Treasurer Jim Chalmers says there are no changes to WA’s GST deal as costs rise
Jim Chalmers has pledged not to reverse a spin on the Morrison-era Goods and Services Tax, despite taxpayers facing $10 billion over the next two years to match payments to Western Australia.
A Commonwealth Grants Commission report found that the estimated cost of the former coalition government’s GST distribution deal will be $4.4 billion this fiscal year and rise to $5.6 billion in fiscal 2024.
Scott Morrison, as treasurer, struck a deal with WA before the 2019 election to introduce a new “floor” meaning each state should receive 70 cents for every dollar of GST they raise in 2022-23 and 75 cents per dollars in 2024-25.
Speaking to journalists in Perth after the CGC report was released on Tuesday, the treasurer said the charges were a “thank you” for the people of WA and that Labor had no plans to change the scheme.
“This is a deal we’re committed to, this is a deal we’re proud of, this is a deal that makes us recognize that the WA economy often turns the wheels of the national economy,” said Dr. Chalmers.
“I’ve said to Prime Minister McGowan and Treasurer McGowan, I’ve said publicly and privately here in WA that we have no intention of changing that deal.”
Prime Minister Mark McGowan – who is also the WA treasurer – has protested against any suggestion to change the scheme despite criticism from other states.
Dr. Chalmers on Tuesday dismissed WA-based Liberal Senator Michaelia Cash’s claims that Labor would tinker with the GST floor as “absolute nonsense”.
But he wouldn’t care if the “no worse off” guarantee would expire in fiscal year 2026, as he said any review of the scheme would be years away.
The Morrison government introduced the safety net when it implemented the new GST floor to compensate states with funding from outside the GST pool for any losses incurred during the transition to the new system.
The floor was introduced to prevent WA from missing out on GST due to skyrocketing mining royalties of 30 cents and to tie it to a benchmark of the fiscally stronger of the less volatile economies of NSW or Victoria.
The scheme has sparked controversy, especially given that WA enjoyed a financial boom during the Covid-19 pandemic and is in a strong economic position, with critics arguing that it is not fair for the state to receive more GST than necessary is.
However, tax expert Robert Breunig warned that Labor would not want to change the policy because it could cost them votes in WA, which he said was the same reason the Liberals introduced the policy in the first place.
“I think it really shows a broader point about governments,” said the director of the Australian National University’s Tax and Transfer Policy Institute.
“If the government starts introducing programs that are not a good idea to win votes, those programs will become almost impossible to undo in the future. Our whole system is full of things like that.”
Professor Breunig said the Commonwealth should return to the previous “apolitical” system of GST distribution.
“We looked at how much each state could afford in terms of how much revenue was raised,” he said.
“We looked at each state’s cost in terms of how difficult it was to provide services that we had a formula that distributed the money fairly across the country.”
The CGC report on Tuesday said every state except WA was estimated to receive less GST this financial year than under the old system.
But all states and territories are expected to receive more GST this fiscal year than last, assuming no worse payments and that the GST pool is expected to grow more than $3 billion to an estimated $86 billion.
The Independent Commission strives to distribute the GST pool fairly among the states and territories each year by considering each state’s and territory’s ability to generate revenue.