other is Prime Minister. My best thoughts and best wishes go to Michael Clarke as he takes on what obviously is the hardest job in Australia. Thanks.