Australia's GST Deal: The Worst Policy Decision of the Century 2026

Australia's GST deal has been labeled the worst public policy decision of the century, and now experts are calling for its reversal. The controversial 2018 arrangement with Western Australia, introduced by then-treasurer Scott Morrison, is projected to cost the federal budget up to $60 billion over a decade. Respected economist Saul Eslake has described it as “the worst public policy decision of the 21st century thus far,” a sentiment echoed by the Productivity Commission's long-awaited review.

The Productivity Commission's Verdict on the GST Deal

The Productivity Commission's report, released on Friday afternoon, found that the GST arrangements have made the distribution of more than $100 billion in revenue among states and territories less equitable. The review concluded that the deal has achieved none of its stated objectives, undermining “harmonious and productive federal financial relations.” Deputy chair Alex Robson warned that the system has been reshaped in a way that leaves taxpayers with a large and growing bill.

The commission's findings are clear: the current GST carve-up is less fair, shockingly expensive, and simply not working. Western Australia is the only state benefiting from the changes, while other states and territories are left with reduced funding for essential services like health and education. The report urges a return to the system's core purpose—ensuring all Australians receive similar standards of services and infrastructure regardless of where they live.

Why the GST Deal Is a Costly Mistake

The financial impact of the deal is staggering. Already costing $23 billion by 2024-25, the arrangement is set to balloon to $60 billion by the end of the decade. This money could have been invested in critical areas such as hospitals, schools, and roads. Instead, it is being redistributed to a single state, creating an imbalance that threatens the sustainability of federal and state budgets.

To illustrate the scale of the problem, consider the following comparison:

This table highlights how the deal has shifted from a fair system to one that disproportionately favors a single state, at the expense of the national interest.

Political Challenges to Reversing the GST Deal

Despite the overwhelming evidence, reversing the deal is politically fraught. Both Labor and the Coalition have shown reluctance to touch the arrangement, fearing backlash from Western Australian voters. The question remains: will either party have the guts to reverse what many call the worst public policy decision of the century? Given the political calculus, it seems unlikely in the near term.

However, the Productivity Commission's report provides a strong foundation for reform. It offers a clear roadmap for restoring fairness and sustainability to the GST distribution system. The challenge lies in mustering the political will to act on it.

Key Takeaways from the Review

• The GST deal is costing the federal budget billions and is projected to reach $60B by 2030.
• Western Australia is the sole beneficiary, while other states lose essential funding.
• The Productivity Commission recommends reversing the arrangement to restore equity.
• Political courage is needed to implement reform, but both major parties are hesitant.
• Taxpayers are ultimately footing the bill for this policy failure.

What Needs to Happen Next

Experts argue that the GST system must be returned to its original purpose: ensuring all states and territories can provide similar levels of services to their residents. This requires a comprehensive overhaul of the current distribution formula, not just a tweak. The Productivity Commission's report offers a clear path forward, but it will take political leadership to act on it.

As Saul Eslake noted, any rational person would conclude that the current arrangements are not fiscally sustainable for the commonwealth. The longer the deal remains in place, the more costly it becomes. It's time for policymakers to prioritize the national interest over short-term political gain.

FAQ

In conclusion, the GST deal is a policy disaster that demands urgent attention. The evidence is overwhelming, and the cost to taxpayers is growing. It's time for our leaders to act decisively and reverse this misguided decision.

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