The federal budget is set to take another hit from “Australia’s worst public policy decision of the 21st century thus far”.
Independent economist and proud Tasmanian Saul Eslake doesn’t hold back in his assessment of the 2018 GST deal between the then-Morrison coalition government and Western Australia.
When it was first announced, changes to the distribution of GST revenue among the states, struck after years of persistent protestations from Perth that they were getting less than their fair share, were forecast to set the federal budget back $9 billion over eight years.
But Mr Eslake now expects the cost to the federal budget will exceed $60 billion over 11 years, making it the biggest blowout in the cost of any single policy decision ever, with the exception of 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 reveal the shape of the latest carve-up on Friday.
The distribution of GST has historically been decided based on need, which meant that resource-rich WA received a lower per capita share than poorer states like Tasmania.
But the 2018 legislation meant that in the past two financial years, WA could receive no less than 75 cents to the dollar of what it would get based on a per capita distribution.
WA’s floor will increase to the equivalent of NSW’s per capita share in Friday’s carve-up, which in the prior financial year was 83 per cent.
That means the cost to federal taxpayers of topping up the pool of GST revenue to make sure no state or territory is worse off will rise from $6.1 billion to $6.9 billion in 2026/27, according to budget estimates.
“Which I think is scandalous,” Mr Eslake told AAP.
Mr Eslake did not blame the WA government for seeking to “screw as much money out of Canberra as they can” – that’s a state treasurer’s KPI, he said.
He laid the blame at the feet of successive federal governments that have continued the deal out of fear of losing votes in the electorally-significant western state.
“How Treasurer Jim Chalmers and Prime Minister Anthony Albanese, who profess a commitment to equity, can take almost $7 billion out of the federal budget and give it to the richest state in Australia so they can run surpluses, I cannot understand,” Mr Eslake said.
WA Treasurer Rita Saffioti said other states and the federal budget have been significantly better off since 2018 due to the higher than expected company tax collections from WA, outweighing the cost of the deal.
“Without the 2018 GST reforms, we risk $6 billion being ripped from the WA economy every year, reducing our ability to invest in the critical economic enabling infrastructure that powers our state and the national economy,” she said.
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