URGENT UPDATE: Western Australia is calling for unwavering support for its crucial GST reforms as tensions rise over national revenue distribution. Rita Saffioti, the Deputy Premier and Treasurer, highlighted the state’s significant contribution of approximately $2.5 billion annually to the national economy, stating that WA is subsidizing the rest of Australia.
This appeal comes as economist Saul Eslake, a vocal critic of the current GST arrangements, arrives in Perth for an industry event today, October 27, 2023. Saffioti aims to clarify why WA will not settle for anything less than the current structures, especially as the Productivity Commission has just launched a critical review of the 2018 GST distribution reforms.
The 2018 reforms ensure WA receives a minimum of 75 percent of its population share of national GST revenue. Without these reforms, WA’s share could plummet to as low as 10 percent, a stark contrast to the 83 percent minimum for other states. “These reforms are not windfall gains for WA,” Saffioti emphasized, urging the need for a balanced approach that supports smaller jurisdictions while fostering economic growth.
With WA accounting for 11 percent of the nation’s population but producing a staggering 45 percent of exports and over 17 percent of national GDP, the stakes are high. Unraveling these reforms could cost WA $6 billion per year, severely impacting infrastructure investments essential for the entire nation.
Saffioti’s statements come amid increasing scrutiny from eastern states regarding the financial implications of these reforms. Critics, including Eslake, have pointed to higher costs to the Commonwealth due to rising iron ore prices. However, Saffioti counters that these prices have also generated over $100 billion in additional company tax for the Commonwealth in just five years, outpacing the costs of the reforms.
Additionally, the redistribution of WA’s mineral royalties means that larger states are benefiting disproportionately from WA’s resources. Saffioti noted that the Northern Territory receives nearly seven times more GST per capita, while Tasmania receives about 2.5 times more than WA.
The urgency of maintaining the GST reforms is underscored by WA’s commitment to economic growth. “Why would a state like WA invest in expanding its resources sector if it means a detrimental hit to our GST share?” she asked. The reforms provide a framework that encourages development while ensuring stability in GST allocations.
As the Productivity Commission review progresses, Saffioti and the WA Government are prepared to advocate fiercely for these reforms to remain intact. With the Albanese Labor Government’s confirmed support, the focus now shifts to ensuring that the benefits of WA’s wealth creation continue to support the entire nation.
Stay tuned for updates as this critical discussion unfolds, impacting the economic landscape for all Australians.
