Interim report calls for carve-up deal that has only benefited Western Australia to be ‘reshaped’ as it has achieved almost none of its objectives
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The Productivity Commission (PC) has criticised the controversial GST deal with Western Australia as a costly mistake that should be reversed, saying tens of billions of dollars of taxpayer money has since gone to the country’s richest state.
An interim report from a PC review of the deal said the reform – requested by WA and implemented under the former Morrison government with Labor’s support – had achieved almost none of its objectives and had made the system less equitable.
Alex Robson, the PC’s deputy chair, said the deal had “reshaped a system that needed targeted reform, leaving taxpayers with a large and growing bill”.
“The system should be brought back to its core purpose: ensuring that all states and territories are able to offer Australians a similar standard of services and infrastructure no matter where they live,” Robson said.
States and territories receive a greater or smaller share of the roughly $100bn annual GST pool on a per person basis depending on their fiscal capacity, as judged annually by the independent Commonwealth Grants Commission.
But the 2018 deal– struck after WA’s share of the GST pool had plummeted as a result of the mining boom – placed an effective floor under any individual state’s share. Currently, no state can receive a lower per-person share than New South Wales or Victoria.
Making sure no other state or territory is left worse off as a result of the WA deal was previously forecast to cost the federal government about $5bn by 2024-25.
But the changes have ended up costing taxpayers nearly $23bn, with the PC concluding that only WA has benefited from the change.
Based on budget forecasts, the total cost of the deal will reach $60bn by 2029-30.
Angela Jackson, a commissioner at the PC, said the deal has created perverse outcomes.
“If a state like South Australia improves its fiscal position, they get less GST because they are considered to need it less,” Jackson said.
“If Western Australia improves its fiscal position, they either don’t lose any GST or potentially receive even more”.
