GST Deal with WA: Productivity Commission Calls for Reversal 2026

The Productivity Commission has slammed the Morrison-era GST deal with Western Australia as a multi-billion dollar mistake that should be reversed, with the cost to taxpayers projected to reach $60 billion by 2029-30. The interim report reveals the deal has failed its objectives and made the system less equitable, benefiting only the country's richest state.

Why the GST Deal with WA Is Under Fire

The deal, struck in 2018 after WA's GST share plummeted due to the mining boom, placed an effective floor under every state's per-person share, ensuring no state receives less than New South Wales or Victoria. However, the Productivity Commission (PC) argues this reform has created perverse outcomes and a growing financial burden.

Alex Robson, the PC's deputy chair, stated that the deal “reshaped a system that needed targeted reform, leaving taxpayers with a large and growing bill.” The system's core purpose—ensuring all states can offer similar services and infrastructure—has been undermined.

Costly Consequences for Taxpayers

Initially forecast to cost about $5 billion by 2024-25, the actual cost has ballooned to nearly $23 billion. The PC's analysis shows that only WA has benefited, while other states like South Australia face reduced GST when they improve their fiscal position, creating a disincentive for economic growth.

Angela Jackson, a PC commissioner, highlighted the perverse outcomes: “If a state like South Australia improves its fiscal position, they get less GST because they are considered to need it less.” This undermines the fairness of the distribution system.

Comparison: Before and After the GST Deal

Key Takeaways from the Productivity Commission Report

• The GST deal with WA is a costly mistake, costing $60bn by 2029-30.
• The deal has failed to achieve its objectives and made the system less equitable.
• Only WA has benefited, while other states face perverse incentives.
• The PC recommends reversing the deal to restore fairness.
• Taxpayers are bearing a large and growing bill.

What Should Be Done? The PC's Recommendation

The PC's interim report urges the federal government to reverse the deal and return to a system that prioritizes equal service delivery across all states. The current system, they argue, is unsustainable and inequitable.

Reversing the deal would require political will, but the PC believes it is necessary to restore trust and efficiency in fiscal federalism. The final report is expected later this year, but the interim findings are clear.

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