Western Australia will be hundreds of millions of dollars worse off than forecast this financial year following the announcement of the GST distribution by the Commonwealth Grants Commission.
The announcement has prompted a call from CCI for the new State Government to exercise spending restraint.
WA’s GST share will rise from 30 cents in the dollar to 34 cents next financial year but well below the forecast 38 cents.
In its report on the GST distribution between the states, the Commission said WA was still the state with the strongest fiscal capacity.
While there was a decline in the value of iron ore production, property sales and taxable payrolls it was offset by a decline in population growth and changes in community health services, the report said.
The change means the WA’s GST share will only rise by $378 million, leaving a $241 million hole in the State’s 2017-18 budget.
CCI Chief Economist Rick Newnham says the announcement creates greater urgency for the new Labor Government to rein in spending and find savings as an immediate priority.
“Given WA’s volatile GST share, it is critical that the new State Government enact strenuous savings measures and find efficiencies wherever possible,” he says.
“Nothing should be off the table – given the State’s financial position, every single area of expenditure must be reviewed to ensure taxpayer dollars are being efficiently spent.
“It is reining in spending and finding efficiencies that must be the bedrock of all budget repair efforts – the business community welcomed Premier Mark McGowan’s election commitment to no new taxes or increased taxes for West Australians, as raising taxes will reduce the capacity of business to grow and create jobs, which is not the answer to fixing the State’s finances.”
Newnham says business has previously welcomed WA Labor’s election commitment to link senior public sector salaries to KPIs, eliminate waste and duplication across government departments and reduce the number of senior executive service positions.
WA’s GST share has been a hot-button issue since 2014 when it started dramatically declining.
To make up for WA’s abysmal share the Federal Government has provided two $500 million grants in previous years but it hasn’t been enough to stem growing discontent from voters over its inaction on the issues surrounding the GST formula.
The inaction has drawn anger from both the former Liberal National State Government and the current Labor State Government.
Last week new Treasurer Ben Wyatt said WA’s GST share was ‘abysmal’.
“This again highlights the complete disconnect in particular between the Commonwealth Grants Commission and economic reality of Western Australia,” he told radio 6PR.