‘How do they sleep at night?' Allan and Minns governments, experts demand Albanese fix GST
The Minns Labor government and its treasurer, Daniel Mookhey, have been pushing for an overhauled distribution model that would give states GST corresponding to their population.
'NSW will continue to argue for a fairer carve up of GST on a per capita basis,' a government spokeswoman told this masthead.
'That would include support for the smaller jurisdictions as required. This would help eliminate the wild fluctuations which hinder states from being able to properly budget for future GST contributions.'
Queensland's Coalition Treasurer David Janetzki warned Labor against 'locking in a Western Australia sweetheart deal for political reasons' and SA Labor Treasurer Stephen Mulligan argued the GST model gave WA 'an unfair financial advantage'.
Albanese and his ministers will spend two days in Perth this week and hold a cabinet meeting in a state that has received lots of attention from this government. Labor last week approved an extension of the North-West Shelf gas project off the state's coast, watered down a petroleum rent tax last term, and backed off on legislating a new environment protection agency last year, partly due to concerns from the mining state.
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Independent economists Saul Eslake and Chris Richardson want Labor to seize the moment to scrap the WA deal.
The cost blowout is the largest in the federal budget and only comparable with the NDIS, according to Eslake, who has been a frequent critic of the WA arrangement.
Eslake said Albanese's big win meant he did not require a group of seats in any one state to remain in power.
'This government didn't introduce the worst public policy decision of the 21st century. But they extended it, and they defended it. And if they are serious, then they have a chance to end it,' Eslake said.
'Given that Anthony Albanese and Jim Chalmers profess to believe in equality and in sound financial management, how can they sleep at night knowing they are giving the richest state in the country $8 billion more than it needs while simultaneously saying they can't afford to increase the JobSeeker allowance?'
In 2016, under pressure from the politically influential WA government, Morrison came up with a plan under which no state's GST share could fall below 75 cents for every dollar of the tax raised within its jurisdiction.
This was designed to offset WA's frustration that it had fallen to a much lower share than 75 per cent because the GST formula punished WA for its ability to raise billions in mining royalties.
The top-up was initially forecast to cost $2.3 billion over four years, but, combined with another policy to make sure no other states were worse off, the total package of changes combined to push the expected cost of Morrison's original plans to $60 billion by the end of the decade.
WA's GST share was expected to lift due to a forecast fall in iron ore prices and royalties, but that did not occur, baking in the costs to taxpayers across Australia. Unlike other states struggling to manage budgets, WA is projected to bank cumulative surpluses worth about $20 billion over the eight years to 2026-27.
Richardson said the only way the WA deal would end was if the Coalition agreed not to turn the issue into a political issue to gain votes in the state.
He said Chalmers must give the Productivity Commission an appropriately expansive terms of reference for its review of the GST next year, which he said would inevitably find that the WA deal was the equivalent of the country 'smoking 100 notes'.
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