A deal that will hand an estimated extra $60bn in tax revenue to Western Australia over a decade will come under scrutiny after Jim Chalmers tasked the Productivity Commission with reviewing the GST distribution.
The treasurer on Wednesday released the terms of reference for the scheduled Productivity Commission review in 2026, acknowledging the GST carve-up between the states and territories “will always be a contentious issue”.
The WA treasurer and acting premier, Rita Saffioti, said her government had set up a special “GST fairness” taskforce to protect the changes introduced in 2018 under the then treasurer, Scott Morrison, and supported by the Labor opposition.
States such as WA and Queensland have argued that the GST distribution penalises them for developing natural resources, as their share of the commonwealth tax falls as income from the sale of commodities such as iron ore and coal boom.
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The 2018 deal put a floor under WA’s share of GST, which undermined the philosophy of the grants system that distributes the money in part according to a jurisdiction’s capacity to pay for services.
Chris Richardson, an independent economist, said the first of four specific directions for the review – whether the post-2018 arrangements are “delivering a reasonable level of horizontal fiscal equalisation” – suggested the terms of reference “lets the PC focus on the failings of the GST deal”.
Saffioti said “we stand ready to fight for WA”, but she was confident the bipartisan support in Canberra meant the review would not undo the deal.
“We know that the prime minister very much backs this deal,” she said, adding that without the extra GST the state would not be able to invest in major resource projects which provided national economic dividends.
The New South Wales treasurer, Daniel Mookhey, welcomed the kick-off of the commission’s review into what he called a “busted system”.
Mookhey has complained the distribution lacks transparency, predictability and penalises the nation’s most populous state. He said “doing nothing means Australia will be stuck with a weird system that no one can understand, let alone explain, much less support”.
“We’d be better off if we shift to distribute the GST on a per-capita basis and use the balance of the federal grants system to help the smaller states.”
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Recognising that the 2018 deal with WA could leave less federal money for other states and territories, the Coalition government promised they would top up any shortfall.
That “no worse-off” arrangement was supposed to cost $9bn over eight years, but has blown out to an expected $60bn over 11 years – a significant hit to the federal budget.
Saul Eslake, an independent economist who has been highly critical of the WA GST deal, said “hopefully the treasurer has today opened the door to reversing the worst public policy decision of the 21st century thus far”.
“It will be a real test of the depth of the government’s commitment to equity and prudent fiscal management [and] whether it is willing to continue gifting Australia’s richest state at least $7bn per annum more than it needs.”
[SRC] https://www.theguardian.com/australia-news/2025/sep/25/western-australia-fight-to-protect-60-billion-gst-deal
