Australia GST Deal: Worst Policy Decision of Century 2026

The Australia GST deal of 2018 has been labeled the worst public policy decision of the 21st century by economist Saul Eslake. This controversial arrangement, which funnels extra GST revenue to Western Australia, is now under scrutiny as a new Productivity Commission report confirms its costly and inequitable impact.

Why the GST Deal Is a Costly Mistake

The 2018 GST deal, introduced by then-treasurer Scott Morrison, was designed to address Western Australia's low share of GST revenue. However, the Productivity Commission's review found it has made the distribution of over $100 billion among states and territories less equitable and failed to achieve its objectives.

Already costing $23 billion by 2024-25, the deal is projected to reach $60 billion by the end of the decade. This has led to warnings that the arrangement is not fiscally sustainable for the commonwealth.

Key Findings from the Productivity Commission

The commission's report highlights that Western Australia is the only state benefiting from the changes, undermining harmonious federal financial relations. Deputy chair Alex Robson stated that the deal has left taxpayers with a large and growing bill, and the system should return to its core purpose of ensuring similar services across all states.

Impact on Federal and State Budgets

GST rules are fundamental to the operation of federal and state budgets. When functioning correctly, they ensure that all Australians receive comparable services regardless of where they live. The current deal disrupts this balance, creating significant fiscal strain.

Comparison of GST Distribution Before and After 2018

Political Will to Reverse the Decision

Despite the damning evidence, both Labor and the Coalition appear reluctant to reverse the deal. Political analysts suggest that the electoral implications of taking money away from Western Australia make it a tough sell. However, the fiscal reality may force action.

As Saul Eslake notes, any rational person would conclude the current arrangements are unsustainable. The question remains whether political courage will prevail over short-term electoral gains.

Key Takeaways

• The 2018 GST deal is costing billions and is less equitable.
• Productivity Commission recommends reversing the arrangement.
• Both major parties are hesitant to act due to political risks.
• The deal undermines federal financial relations and budget sustainability.

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