West Australian Premier Colin Barnett is threatening an unprecedented revolt over his state’s dwindling share of the GST, claiming he is preparing a policy of “disengagement” with the rest of the nation that would threaten federal programs and east-west trade links.
In his strongest comments yet on the issue, Mr Barnett said yesterday that his resource-rich state was facing its “Boston tea party moment” by being forced to give $3.7 billion in GST revenues to other states and territories this year.
“If the GST is not resolved, Western Australia’s future is not with the rest of Australia in a financial or economic sense,” he told The Australian in Singapore, where he is holding trade and investment talks. “Our future then shifts to Asia even more strongly than it is now.”
Mr Barnett’s comments came as federal Finance Minister Mathias Cormann — a West Australian senator — risked cabinet splits by advocating a proposal to divert more GST revenue to the state.
The potential rescue package to freeze the carve-up of $57.2bn in annual GST receipts at this year’s levels, first proposed by West Australian Treasurer Mike Nahan, is dividing the federal government ahead of Tony Abbott’s meeting with premiers on Friday.
State treasurers clashed at a meeting in Canberra on Thursday to discuss the tax proceeds, with Mr Nahan arguing for a federal intervention to overturn recommendations from the Commonwealth Grants Commission released to the public that day.
It recommended Western Australia’s share drop from 37c of every dollar of GST collected in that state to 29.99c next year.
The Australian has calculated that the freeze advocated by Western Australia and Senator Cormann — and rejected by several treasurers from other states — would see Victoria, Queensland, South Australia and Tasmania lose a combined $1.2bn in one year alone.
With the states at loggerheads over how to help Western Australia manage its dwindling revenues amid a collapse in iron ore prices, Senator Cormann said it was now up to federal parliament to resolve the issue affecting the state, although he pointedly warned Mr Barnett of the need to accelerate economic reforms.
The Prime Minister, however, has insisted that a resolution was up to the states, while Education Minister Christopher Pyne told The Australian yesterday his home state of South Australia would not back changes that left it worse off.
“The GST is a state tax and any changes to its distribution must be initiated by the states,” Mr Pyne said. “I can’t see South Australia supporting any change that reduces our share. Overall, every state is better off as GST revenue is up.”
In a hint of possible compromise, Mr Barnett revealed he would settle for a 50 per cent floor in his state’s GST allocation — down from the 75 per cent for which he has previously lobbied. He warned Mr Abbott the Liberals would lose seats in Western Australia at next year’s federal election if its share of the GST continued to plummet below 30c in the dollar.
Mr Barnett said he believed that Mr Abbott had little idea of the anger in Western Australia over the issue and the potential implications for the federation.
“I think the commonwealth government grossly underestimates the tension that’s going to arise in the federation,” he said. “It’s not secession, but it will be tension and disengagement.”
Mr Barnett said his government would consider refusing to sign up to federal-state agreements and may slash its lucrative trade with the east coast. “Stand on the Eyre Highway one day and watch all the trucks and the trains coming from the east to the west full with products and cargo and going back empty — we are a huge customer of the east coast,” he said.
“If we shift to Asia then more of what is brought into Western Australia, more of our goods and services, will come from Asia and not from the east coast. Our Boston tea party will be shifting our economic focus to Asia at an accelerated rate.”
The Boston tea party was a resistance movement that culminated in the American Revolution and involved colonists protesting against paying a British tax on imported tea.
Mr Barnett also rejected “pathetic” suggestions by Joe Hockey, Senator Cormann and others that Western Australia should sell its electricity network and other assets as part of a GST rescue.
Senator Cormann told Sky News Australian Agenda yesterday that Western Australia needed to show “a sense of urgency” around microeconomic reforms, the sale of state-owned assets and the “deregulation of trading hours”.
“There’s absolutely no doubt in my mind that the West Australian government has to do better in the pursuit of economic reform in Western Australia, in particular when it comes to the sale of government-owned assets that could perform better in private hands and where the capital release could be reinvested in productivity-enhancing infrastructure to boost economic growth in the future,” Senator Cormann said, adding that the issue was linked to the GST carve-up.
Mr Barnett was “personally offended by the attempts to link that to other areas of public policy and to try and intimidate”.
“The commonwealth is jealous of Western Australia. They are jealous of our economic success, they are jealous of our success in Asia and of the fact that the Australia-China relationship is essentially China-Western Australia,” he said.
Opposition Treasury spokesman Chris Bowen said the cabinet splits on the GST put the Treasurer “in the middle of an almighty mess of his own making”.
“A decision that is supposed to be for the Treasurer is now the subject of cabinet ministers mounting competing public arguments over what should be done,” Mr Bowen said.
The Commonwealth Grants Commission is tasked with applying a formula to allocate GST proceeds according to economic and social need to ensure “equalised” conditions for Australians. Western Australia has lost ground under the rules in recent years because of the wealth that flowed from the mining boom.
The formula revealed last Thursday would leave Western Australia with $1.9bn next year — a 14 per cent drop on this year. If Western Australia’s share was frozen at 4.2 per cent of the overall GST pool, as urged by Dr Nahan and endorsed by Senator Cormann, its payment would increase by $154 million.
NSW would also benefit from a freeze of distribution levels, with its payment forecast to be $535m more under last year’s carve-up. Queensland would be the biggest loser, with $577m at stake, followed by South Australia, Tasmania and Victoria.
Because the GST pie is expected to grow by $3.5bn next year, all states would receive more than in 2014-15.