‘No change whatsoever’: Albanese thumbs nose at Productivity Commission over WA’s $47bn GST windfall
Anthony Albanese has thumbed his nose at the Productivity Commission after it found GST distribution changes that favoured the mining-rich state of Western Australia were inequitable and imposed a massive cost on taxpayers.
Mr Albanese dismissed the commission’s report on Monday, declaring “no change whatsoever” will be made to existing GST arrangements.
His position comes after the commission delivered its damning interim report into 2018 GST distribution reforms made under the Morrison government.
The Productivity Commission found the changes cost federal taxpayers almost $23 billion by 2024-25, more than four times the $5 billion originally expected.
Western Australia (WA) has been the only state to benefit financially, while the distribution system has created “perverse outcomes” and “increased complexity”.
Meanwhile, all states and territories, including both Labor and Liberal Premiers and Chief Ministers – excluding WA – have opposed the GST carve-up, with NSW Treasurer saying the country’s most populous state was $11.9 billion worse off as a result of the WA political fix.
The commission has recommended returning to the pre-2018 system, allowing targeted measures to deal with the effects of WA’s enormous mineral royalty revenues.
PM stands by broken system
Despite the Productivity Commission’s conclusive findings, Mr Albanese on Monday made clear he has no intention of adopting its recommendations.
Speaking in WA he sought to shift responsibility for the review onto the former Coalition government, pointing out that the inquiry was commissioned under Scott Morrison.
“This is an interim report commissioned by the Liberal Party, commissioned by the Morrison Government, not commissioned by us,” Mr Albanese said.
“When you commission the Productivity Commission, you shouldn’t be surprised that you get the sort of economic rationalist view of the world coming out.”
It’s an extraordinary position for a government which convened an “Economic Reform Roundtable” just 12 months ago in order to consider how to “improve productivity”.
Mr Albanese said the Productivity Commission would deliver its final report later this year, but insisted the outcome would not change his position.
“What I believe is very clearly, there will be no change to WA’s GST arrangements whilst I’m Prime Minister,” he said.
“WA is a major driver of our national economy and they deserve their fair share of the GST.”
Mr Albanese’s staunch defence of the WA deal coincides with the fact the Labor Party has 11 of the 16 federal seats and 46 of 59 state lower house seats.
“I will always back WA. I am in sync with the Premier of WA, and I can’t be clearer about that. No change to WA’s share of the GST,” he said.
How does the system work?
The Goods and Services Tax is collected by the federal government and then distributed to the states and territories.
The federal government is meant to parcel out the money to the states so they can deliver equivalent services across education, health and policing.
However, the distribution arrangements were changed in 2018, at a time when WA was key to the federal election.
The state was given more money than it would have otherwise received based on fairness, effectively creating an unfair system.
While WA earns extra cash from resources booms, the federal government still has to top it up with federal funds, despite it not needing as much money as other states.
Because the GST pool is fixed, whenever one state benefits, another state loses, and WA has surged $47 billion ahead of other states since 2018.
Economists slam ‘disaster deal’
Prominent economists have long condemned the WA GST deal which has been variously described as a “disaster”, “broken” and a “prisoners’ dilemma”.
Leading economist Saul Eslake recently welcomed the Productivity Commission’s findings, arguing they vindicate years of criticism of the WA GST arrangement.
Mr Eslake has described the 2018 deal as the “worst public policy decision of the 21st century thus far”, saying it has cost taxpayers significantly.
He has pointed to the $6.4 billion cost of the reforms in 2024-25, arguing that money could have funded a tax cut of more than $450 for every taxpayer.
Mr Eslake has said he cannot understand how a Labor government could regard handing “$60 billion over 11 years to the richest state in the country” as fair.
“Nor do I understand how that can be considered consistent with ‘prudent management’ of the nation’s finances,” Mr Eslake said.
Fellow independent economist Chris Richardson also backed the Productivity Commission, saying politicians were ignoring the obvious fix.
“As the Productivity Commission points out, we’d have done better to stick with what we were already doing (pre-2018),” he said.
“But reactions to the PC report to date tell … that the fix is in – all the politicians know what’s right, and they’re ignoring that.
“Instead, they’re circling the wagons to protect a dirty deal. They’re doing so to avoid losing votes.
“A handful of journalists are fighting the good fight, but most of the media is just shrugging off the sight of the largest single bribe delivered to marginal electorates that Australia has ever seen.”
States pile pressure on Canberra
The commission’s findings have intensified pressure from the eastern states, with NSW Treasurer Daniel Mookhey describing the deal as an “expensive failure”.
He has argued all Australians should receive comparable government services regardless of which state they live in.
Queensland Treasurer David Janetzki has called the current system unfair, while South Australian Treasurer Tom Koutsantonis labelled the GST arrangement “a dog of a deal”.
Western Australia has strongly rejected the report, with Premier Roger Cook attacking its critics and defending the state’s entitlement to the additional GST funding.
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