The following report was submitted as a follow-up to Put WA First’s Submission to the Productivity Commission.
Put WA First Party
PO Box 1
5 February 2018
Ms Karen Chester
Deputy Chair Productivity Commission
GPO Box 1428
It has been 12 weeks since the Commission’s hearings in Perth. Since then, the Commission has heard from a range of people and organisations who generally represent interests currently receiving handouts at Western Australia’s expense.
Unsurprisingly, they have been keen to argue for a continuation of the current model rather than accepting a fairer distribution of the nation’s GST funds.
Put WA First believes that it is important to remind the Commission of the viewpoints presented at the start of the hearing process and to address some of the themes that were consistently argued at the later hearings.
The full equalization myths
Several people in later hearings talked about the current method of HFE calculation as being full equalization and argued for a continuation of the status quo.
The first problem with this is that there is a perception that people across the country will have access to the same levels of services where ever they are.
This is not the case now and it is unlikely to ever occur. The amount of money required to match the standard of health services accessible by people in Broome of Derby to those received in Melbourne means that it will never happen.
The second perception is that the current methodology was the result of careful consideration and agreement by the governments representing the people of each State.
In the Hobart transcript in the exchange with Saul Eslake, Commissioner Chester records that the Grants Commission departed from the approach agreed by Governments in 1981 and continued this formula without acknowledging the change for 14 years.
So, the means by which we arrived at the status quo is very questionable and so there is no valid argument for retaining it except that it maintains the current unfair allocation.
The impact of reducing GST allocations
Several participants described the impact of a reduction in their GST allocation. For instance, the Victorian Treasurer described the number of nurses (8,700), teachers (9,300), and police officers (7,700) that could be lost if their GST allocation was reduced by $970 Million in their overall state budget of $60 Billion.
This needs to be balanced by considering the number of the same key Western Australian public servants whose wages could be met by the $3.6 Billion discrepancy between the current GST and the GST distribution on the “equalize to the average” model on a total State budget of $28.45 Billion.
Western Australia’s undisciplined spending
The Tasmanian Treasurer is one of several presenters who point to the high rate of growth in the WA Government’s expenditure over the period 2006-07 to 2015-16 as evidence of lax Government control.
This ignores completely the that Government of the time had to support a growth in population equal to that of that of Tasmania in the period from December 2005 to December 2016.
At the same time they needed to invest in infrastructure to support the private investments in growing the capacity of the Oil and gas and Iron ore industries.
This resulted in a $600 Billion investment in infrastructure over a 12 year period.
No doubt a better job could have been done but understanding the context is important and one wonders how the Tasmanian Government would have handled a doubling of their population in such a short period.
Ownership of mineral resources
A number of presenters referred to mineral resources belonging to the nation as a whole not to one state by virtue of “lines on a map”.
This is incorrect. From the time of Federation, mineral resources within the 3 mile limit have been owned by the State while those outside the 3 mile limit belong to the Commonwealth.This has been the basis under which States are able to receive royalties from the development of mineral resources.
If other State Governments do not believe this, perhaps they should mount a High Court challenge to get a share of royalties directly rather than misappropriation by stealth as now.
Of course, this would then need to consider the value that other States derive from other natural assets benefiting individual states by virtue of “lines on a map” and how this value might be shared equally with other states. This might include, the Great Barrier Reef, The Gold Coast, Sydney Harbour, the Victorian ski fields, Kakadu and the Barossa Valley.
Western Australia’s long term contribution
A number of presenters referred to WA as being a net receiver of funding from the Commonwealth.
I draw your attention to the submission made by the WA Government in response to the Productivity Commission’s draft report.
Relevant points made in the submission are:
- When WA previously benefited from HFE before 1997-98, this was to compensate it’s export oriented economy for the impact of Commonwealth tariff policies which favoured Eastern states manufacturing industries. The tariff policies were estimated to reduce WA’s GSP by around 3%.
- In 2014-15, Western Australia contributed $23 Billion to the Federation or $8,850 per person. As can be seen in the table below, this is significantly higher than any other state.
Net Fiscal Contribution 2014-15 STATE $M $ per capita New South Wales 1,997 264 Victoria 1,175 200 Queensland -7,706 -1,622 Western Australia 22,776 8,848 South Australia -8,409 -4,969 Tasmania -5,490 -10,650 Northern Territory -4,344 -17,846 TOTAL 0
- Between 1986-87 and 2014-15, Western Australia’s net contribution to the Federation was $206.6 Billion
I urge the Commission to recognize that the arguments made to continue the status quo are made with significant self interest and they ignore that the current status quo is unfairly stripping money from Western Australia to support most other States.
Put WA First Party