In 2016/17, Western Australia received back 30 cents in every dollar of GST collected across the State; the other 70 cents were redistributed to the weaker* economic states and territories – Northern Territory, Tasmania, South Australia, Queensland and the ACT (*Note: ‘weaker’ according to the Commonwealth Grants Commission GST distribution formula). The two largest states, New South Wales and Victoria, were also net providers of GST grants.
We need to look at some facts:
- The GST redistribution is fundamentally used to share Western Australia’s mineral royalties across the country – keeping a commitment to the common wealth of Australia.
- In the past, WA has been a recipient and provider of financial assistance from/to the rest of Australia.
- The economists in WA Treasury forecast this situation and rang the bells at least six years ago (see following chart). But of course, you don’t miss your water until the well runs dry.
The system is far from perfect:
- In 2016/17, the GST distribution assumed that WA had the strongest economy of the nation and that Northern Territory, Tasmania, South Australia, Queensland and the ACT had the weakest.
- The fluctuations from year-to-year make forward budgeting difficult, particularly given the difficulty the ABS has with estimating the present population.
- The GST distribution has some perverse distortions around resource investment where the jurisdiction that proactively encourages development gets little to no benefit (see following chart).
It’s not a unique debate; one comparison to make it more real is to consider social equity: How much time should we spend on remedial education to help underperforming students step up? How then do we ensure that high-achievers are getting the teacher attention that can help them reach even higher goals? The answer clearly must be we do both, but we must get smarter how to achieve those outcomes, so we carry those that need help, but we don’t hold back the achievers from soaring to their full potential.
MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities. Contact Stuart McKnight, General Manager – Western Australia, today to discuss your property research requirements.