A powerful coalition of eastern states is making a bold demand to Prime Minister Anthony Albanese: fix the flawed GST system. The call comes as influential economists urge the government to take advantage of its recent election victory to address an issue that could potentially cost taxpayers a staggering $60 billion over 11 years.
The heart of the matter lies in a policy implemented during the Coalition era, which was meant to boost Western Australia’s GST allocation. However, this move has now been criticized as possibly
“the worst public policy decision in Australian history.”
As pressure mounts on Albanese and his team, they are being urged to reconsider this controversial arrangement that guarantees each state a minimum share of the GST raised within their borders.
The issue gained prominence after complaints from WA leaders following the 2016 election, leading to adjustments that have significantly impacted the federal budget. With spending priorities shifting towards areas like defense, aged care, NDIS, and national debt interest payments, experts are now questioning the sustainability of continuing with this policy.
Victorian Premier Jacinta Allan emphasized her state’s long-standing struggle with receiving less GST than it contributes due to resource-rich states benefiting disproportionately. Similarly, NSW Treasurer Daniel Mookhey is advocating for a fairer distribution model based on population size to eliminate unpredictable fluctuations in GST revenues.
Queensland’s Treasurer David Janetzki cautioned against perpetuating what he described as a “sweetheart deal” for Western Australia at the expense of other states. South Australia’s Treasurer Stephen Mulligan echoed these sentiments by highlighting the unfair financial advantage that WA currently enjoys under the existing system.
As discussions heat up, attention turns towards Prime Minister Albanese and his cabinet members as they convene in Perth amidst mounting calls for reform. Independent economists Saul Eslake and Chris Richardson are urging swift action to scrap the problematic WA deal before it further impacts the federal budget.
Eslake pointed out that despite not initiating this policy, Albanese’s government has extended and defended it thus far. He emphasized the importance of aligning fiscal decisions with principles of equality and prudent financial management. The looming review of GST rules next year presents an opportune moment for Albanese and Treasurer Jim Chalmers to steer towards a more equitable distribution model.
In conclusion, resolving the complexities surrounding Australia’s GST system requires political will and strategic decision-making devoid of short-term gains or political expediency. The stakes are high not just for individual states but for all taxpayers across the country who ultimately bear the financial consequences of these policy choices.
