- GST reform package successfully passes through the Senate
- WA’s GST ‘top-up’ payments will solely be used to reduce WA’s debt burden
- An estimated $1.7 billion in ‘top-up’ payments between 2019-20 and 2021-22 to be dedicated to a Debt Reduction Account
- Account forecast to save about $200 million in interest payments alone in the first three years
The McGowan Labor Government has welcomed the successful conclusion of the GST debate and announced its plan to utilise the additional funding expected to flow to Western Australia.
WA’s fair share of the GST campaign was in the making for years and the beginning of the current process started when Premier Mark McGowan wrote to the then Prime Minister in April 2017, requesting the Productivity Commission conduct an inquiry into the flawed system.
Through successfully lobbying Canberra to secure WA’s fair share of the GST, the McGowan Government will now lock away the additional funding to help pay down the debt burden left behind by the previous Liberal National Government, forecast to peak at $41 billion.
Western Australia is now guaranteed to receive a ‘top-up’ to an effective 70 per cent floor over the three years from 2019-20 to 2021-22. The Federal Government currently estimates this to be worth $1.7 billion.
The McGowan Government will direct the first three years of the ‘top-up’ payments into the State’s Debt Reduction Account. This will be included in the 2018-19 Mid-year Review.
It will save hundreds of millions of dollars in interest payments over the long term, with Treasury currently forecasting about $200 million in savings over just the next three years.
With the passage of the legislation in the Senate today, the new GST system will be introduced over eight years. In addition to the initial untied ‘top-up’ payments for WA, a transition to the new equalisation formula will see all States and Territories equalised to the strongest State out of New South Wales and Victoria.
A ‘within‑system’ 70 per cent floor will also be locked into place from 2022-23, and rise to 75 per cent from 2024-25. This will prevent any State or Territory from falling below this mark.
The new equalisation formula (and associated GST pool ‘top‑ups’) is estimated to deliver an additional $3 billion in revenue to WA over six years from 2021-22. This revenue will form part of the typical annual GST grants.
Over the last 12 years, Western Australia has provided $30 billion of our GST money to other States and Territories. In 2015-16, WA’s GST fell as low as 30 per cent with our current share at 47 per cent under the existing GST formula.
As noted by Premier Mark McGowan:
“This is a historic day for Western Australia, we have finally secured our fair share of the GST.
“It has been a long and difficult campaign, but today every Western Australian can take comfort in knowing that our State is no longer taken for granted by Canberra.
“I want to acknowledge the efforts of the leaders from both sides of politics, the Federal Government and the Federal Opposition, for working with my Government and with the other States and Territories to implement this plan through legislation.
“It is no secret that my Government inherited a record level of debt, on an unsustainable trajectory, that would burden generations of Western Australians.
“In just a short space of time, with responsible financial management, our debt trajectory is now under control and we are on track to return to surplus.
“However our policy of managing the finances responsibly will continue with the success of the GST campaign, and that is why all additional ‘top-up’ funding will be dedicated towards our Debt Reduction Account.
“My Government takes budget management seriously and that is why we will manage this GST funding responsibly, to ensure it delivers ongoing benefits to all Western Australians into the future.”
As noted by Treasurer Ben Wyatt:
“Today is a great day for Western Australia. Today, we end decades of political squabbling and point scoring with action that puts the State’s finances back on a path to sustainability.
“Of course the irony is that much of this money was assumed to arrive in former Treasurer Christian Porter’s Budget of 2011-12 and was spent accordingly, so our action today is merely continuing to right the wrongs of the previous Liberal National Government.
“The McGowan Government has always said it will manage the finances in a mature, responsible fashion, and utilising this additional GST revenue will be no different.
“We have been workman-like since coming to office and today we reap the rewards of that approach, with the Debt Reduction Account to deliver ongoing savings in our interest bill.”
