GST Deal with WA: Productivity Commission Calls for Reversal 2026

Alicia Foster
GST Deal with WA: Productivity Commission Calls for Reversal
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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.


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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.

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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

Aspect Before 2018 Deal After 2018 Deal
GST floor No floor; based on fiscal capacity Floor set at NSW/VIC level
Cost to federal budget N/A Projected $60bn by 2029-30
Beneficiaries All states based on need Only WA
Equity More equitable Less equitable

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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FAQ

What is the GST deal with WA?

The 2018 GST deal, implemented under the Morrison government, placed a floor on the GST share for any state, ensuring no state receives less per person than NSW or Victoria. It was designed to help WA after its GST share dropped due to the mining boom.

Why does the Productivity Commission want to reverse it?

The PC finds the deal has cost taxpayers nearly $23bn so far, projected to reach $60bn, and has only benefited WA. It has made the system less equitable and created perverse incentives for other states.

How will reversing the deal affect taxpayers?

Reversing the deal would reduce the federal government's expenditure, potentially easing the budget deficit and allowing funds to be redirected to other priorities. It would restore a more equitable distribution of GST across all states.

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Alicia Foster

Author

Alicia Foster

Alicia is a trailblazer in luxury travel and all-inclusive resorts. Armed with a master's degree in Tourism Management, she has not only explored the hidden gems of the Caribbean, but has also collaborated with renowned hospitality brands. Her words are a gold mine for choosing the perfect accommodation.


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