Should Victoria and NSW send WA and Qld a bill?


Apparently the WA and Queensland politicians do not like the current GST carve up, which is  part of Australia’s long term (i.e. since federation) fiscal equalization policies. They complain that they are not getting their ‘fair share’. One example is here. For those of use old enough to have lived through previous mining booms, we have seen this before. Whenever the prices of minerals rise, the mining states complain about ‘subsidising’ the other states. Of course, silence reigns when the boom finishes.

But the federal government is reviewing the GST distribution and the Victorian government has a nice background paper here.  It notes that since federation, Victoria has net paid $66b and NSW has net paid $75b while WA has on net received $36b and Qld has received $11b. Even if we look at just the last 30 years:

the mining states of WA and Queensland have received $106 and $112 per person respectively.

Now the submission does not make it clear exactly how these numbers are calculated, but the direction is correct. Over the long term WA and Qld have gained significantly by federal fiscal equilization. And they will again when the current mining boom fades. So to the people of WA and Qld –  be careful what your politicians try to sell you. You may live to regret it.


3 Responses to "Should Victoria and NSW send WA and Qld a bill?"
  1. I’m a West Australian by birth (a long time ago) and worked in State Treasury in preparing parts of the Grants Commission submissions for a few years a couple of decades ago. WA was a net beneficiary at the time but it seemed to me a simple per-capita distribution would be fairer.  Then there was pretty much equal per-capita shares anyway except for the NT and Tas and a huge effort arguing the toss. Now WA is “paying some of those benefits back” ie because of geological luck some valuable minerals are within our borders.

    However I’ve changed my view and it does not seem sensible to just move towards per-capita distribution because the historical system now seems like a much better way of spreading the wealth around.

    There is such an extreme divergence in the economies of the states created by the miming boom that the costs being borne by other states through higher wages, exchange rate impacts on industries etc don’t equate to the previous costs of protectionism (the high tariffs regime, era to era).

    As an example of responsible State Government behaviour, there was a time when there was NO royalty on gold producion in WA.  Small minded State politicians have ALWAYS resisted policies that might actually have returned a fair amount to the population through economic rent based mineral taxation. There have been a number of independent studies that  recommended that State Governments adopt a more economically efficient mineral taxation regime, either jointly or singly – all loudly rejected by the state clowns.

    In the end the real problem is the expenditure priorities of the State Governments are very short term like their decision making. 

    It is completely incidental  if a decision results in long term benefit to the community and it was probably unintended. 

    Anyway, the horse has bolted on this boom, we will soon be back in the world where mining is yesterdays industry and Australia will increasingly look like Argentina.

  2. I did not write that comment: 

    Ratee on April 19th, 2012 6:11 pm 

    and it’s kind of a rare name… 

%d bloggers like this: