Archived News
March 2008
Western Australia’s share of GST revenue is to be cut by $350 million for 2008‑09. For the first time ever, Western Australia’s GST grant share will be the lowest of any State or Territory relative to its population.
The Commonwealth Grants Commission (CGC) released its 2008 Update report on Tuesday 4 March 2008, providing recommendations for the interstate distribution of GST revenue grants in 2008-09. The CGC does not determine the aggregate Commonwealth funding available, but only how that funding is shared among the States.
The CGC's recommendations were accepted by the 14 March meeting of the Ministerial Council of Treasurers.
The CGC’s 2008 Update is based on the same methodology as used in 2007, but incorporates more recent data on (for example) States’ relative economic activity as it affects revenue‑raising capacity and (at least in theory) costs. The CGC uses the average of five years of data, so this update replaces 2001-02 data with 2006-07 data, and revises data for the four intervening years. Data revisions in this update are unusually large as it is the first to incorporate data from the 2006 Census.
The methods and assumptions in the CGC’s model are generally reviewed only every five or six years. The next review is due to be reported in February 2010.
The CGC’s 2008 Update recommends a decrease in Western Australia’s funding share of $327 million in 2007-08 terms (using the 2007-08 GST pool), which translates into a $350 million reduction in 2008-09 (incorporating the forecast growth in the GST pool). Queensland and Tasmania were the only other ‘losers’.
|
$ million
|
$ per capita
|
New South Wales
|
+341
|
+49.3
|
Victoria
|
+317
|
+61.5
|
Queensland
|
-409
|
-97.0
|
Western Australia
|
-327
|
-154.0
|
South Australia
|
+6
|
+3.7
|
Tasmania
|
-16
|
-32.7
|
ACT
|
+8
|
+24.0
|
Northern Territory
|
+80
|
+369.5
|
Total
|
0
|
0.0
|
As shown in the chart below, Western Australia’s GST relativity (i.e. relative per capita share of the pool of funds distributed by the CGC) is now the lowest of any jurisdiction. This is the first time using the CGC’s current approach (introduced in the early 1980s) that our relativity has been below New South Wales and Victoria.
Western Australia’s $327 million grant reduction (in 2007-08 terms) includes:
- a $323 million reduction on account of increased relative revenue raising capacity, principally for stamp duty on conveyances ($139 million) and mining revenue ($102 million). Also significant were increases in our capacity to raise payroll tax and land revenue; and
- a $5 million reduction on account of reduced relative expenditure needs, reflecting a range of mainly offsetting factors.
The reduction in our grant share was not unexpected given the relative strength of the Western Australian economy.
While the CGC’s assessments quickly take account of changed circumstances on the revenue side it is apparent that they are slower to respond to pressures on the expenditure side. Western Australia’s booming economy has led to relative increases in wages and construction costs. However, these are yet to ameliorate the reduction in our grants.
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