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Western Australian Premier Mark McGowan says there will be “dire consequences” for any political party that pushes to change the GST distribution system that helped his government deliver its sixth budget surplus in a row.
Speaking at a post-budget breakfast in Perth on Friday McGowan issued the warning in response to a question about whether the state’s multi-billion dollar surpluses predicted in the forward estimates would force the federal government to alter the GST floor legislated in 2018.
WA Premier Mark McGowan at the 2023-24 budget lockup.Credit: Hamish Hastie
“The federal government has said they’re not going to change it, I believe them and it would be politically deadly were they to do that,” he said.
“Obviously, it’s a red line they should not cross.
“Any political party nationally that crosses that will suffer dire consequences in Western Australia so I think it’s here to stay.”
Politicians and high-profile West Australian businesspeople began mounting a campaign to increase the state’s share of the GST in 2014 after it collapsed to just 30 cents for every dollar it contributed at the same time iron ore royalties plummeted.
In 2018 former Coalition treasurer Scott Morrison struck a deal to introduce a floor of 70 cents for every dollar, which will increase to 75 cents by 2024-25.
Any political party nationally that crosses that will suffer dire consequences in Western Australia
To appease other states the government introduced no-worse off payments, which were originally forecast to cost Australian taxpayers $2.3 billion over three years.
However, the unexpected surge in iron ore prices has meant the deal has blown out to $30 billion with the payments scheduled to end in four years.
The WA budget projects the state will reap $6.5 billion in GST grants this coming financial year up from the $6.3 billion last year, with grants expected to increase to $8.9 billion by 2026-27.
Coupled with tens of billions in iron ore royalties the state expects to deliver a combined $7.8 billion in surpluses from 2024 to 2027.
State premiers and treasurers from across the country and political divide have decried the deal and urged the federal government to either return the system to its pre-2018 state or ensure the top-up payments continue indefinitely.
At the WA Business News breakfast McGowan rubbished any notion the GST carve-up was to blame for the budgetary problems being faced by other states.
“If their budgets are in the red, if they’re losing their credit ratings and so forth it’s not because of the GST deal, because there’s been no loss of money to them,” he said.
“I know people like to point elsewhere when there are financial issues, but if they have a problem they really need to look in the mirror.”
The WA budget predicted that had the old GST system continued WA would only have received $900 million from a pool of $86 billion this financial year.
The Productivity Commission is scheduled to review the current GST arrangements after the next federal election in 2026 but Treasurer Jim Chalmers has already committed to keeping the current floor arrangements.
“What’s not under consideration, what’s not up for review, is the GST floor here in Western Australia,” he said while visiting WA in March.
Both sides of politics support the deal because of the political makeup of the state that helped deliver the Anthony Albanese majority government in May last year when Labor nabbed four WA seats from the Liberals.
With a potential 16th seat set to return to the state following an electorate redistribution, its political sway will increase further.
The WA government is spending $1.6 million to assemble a team of GST “fairness fighters” to help develop the state’s case to keep the current arrangements ahead of the Productivity Commission review.
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