DEMANDING consumers pay more GST is Tasmania's best hope of coping with a looming shortfall in Commonwealth funding for schools and hospitals, a leading economist has recommended.
Bank of America Merrill Lynch chief economist Saul Eslake said demanding more GST revenue by broadening the base or a rise in the GST rate is the ``least unpalatable'' of limited options for the state government.
Without more GST revenue, the state would have to cut funding or significantly raise state taxes, he said.
Premier Will Hodgman was yesterday quick to restate his opposition to any change to the GST, despite the federal government's plans to shift the burden of health and education costs onto the state.
``In my view increasing the GST, a further burden on Tasmanian consumers and taxpayers, is not the way to fix a budget,'' Mr Hodgman said.
He said the tough federal budget presented ``some significant issues'' for the state.
``I am concerned about shifting of funding obligations to the state that are not matched by commensurate support,'' he said.
``If there's increased demands placed on the state there needs to be commensurate support provided.''
Mr Hodgman would not say what form of support he would seek from the federal government.
The state opposition estimated the impact on Tasmania's health and education systems would be $1.6 billion cut over 10 years and called on Mr Hodgman to stand up to his federal Liberal colleagues.
In contrast to other state premiers and treasurers who slammed the surprise moves and called for an urgent COAG meeting to discuss the impact and the need for GST reform, Mr Hodgman was mild in his reaction, vowing to work constructively with the federal government.
It was revealed in Tuesday's federal budget that the federal government will replace the previous government's big spending Gonski commitments from 2018 with modest increases based on inflation.
The Commonwealth has also revamped the health funding formula to put the onus on the state government to pay for hospital services.
The Australian Education Union called on Mr Hodgman to honour his pre-election pledge to fight for the full roll-out of Gonski as promised by the previous Labor government.
AEU Tasmanian president Terry Polglase said Mr Hodgman should have spoken up sooner.
Mr Hodgman said he stood by his pledge and would seek Tasmania's ``fair share'' of education and health funding.