CCIWA has called on the Productivity Commission to retain the core elements of the 2018 GST reforms, arguing the current model restored stability to Western Australia’s finances while strengthening incentives for national productivity.
CCIWA Chief Economist Dr Daniel Kiely said the reforms delivered benefits well beyond WA.
“A strong WA means a strong Australia,” he said. “We produce almost half the nation’s exports, which supports jobs and growth across Australia.
“Meanwhile, tax revenue from higher iron ore prices has led to stronger-than-expected Commonwealth revenue.
“The deal is working for WA, and it’s working for the nation.”
CCIWA GST Steering Committee member and prominent WA businessman Michael Chaney said the current system enabled WA to “do the heavy lifting” for the national economy.
“We can’t go back to a system that disincentivised the development of our resources, caused boom-and-bust fluctuations and worked against efficiency at a time when productivity growth has never been as important,” he said.
“Stability provides greater certainty and signals to international investors that Australia is a great place to invest and do business.”
Why the 2018 reforms worked
Before 2018, GST was distributed under a model of full horizontal fiscal equalisation, which aimed to lift every state to the fiscal capacity of the strongest.
The Productivity Commission found that approach could create volatility and disincentives for growth, particularly in resource-rich states.
Percentage of total State revenue that is GST distribution, 2023-24.
The 2018 changes introduced two key mechanisms: a legislated relativity floor and a revised benchmark.
CCIWA’s submission stated this shift to “reasonable equalisation” had reduced volatility, improved budget certainty and removed policy settings that penalised economic growth.
Kiely said the previous system effectively discouraged states from expanding their economies.
“The better your economy was doing, the less you would receive from the GST,” he said.
“We can’t go back to a system that punishes economic growth and creates uncertainty for business.
“We need a system that rewards productivity in every state, and that’s what the current deal delivers.”
The submission highlighted WA’s exposure to global commodity cycles and argued the 0.75 floor reduced the risk of sharp budget shocks when iron ore prices fluctuate.
Fixing the flaws
Example of how ETA could apply to the States.
While backing the current framework, CCIWA stated further refinements were needed.
It recommended reviewing how the Commonwealth Grants Commission assesses mining royalties, remoteness costs, gambling revenue and state debt, as well as improving transparency in the calculation of GST relativities
“We believe some of these minor changes to outdated formulas can be made relatively easily, without ripping apart the structure of the current GST system,” Kiely said.
“For example, despite being able to fit in WA around 37 times, Tasmania receives $1,167 more per capita than WA does as compensation for regional and remote costs. It’s much harder to deliver services in the Kimberley than it is an hour out of Hobart.”
When WA does well, the nation does well
The submission highlighted the reliance Australia has on WA – for example, it produces nearly half of the nation’s exports despite representing around 11% of the population.
Kiely said WA’s broader fiscal contribution is not always recognised by other states.
“WA still receives the lowest amount of GST revenue per capita – just $2,563 dollars per person, which would have dropped to $610 per person without the 2018 deal,” he said.
“That’s why it’s particularly galling to hear east-coast critics suggest that WA is somehow making a windfall from this deal. We are still doing the heavy lifting.
“WA and New South Wales are currently the only net contributors to the Federal Budget – and WA’s contribution is 19 times bigger than NSW.”
The Productivity Commission is expected to release its interim report in August, with GST distribution again shaping up as a central issue in the national productivity debate.
CCIWA and the GST Steering Committee plan to seek a meeting with Prime Minister Anthony Albanese to discuss the GST later this year.
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