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Long road and deep pockets to fix the GST

Shane WrightThe West Australian
Prime Minister Scott Morrison at HMAS Stirling Naval Base.
Camera IconPrime Minister Scott Morrison at HMAS Stirling Naval Base. Credit: Danella Bevis

To get decent reform in this country requires deep pockets.

In this case, the long-needed overhaul of the GST system has required paying off every State and Territory — including WA.

About $2 billion in direct payments to WA coupled with an additional $7 billion pumped into the GST pool until 2026-27 is the financial price paid to fix a broken system.

But angry States and Territories in the east have wanted more.

The blow-up at the recent meeting of the nation’s treasurers, where every one of them demanded a legislated guarantee that they would not be worse off under GST changes, was evidence of calling for something else.

Federal Treasurer Josh Frydenberg and the Government attempted to hold the line. But with Federal Liberal backbenchers raising the concerns and threatening to derail the process — and Federal Labor jumping on the bandwagon — there had to be some give.

That give is the legislated promise that no State will be left behind.

The guarantee, while politically important, is almost financially worthless.

It’s a promise for no State to be worse off in six or eight years from now.

At least three elections — and who knows how many prime ministers — will have come and gone before we hit that point.

Given the pace of political changes, predicting where government policy will stand next week let alone next decade is akin to pinning your mortgage repayments to a Powerball draw.

Even then, in a clever move, the Government has locked in a Productivity Commission review of the GST system before fully moving to the new and improved allocation process.

The commission, whose initial report has been mentioned often but its recommendations generally ignored, will get another chance to look at a system that even with its planned overhaul would challenge most Nobel laureates to explain.

It took 18 years and three years of a WA recession for politicians to properly look at how the GST system has worked since its inception.

Another review in eight years is a positive step.

But it’s taken a lot of money to get there.

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