The recent report from the Productivity Commission (PC) has ignited a heated debate about the controversial GST deal with Western Australia, highlighting a multi-billion-dollar mistake that demands urgent attention. This deal, negotiated under the Morrison government with Labor's support, aimed to address the challenges posed by the mining boom's impact on WA's GST share. However, the PC's findings paint a starkly different picture, revealing a costly blunder that has disproportionately benefited WA at the expense of other states and territories.
The PC's interim report exposes the deal's failure to achieve its intended objectives, resulting in a significant loss of equity in the system. Alex Robson, the PC's deputy chair, emphasizes the deal's unintended consequences, stating that it has reshaped a system requiring targeted reform, leaving taxpayers with a substantial and growing financial burden. The report underscores the need to restore the GST system's core purpose: ensuring equitable service and infrastructure standards across all states and territories.
One of the deal's most significant flaws is the introduction of a floor for individual states' GST shares, ensuring that no state can receive a lower per-person share than New South Wales or Victoria. While this was intended to protect WA, it has inadvertently created a perverse outcome. Angela Jackson, a PC commissioner, illustrates this paradox by mentioning that states like South Australia, which improve their fiscal positions, receive less GST, while WA, despite potential improvements, either maintains or increases its GST share.
The financial implications of this deal are staggering. The PC estimates that the no-worse-off payments associated with the 2018 deal will cost taxpayers nearly $23 billion by 2029-30, a figure that could have funded substantial tax cuts for every taxpayer. The deal's initial estimates were already surpassed by 2020-21, and the actual costs continue to soar, reaching six times the estimated amount by 2024-25. This staggering financial burden raises questions about the deal's long-term sustainability and its impact on the national budget.
The PC's recommendations are clear: the government should either overhaul the GST distribution system or make the no-worse-off payments permanent. However, the political landscape presents a significant challenge. The government and opposition are deeply invested in maintaining their political fortunes in the country's west, making any significant changes to the deal politically risky. This political quagmire further complicates the path to rectifying the mistake.
In conclusion, the Productivity Commission's report exposes a costly mistake in the GST deal with Western Australia, one that has had far-reaching consequences for the nation's budget and equity. The PC's findings demand a reevaluation of the deal's impact and a serious consideration of the proposed reforms. As the government grapples with the political implications, the need for a fair and equitable GST system becomes increasingly urgent, requiring a comprehensive review and a commitment to addressing the systemic issues identified by the PC.
