Architect of current GST system says its 'working exactly as intended'

PM's Pledge on WA GST

Prime Minister Anthony Albanese has promised that Western Australia's GST allocation will not change while he is prime minister, pushing back against a recent Productivity Commission report that called the 2018 deal a "costly mistake" and recommended it be scrapped.

Speaking to reporters in Perth on Monday, Albanese said: "What I believe is very clearly, there will be no change to WA's GST arrangements whilst I'm prime minister. That is my view. That has consistently been my view." Pressed repeatedly by journalists, he insisted: "There will be no change to WA's arrangements whatsoever on the GST."

The prime minister argued that the state's economic contribution justified its share, saying "WA is a major driver of our national economy, and they deserve their fair share of the GST." He also said he was comfortable with the Commonwealth continuing no-worse-off payments that support the arrangement, and that his government would not give in to pressure from other states and economists to unwind it.

Productivity Commission's Findings

The Productivity Commission's interim report, released earlier in August, described the 2018 deal struck by the Morrison government as a "costly mistake" that had only benefited WA and should be scrapped. The commission found the deal had cost federal taxpayers $23 billion in top-up payments to WA since it was struck, with $22 billion flowing to prop up the WA government's budget surplus. Federal budget forecasts show the deal will cost $6.6 billion in 2026/27 and $60 billion in total by the end of the decade.

The commission also found that every state and territory besides WA has 98% of their expenditure met with GST returns, compared to WA's 113%. It recommended returning to a system similar to the pre-2018 method, which apportions GST revenue to states based on need, rather than the current floor tied to NSW's per capita share.

Reactions from Other States

The prime minister's announcement has drawn sharp criticism from leaders of other states, who argue the arrangement is unfair and leaves them worse off.

Victoria's Labor Treasurer Colin Brooks said the Productivity Commission's interim findings "backed up exactly what Victoria has been saying for years." "The current system isn't working — it leaves other states like Victoria exposed and goes against the core purpose of fair distribution," he said.

Queensland's LNP Treasurer David Janetzki voiced concerns that "the inequity of the GST distribution, the consistent cost shifting from the federal government to the state government, is threatening the integrity of the federation." He called for a "consistent approach," arguing that if the prime minister acknowledged WA's unique character as a resources state, "the same should be applied to Queensland."

Tasmania's Liberal Treasurer Eric Abetz warned his state faced possible significant reductions in GST revenue unless the 2018 decision was reversed. "Australia was built on a simple concept — a fair go. This sense of fairness is what underpinned GST when it was first introduced," he said, adding that "the prime minister has told the nation that doesn't exist anymore. Western Australia has been told it can keep its lucrative and disproportionate deal."

South Australian Labor Premier Peter Malinauskas described the deal as a "dud deal" for the rest of the country that needed to be scrapped.

NSW Treasurer Daniel Mookhey noted that every state and territory bar one agreed the current system rewarded some Australians more than others and needed to change. NSW Premier Chris Minns is among the premiers unhappy with the arrangement, according to the ABC.

Nationals leader Matt Canavan called Albanese's assurance that WA would receive its fair share "weasel words," and urged the prime minister to get his pledge tattooed on his own arm.

WA's Defence

Western Australian leaders have welcomed the prime minister's commitment.

WA Premier Roger Cook said every Western Australian was "relieved and pleased" to hear the confirmation. "You don't come to Western Australia on 45 occasions without appreciating that the Western Australian economy is driving the national economy, and we are very pleased that the prime minister has backed WA," he said. Cook had earlier lashed out at the Productivity Commission's authors as "east coast clowns."

Resources Minister Madeleine King, who is from WA, also welcomed the decision but cast doubt on how the commission reached its conclusions. "There's no kind of halfway house in that report. It was all about winding back the arrangements that the Productivity Commission itself had recommended in 2018 to the government of the day," she told ABC Radio on Tuesday. She noted the report had "zero reference to suggestions made by the WA government," and argued other states had benefited from the arrangement, with about 90% of iron ore royalties distributed around the country.

Opposition frontbencher Dan Tehan said his home state of Victoria was also better off under the deal, and criticised Victoria for locking down natural resources.

Cormann Defends Legacy

Mathias Cormann, the former WA senator and federal finance minister in the Morrison government who helped design the 2018 deal, said the system was "working exactly as intended." In an interview with 102.5 ABC Perth, Cormann said the changes addressed "the unbelievable unfairness that Western Australia was on the receiving end of," and that the national economy and budget benefit from WA's resource development, making it "appropriate balance." He said no other state or territory was left worse off due to a no-worse-off guarantee, and argued the core architecture should remain, though refinements at the margins were possible.

What's Next

Albanese is set to meet with state and territory leaders at national cabinet on Wednesday, putting him on a collision course with premiers demanding a GST shake-up. The Productivity Commission is due to issue its final report in December, and Albanese has said he would decide on the matter then.

During Monday's press conference, Albanese referenced a 2024 press conference where he inscribed "no change to WA GST" on the arm of reporter Dylan Caporn, who is now a media adviser to Premier Cook. "I've signed people's body parts, for goodness sake," Albanese said, defending the consistency of his position.