Highlights
- Western Australia launches a million-dollar advertising campaign to protect its current GST distribution deal
- The current arrangement gives WA roughly $6 billion extra per year through a 0.75 floor on GST payments
- Economists call it “the worst public policy decision of the 21st century”, but it is popular in WA
- Productivity Commission is currently reviewing GST arrangements, with final recommendations due end of 2026
- The original forecast of $8.95 billion over 10 years has surged past $50 billion already
WA Launches Million-Dollar Ad Campaign
If you live in eastern Australia, you’ll soon see ads telling you how great the current GST deal is. The West Australian government is launching a million-dollar advertising blitz to protect a controversial tax arrangement. The deal gives WA roughly $6 billion extra each year compared to what it would get under the old system. Premier Roger Cook announced the campaign this week, saying the state’s GST share helps create infrastructure crucial for the whole nation. WA also hired a so-called “fairness fighter” to lead the state’s response to a government review of GST arrangements.
How the Controversial Deal Works
The federal government gives states billions each year because states run big programs, such as hospitals and schools, but cannot raise much money themselves. About half of that federal funding comes from GST, and a formula determines who gets how much. In 2018, then-treasurer Scott Morrison introduced a new model which put a floor under payments. No state’s share was allowed to fall below 0.75, meaning each state would get at least 75 cents for every dollar of GST it raises. Without the deal, WA’s share for 2025-26 would be around 0.18 rather than 0.75. That is an extra $6 billion a year for WA, a state whose budget is already the strongest thanks to mining royalties.
Why Economists Call It the Worst Policy
This is a very expensive deal that clearly benefits Western Australia above all others. To placate the other states, the 2018 arrangement included top-up payments so no one would be worse off. These top-up payments haven’t kept everyone content, and they’ve proven to be far more expensive than expected. The original forecast put the cost at $8.95 billion over 10 years.
In reality, the payments cost more than that in just the past two years, and the overall price has surged past $50 billion. This is at a time when the federal budget is deep in debt and the government is under pressure to cut spending. “This is just a disaster,” said public policy expert Robert Breunig. Economist Saul Eslake went further, calling it “the worst public policy decision of the 21st century” and WA’s arguments “vacuous” and “without foundation whatsoever.”
FAQs
Q: Why is Western Australia getting so much extra GST money?
A: A 2018 deal set a floor where no state receives less than 75 cents for every dollar of GST raised. Without this floor, WA would only get 18 cents, so the floor gives them $6 billion extra yearly.
Q: Why does the government create a GST deal like this in the first place?
A: Then-treasurer Scott Morrison introduced it in 2018 to help Western Australia, which is politically important in elections. The mining boom made WA rich, but voters there felt shortchanged under the old system.
Q: How much has this GST arrangement cost?
A: Originally projected to be $8.95 billion over 10 years, it has blown up to over $50 billion in only a few years, far more than was ever anticipated.
Q: Will the GST deal change?
A: The Productivity Commission is reviewing the GST arrangements and will give its final recommendations by the end of 2026. That’s why WA is campaigning to protect the current deal.
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