State governments in Western Australia first Liberal and now Labor have decried the unfair nature of the GST distribution from the federal government to the states which now sees Western Australia only obtain 30 cents in the dollar. The current formula of GST distribution is aimed to bring all states to full fiscal equalization and as such it has seen GST revenue prop up under-performing states such as South Australia and Tasmania while Western Australia appears to have been punished because of its successful mining boom.
The issue has caused such anger in Western Australia that a secession movement for the state has been established and at the last state conference of the Western Australia Liberal Party they voted in favour of establishing a committee to investigate Western Australia becoming a “financially independent State”.
The federal government who have been hearing complaints from Western Australia for years now about the unfair nature of the GST distribution asked the Productivity Commission to investigate possible changes. It released a draft report last October which stated the goal of full equalisation should be scrapped as it has led to a system of perverse incentives where states are not rewarded for reforming their tax systems or allowing further exploration of their mineral resources.
If Western Australia is to obtain more a greater share of their GST revenue it would mean that the other states would have to forgo some of their revenue. Every other state leader only looks after their state’s self-interest and this was on display today with South Australia Premier Jay Weatherill claiming his state would lose $557 million each year and would have to cut frontline services under the draft changes.
He appeared at a press conference today with Acting federal Opposition Leader Tanya Plibersek who appeared to indicate that federal Labor was opposed to any change to the current GST distribution formula “every state and territory bar WA will lose and lose big time under the proposals in the draft report”. Labor’s solution to Western Australia’s complaints is to bribe the state government with $1.6 billion in federal infrastructure spending.
Weatherill and Pilbersek were speaking today on this issue because Treasurer Scott Morrison has extended the deadline for the Productivity Commission to hand down its report until May 15 which is after the federal budget and two months after the South Australia and Tasmania state elections which smacks of political trickery.
This is only one state government so far that has announced its opposition to any attempt to the reform the GST distribution formula, it is likely more will speak out soon. All three parties in South Australia have stated that they will never support any reform that in their eyes disadvantages their state. It is clear that Western Australia is going to face near universal opposition from the rest of Australia to obtain their fair share which will only make the frictions between the West and the rest of Australia grow deeper.