Talking Point: WA wasted all its boomtime revenue and now it wants more



Vice-Chancellor’s Fellow Saul Eslake

Saul Eslake 195

WHILE it is true, as West Australians keep saying, their share of total GST revenue has been unprecedently low in recent years, relative to their share of the population, there is a good reason for that.

As a result of the mining boom, WA has been richer than the rest of the country by an unprecedented margin.

Over the four years to 2015-2016, WA’s per capita gross state product averaged almost $97,500, that is almost $30,000 per head or 44 per cent above the average for all states and territories. There has not been another occasion in Australia’s history where one state has been so much richer than the rest of the country as WA has been since the early 2000s.

When NSW was the richest state, as it was for most of the 1990s, its per capita GSP was not more than 8 per cent above the national average, and the ACT’s per capita GSP has never been more than 36 per cent above the national average. By contrast, over the past four years Tasmania’s per capita GSP has been 28 per cent below national average.

As a result of this extraordinary, unprecedented wealth, WA has been able to generate much more revenue than any other state from its own resources. The WA Government has collected an average of $7212 per head from its own resources (revenue minus Commonwealth grants) over the four years to 2015-2016. That’s $1900 per head or 36 per cent above the average. By contrast, the Tasmanian Government has raised, from its own resources, an average of $3971 per head over this period, $1350 or 25 per cent below the national average.

Why should the rest of Australia be forced to make up for WA having wasted its windfall gains?

Thanks to its enhanced capacity to raise revenue from its own resources, and notwithstanding that WA has received a much smaller share of the GST revenue than it would have if it were distributed on an equal per capita basis, WA has had at its disposal total revenue (from its own resources and from Commonwealth grants, including the GST share) of $10,550 per head over the past four years. That’s almost $950 per head or 10 per cent above the average for all states and territories. Only the Northern Territory has had more revenue per head over the past five years than WA.

WA could have put money aside from all the windfalls it received during the up phase of the mining boom to prepare for the day commodity prices inevitably started to fall.

During the up phase of the boom, GST revenue shares were determined using data averaged over a five-year period — longer than it is now — so WA’s GST share actually did not fall as much as it should have, had the formula been applied the way WA now wants it to be.

Instead of putting money aside, WA spent it all. In the decade of the boom, from 2002-2004 to 2013-2014, WA’s total operating expenses per capita rose at an average annual rate of 5.9 per cent — fully one percentage point per annum above the average for the eastern states. It’s only since Mike Nahan became Treasurer that WA has started to exercise restraint in spending. And despite proudly proclaiming itself the most Right-wing of any of the Liberal Party divisions, the WA Government has until its most recent budget refused to contemplate any major asset sales of ports or electricity assets, which governments of both political persuasions have been willing to do in the eastern states.

WA has behaved like a pensioner who has won the lottery, and starts complaining about no longer being eligible for the pension and having to pay income tax instead.

On its own figures, as published in its most recent State Budget, WA will still be 25 per cent richer, on average, than Australia as a whole (measured by per capita gross product), over the next four years (to 2019-2020). As a result, it will raise, from its own resources, an average of $1750 per head (or 31 per cent) more than the corresponding average of all states and territories (by contrast, Tasmania will generate about $1900, or 34 per cent, less state government revenue per head from its own resources).

Again using WA’s own recent budget figures, even with a below-average (though rising) share of GST revenue, WA will have at its disposal total state government revenues, including grants from the Commonwealth, averaging $10,581 per head over the four years to 2019-2020, $132 per head more than the average of all states and territories. True, that’s not nearly as big a margin as WA has enjoyed over the past decade, but why should the rest of Australia be forced to make up for WA having wasted its windfall gains?

WA has behaved like a pensioner who has won the lottery, and starts complaining about no longer being eligible for the pension and having to pay income tax instead. Now it has in effect spent the lottery winnings, it wants its income tax payments refunded and to go back on the pension.

With a State Election looming, Colin Barnett’s Government is on the nose with WA voters and Mr Turnbull is trying to help him.

I wonder whether the PM is also punishing Tasmania for having so soundly rejected his party at the Federal Election? After all, he can hardly lose any more seats here next time.

Or is he punishing the Tasmanian division of the Liberal Party for preselection decisions? After all, he is the first PM since Menzies in 1939-1941 to preside over a government without a single Tasmanian minister.

Tasmanian economist Saul Eslake is Vice-Chancellor’s Fellow at the University of Tasmania.

This Op-Ed was originally published in The Mercury on Tuesday 16 August 2016.

 


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