Wry & Dry

WA's GST gambit: false news?

"Never stand between a State Treasurer and a bucket of money"

Former Federal Treasurer Paul Keating had a sharp mind.  And an acid tongue (see above).  He knew full well the political posturing, blame-gaming and responsibility-shifting gambits that were integral to a State Treasurer's job description.

Which brings W&D to the massive and ongoing whinging by Western Australia and its politicians about how hard done by the state is because of the GST-sharing arrangements between the various states.  This issue rose its very ugly head in the recent WA state election.

The short story is that WA whinges because its share of Australia-wide GST revenue is only about 30 cents for every one dollar raised in WA.  And this mantra is being taken up by Federal Liberal MPs last week in a delegation to PM Croesus Turnbull.

As the master of propaganda, Joseph Goebbels [1] once said, “If you tell a lie big enough and keep repeating it, people will eventually come to believe it."  

And this what WA has done about the GST.

Readers will know that W&D is not an expert on state taxes.  And hence is grateful to Independent Economist Saul Eslake for consent to publish the following edited extract from his website [2].  The article also appeared in the Hobart Mercury on 16-Aug-16. 

WA wasted all its boom-time revenue and now it wants more

While it is true, as West Australians keep saying, their share of total GST revenue has been unprecedently low in recent years, relative to their share of the population, there is a good reason for that.

As a result of the mining boom, WA has been richer than the rest of the country by an unprecedented margin.

Over the four years to 2015-2016, WA’s per capita gross state product (GSP) averaged almost $97,500, that is almost $30,000 per head or 44% above the average for all states and territories. There has not been another occasion in Australia’s history where one state has been so much richer than the rest of the country as WA has been since the early 2000s.

When NSW was the richest state, as it was for most of the 1990s, its per capita GSP was not more than 8% above the national average, and the ACT’s per capita GSP has never been more than 36% above the national average. 

As a result of this extraordinary, unprecedented wealth, WA has been able to generate much more revenue than any other state from its own resources. The WA Government has collected an average of $7212 per head from its own resources (revenue minus Commonwealth grants) over the four years to 2015-2016. That’s $1900 per head or 36% above the average. 

Thanks to its enhanced capacity to raise revenue from its own resources, and notwithstanding that WA has received a much smaller share of the GST revenue than it would have if it were distributed on an equal per capita basis, WA has had at its disposal total revenue (from its own resources and from Commonwealth grants, including the GST share) of $10,550 per head over the past four years. That’s almost $950 per head or 10% above the average for all states and territories. Only the Northern Territory has had more revenue per head over the past five years than WA.

WA could have put money aside from all the windfalls it received during the up phase of the mining boom to prepare for the day commodity prices inevitably started to fall.

During the up phase of the boom, GST revenue shares were determined using data averaged over a five-year period — longer than it is now — so WA’s GST share actually did not fall as much as it should have, had the formula been applied the way WA now wants it to be.

Instead of putting money aside, WA spent it all. In the decade of the boom, from 2002-2004 to 2013-2014, WA’s total operating expenses per capita rose at an average annual rate of 5.9% — fully one percentage point per annum above the average for the eastern states. 

Even with a below-average (though rising) share of GST revenue, WA will have at its disposal total state government revenues, including grants from the Commonwealth, averaging $10,581 per head over the four years to 2019-2020, $132 per head more than the average of all states and territories. True, that’s not nearly as big a margin as WA has enjoyed over the past decade, but why should the rest of Australia be forced to make up for WA having wasted its windfall gains?

WA has behaved like a pensioner who has won the lottery, and starts complaining about no longer being eligible for the pension and having to pay income tax instead. Now it has in effect spent the lottery winnings, it wants its income tax payments refunded and to go back on the pension. 

[1] Paul Joseph Goebbels was a German politician and Reich Minister of Propaganda of Nazi Germany from 1933 to 1945. He was one of Adolf Hitler's close associates and most devoted followers, and was known for his skills in public speaking and his deep, virulent antisemitism, which was evident in his publicly voiced views. He advocated progressively harsher discrimination, including the extermination of the Jews in the Holocaust.

After the Nazi Seizure of Power in 1933, Goebbels' Propaganda Ministry quickly gained and exerted controlling supervision over the news media, arts, and information in Germany. He was particularly adept at using the relatively new media of radio and film for propaganda purposes. Topics for party propaganda included antisemitism, attacks on the Christian churches, and (after the start of the Second World War) attempting to shape morale.

As the war drew to a close and Nazi Germany faced defeat, Magda Goebbels and the Goebbels children joined him in Berlin. They moved into the underground Vorbunker, part of Hitler's underground bunker complex, on 22 April 1945. Hitler committed suicide on 30 April. In accordance with Hitler's will, Goebbels succeeded him as Chancellor of Germany; he served one day in this post. The following day, Goebbels and his wife committed suicide, after poisoning their six children with cyanide

[2] - See more at: http://www.saul-eslake.com/op-ed-article-proposed-changes-gst-revenue-sharing-arrangements-published-hobart-mercury/#sthash.8dEtUOxp.8yMCnujJ.dpuf