GST increase still a $3.8 billion loss for WA

Western Australia’s GST share is tipped by the Chamber of Commerce and Industry WA (CCI) to increase to 45 cents this financial year, meaning WA will lose more than $3.8 billion to other states.

Today’s forecast by CCI is in line with WA Treasury forecasts ahead of the Federal Treasurer’s announcement of state relativities, expected within a month.

CCI Chief Economist Rick Newnham said for the past year WA has had a relativity of 34 cents in the dollar – far less than half of any other state or territory.

“While an 11 cent increase in GST will be welcome, it doesn’t come close to closing the gap in the $3.8 billion that will be stripped out of WA to prop up other states,” Mr Newnham said.

“While WA has forged ahead and developed its own economy it is being punished with less GST – we aren’t even receiving half of what would be our equal per person share.

“The $3.8 billion that will be lost this year is equivalent to the combined salary of every teacher in WA’s public schools, or to provide private health insurance for every West Australian, or to eliminate payroll tax in WA altogether.

“The $37.3 billion we would have lost to other states since the introduction of the GST is enough to extend the Mitchell Freeway all the way north to Geraldton and as far south as Albany.”

It is clear that the current GST distribution punishes states for developing their own economy, and this is exactly what has happened to WA.

“WA’s GST share won’t fix itself. It is a myth that after the mining boom WA’s GST share will return to pre-boom levels,” Mr Newnham said.

“The sustained increase in WA’s iron ore production means that WA will be permanently punished for developing its economy through less GST, unless the Federal Government steps in to make a change.

“Every day the iron ore price rises we can expect WA’s GST share to fall. So far WA’s iron ore price is 23 per cent higher than it was at the start of the financial year, putting downward pressure again on our GST share.”

The Productivity Commission, which is reviewing the GST distribution’s impact on the national economy, has backed CCI’s proposal to equalise to the national average.

“If implemented, this would have returned an additional $3.55 billion to WA in additional GST in the last year alone,” Mr Newnham said.

“It would also ensure every Australian citizen continues to have access to the very high standard of the national average of public services, while incentivising states and territories to develop their own industries and grow the national economy.

“Every state should be expected to stand on its own two feet, and that is exactly what a change to the GST carve up will ensure. This isn’t just in WA’s interest, it’s in the interest of every Australian.”

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