‘Scandalous’: GST carve-up another blow for taxpayers

The federal budget is set to take another hit from “the worst public policy decision Australia has ever made in the 21st century”.

Independent economist and proud Tasmanian Saul Eslake does not hold back in his assessment of the 2018 GST deal between the then Morrison coalition government and Western Australia.

When first announced, it was estimated that changes to the distribution of GST revenue among the provinces, following Perth’s persistent protests that they were receiving less than their fair share, would set the federal budget back by $9 billion over eight years.

But Mr Eslake now expects the cost to the federal budget to exceed $60 billion within 11 years, which would be the biggest ever explosion in the cost of any single policy decision other than the NDIS.

The Commonwealth Grants Commission, an independent body that advises the federal government on the share of GST each state and territory should receive, will announce the form of the latest allocation on Friday.

Distribution of GST has historically been decided based on need; This meant that resource-rich WA received a lower share per capita than poorer states such as Tasmania.

But 2018 legislation meant that for the last two financial years WA could receive at least 75 cents per dollar of its claim on a per capita basis.

WA’s base will be equivalent to NSW’s per capita share in Friday’s share, which was 83 per cent in the previous financial year.

This means the cost to federal taxpayers of filling the GST revenue pool will rise from $6.1 billion to $6.9 billion in 2026/27 to ensure no state or territory is worse off, according to budget forecasts.

“I think it’s scandalous,” Mr Eslake told AAP.

Mr Eslake did not accuse the WA government of trying to “spend as much money as possible out of Canberra”; He said it was a KPI of state finances.

He placed the blame on successive federal governments that kept the deal for fear of losing votes in the electorally important western state.

“I cannot understand how Treasurer Jim Chalmers and Premier Anthony Albanese, with their clear declaration of commitment to equality, can take almost $7 billion from the federal budget and give it to Australia’s richest state so they can create a surplus,” Mr Eslake said.

WA Finance Minister Rita Saffioti said other states and the federal budget had fared significantly better since 2018 due to higher-than-expected company tax collections from WA, which exceeded the cost of the deal.

“Without the 2018 GST reforms, we risk $6 billion being ripped out of the WA economy each year, reducing our ability to invest in the critical economic enabling infrastructure that powers our state and national economy,” he said.

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