Landmark review says GST deal costly and unfair

The Productivity Commission has delivered a scathing assessment of the Western Australian GST floor, characterising the 2018 arrangement as a “costly mistake” that has undermined the nation’s fiscal integrity. In a landmark review released today, the government’s top advisory body warned that the deal has produced “perverse” outcomes, effectively draining billions from the federal budget while distorting the long-standing principle of horizontal fiscal equalisation.

Under the current agreement, Western Australia is guaranteed a minimum share of GST revenue regardless of its own substantial mining royalty windfall, a move originally intended to settle political grievances in the West. However, the Commission finds that this departure from standard economic practice has created a systemic imbalance, placing an undue burden on other states and territories that are now struggling to fund essential services amidst rising cost-of-living pressures.

“When political expediency overrides economic logic, the ultimate price is the erosion of federal equity and a weakening of the national interest.”

The report’s primary recommendation is a complete dissolution of the special deal, urging a return to the traditional distribution model to ensure all Australians receive comparable levels of service. While the findings will likely embolden Eastern State Premiers seeking a larger slice of the revenue pie, they present a significant political headache for Canberra as it attempts to balance national productivity against the risk of a severe regional backlash from the West.