PM backs GST deal, leaves future taxpayers on the hook for billions

Anthony Albanese has promised to keep a special deal to protect Western Australia’s share of the GST for as long as he is prime minister, reminding every other state that it was his government bankrolling an agreement that was on track to cost taxpayers $60 billion.

Speaking in Perth, Albanese effectively made redundant a report into the deal by the Productivity Commission, which earlier this month declared the GST allocation system a “mistake” that will weigh on the federal budget into the next decade.

“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,” he told a press conference. “There will be no change.”

The deal, put in place by then treasurer Scott Morrison after the collapse in WA’s share of GST, was expected to cost around $2.3 billion. Instead, it had blown out to $23 billion by 2024 and is on track to cost $60 billion by the end of the decade.

The extra spending goes to every other state and territory to ensure they are not left worse off by the deal.

In a scathing interim report, the Productivity Commission found the agreement created perverse outcomes, almost all of which benefit Western Australia at the expense of the rest of the federation and federal taxpayers.

A bushfire in NSW would actually deliver extra GST to Western Australia because of the way the deal is structured.

The commission also warned that the cost of protecting other states and territories, currently about $6 billion a year, could double if the price of iron ore climbed.

A final report is due by year’s end, but Albanese’s declaration made redundant whatever the commission ultimately recommends. He said there should be no surprise that the institution would deliver an “economic rationalist” worldview on the deal.

He pushed back at criticism from every other state and territory about the deal, noting that ultimately it was being paid by the federal government.

“[The] important thing that sometimes isn’t understood from some of the critique of WA getting its fair share of the GST is that those additional payments have not come from states and territories; they’ve come from the Commonwealth,” Albanese said.

“I’m comfortable with that, and what I say to premiers and chief ministers, though, is that you need to bear that in mind when you are discussing federal-state financial relations.”

NSW Treasurer Daniel Mookhey, who described the Productivity Commission’s report as “superb”, said he would continue to fight for a change to WA GST arrangement.

He acknowledged that the prime minister had pledged to stick with the deal, but the evidence for change was overwhelming.