‘Costly mistake’: Scathing review into billion-dollar deal that only keeps one state happy
Updated . First published at
Australians have lost almost $23 billion in a GST system that a scathing report has found has been “a costly mistake” that has only kept one state happy.
The Productivity Commission on Friday delivered an interim report into the 2018 GST reforms, finding it has cost four times more than projected and propped up Western Australia over other jurisdictions.
The Productivity Commission has warned the federal government that the GST system is too costly Nine
“The result is a system that is now more complex, less consistent and more costly,” Productivity Commission deputy chair Alex Robson said.
GST has been collected by the federal government and distributed to the states and territories since its inception in 2000 to fund essential services like education and healthcare.
Changes were introduced 18 years later following a collapse in Western Australia’s share of GST despite going through a domestic recession.
Then-treasurer Scott Morrison introduced rules to ensure no state would receive less GST than the financially strongest jurisdiction (either NSW or Victoria) and the federal government would top up the GST pool each year so no state was worse off.
This was to compensate financially weaker states so each can deliver the same standard of services and also account for factors that affect different states, like population or remoteness.
The Productivity Commission found that these rules have only benefited Western Australia, which generates billions of dollars from its lucrative resources sector.
Before 2018, all states received enough GST to meet 100 per cent of their financial needs.
That changed to 113 per cent for Western Australia in the 2024-25 financial year, compared to 98 per cent for the remaining jurisdictions.
To ensure the other states were not worse off, the federal government has spent almost $23 billion since 2018 to cover the difference.
Productivity Commissioner Angela Jackson said this has created two sets of rules: one for Western Australia and another for every other state and territory.
“If a state like South Australia improves its fiscal position, they get less GST because they are considered to need it less,” she said.
“If Western Australia improves its fiscal position, they either don’t lose any GST or potentially receive even more.”
WA Premier Roger Cook and Prime Minister Anthony Albanese. Nine
The Productivity Commission in the interim report recommended the federal government wind back to the system to pre-2018 settings and request the body that distributes GST address costly effects when they arise like mining.
Prime Minister Anthony Albanese refused to say whether he would revisit the GST deal with Western Australia, instead saying he would wait and see until the final report is delivered at the end of the year.
“I assure Western Australians of this - you will get your fair share because your work and what you contribute to the national economy really counts,” he told reporters in Canberra.
NSW Premier Chris Minns called for his state to receive a better and fairer share of the GST pie, criticising the system for allowing Western Australia to become so rich.
“We’re now in a situation where Western Australia is so wealthy and so rich that they’re competing and bidding on NSW rugby league games and putting tens of millions of dollars on the table,” he told reporters on Friday.
“You’re seeing similar behaviour from Gulf states like Saudi Arabia and the UAE and Dubai, and almost for the same reason because they’re digging up natural resources and they’ve got billions of dollars to spend.
“But it shouldn’t come at the expense of NSW.”
Western Australian Premier Roger Cook backed his state receiving the bulk of the benefit of the GST system, saying it is the economic powerhouse of the national economy.
“Today’s Productivity Commission interim report is not just 116 pages of dry facts and figures, it is an attack on every hardworking Western Australian, it is an attack on the deal, which has been endorsed by Western Australians at every election this decade,” he said.
“It’s a sign that these east coast clowns simply do not understand Western Australia.”
The Productivity Commission will hold hearings on its interim report before delivering its final report on December 31.
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