Cinderella and her GST.

 Economist, Saul, Eslake wants more and more WA’s Goods and Services Tax .  WA already gives 25% of the GST money raised in WA to Tasmania, Northern Territory and other states. It used to give 70% until a deal was struck with the Federal goverrnment for a guaranteed 7% of GST for WA. This guarantee is now 75%. The WA Government says if the guarantee is scrapped and the old system reinstated, WA would now only be  receiving  about 8% of its GST. For every hundred dollars paid in to the GST by Western Australians, $92 would be spent outside of WA. Hardly a Fair Go! Yest, Eslake and various other state treasurers think it is a great idea.

The GST  was introduced by then Prime Minister, John Howard’s  LNP government in July 2000.           The GST was designed to replace a raft of state taxes like sales tax, which in some cases was charged at a rate of 32%. Many believed that as the GST money was raised in each state to replace existing state taxes, the GST taxes would also remain in that state. This was not the case.

Although the GST is raised in each state, it is distributed among the states by the Commonwealth Grants Commission, based on formula that eventually saw WA‘s share of its GST drop considerably. Because WA received a great deal of money from mining royalties The Grants Commission steadily reduced its share of the GST. In 2016, WA's share of its GST was 30%. It needs to be said that WA worked very hard and spent a lot of money, in conjunction with the Federal government and various foreign governments and international resource companies to develop its vast mineral resources. 

Naturally, Western Australians were not happy that, over the years, the CGC allocated more and more of WA's GST to other states and territories based on each states financial position. 70% of the money raised in WA went to Tasmania, The Northern Territory and other eastern states.                                  Western Australia strenuously protested. Which is why the Morrison LNP government established that WA would always receive 70% of its GST. This has now risen to 75%. The WA State Government estimates that if that guarantee was not in place WA would at present only be receiving about 3% to 8% of its GST. Definitely, not a Fair Go!

All of WA’s sister states are salivating at the thought of getting their hands on 92% of WA’s GST.            For many years Western Australia was referred to as The Cinderella State.
We all Know that Cinderella was famous for things …. Her great beauty and the ugliness of her sisters.

Unlike the carping conservative media, economist, Saul Eslake, wrote recently that he sees much merit in Labor's tax reformist budget 0f 2026. He is not worried by the fact that Labor promised before the 2025 election that it would not change existing laws regarding negative gearing and capital gains tax. Eslake believes Labor has made the correct and necessary decisions in trying to bridge the widening gap between housing investment speculators with several houses in their portfolio outbidding young people trying to purchase their first home.

He concludes his article by expressing the wish that Labor will break another promise, the promise that Western Australia will always receive at least 75% of the GST that it raises. Here, I part company with Mr Eslake, who has argued loudly ever since the LNP Morrison government signed the deal that made that GST guarantee. Prime Minister Albanese and Labor treasurer, Jim Chalmers both  strongly endorse former Prime Minister Morrison’s pledge to peg WA’s share of the GST at 75%.

Western Australians realise they live in a commonwealth and are prepared to share the GST but they also believe in a Fair Go.  For most of the 20^th Century, WA was a mendicant state. That is, the money WA raised  fromy state taxes or was given as its share of from federal income tax distribution, was not enough to pay for the state’s schools, hospitals, road, railways and other vital state responsibilities.        The Commonwealth Grants Commission provided the WA government with additional funding to carry out necessary public works.

WA now receives huge royalties’ payments for its mineral resources and no longer needs assistance from the Commonwealth Grants Commission. Some other states do not raise enough GST money to carry out all their necessary works and they are very happy to receive large chunks of WA’s GST. It was the former firebrand Labor Premier of NSW, Jack lang, who once observed, “Never stand between a state treasurer and a bucket of money.”

Western Australians are standing between their bucket of GST money and all other state and territories’ treasurers who want some of it. Having been a mendicant state, Western Australians would like to see a situation where all of the GST money raised by a state stayed in that state. If that money is not sufficient for the  needs of an individual state then they should be given more of Australian taxpayers’ money by the Commonwealth Grants Commission. That means all Australians share the load through their taxes.

 Western Australians also argue that there are anomalies in the formula used by the CGC to carve of the GST. The Grants Commission always counts WA's mineral royalties in its calculations but never includes the considerable gambling revenue that other states collect when determining the GST carve up. Western Australians decided many years ago, in the best interests of social cohesion, not to have widespread gambling in their state. There is a popular State Lottery, associated with Tats Lotto, which provides big cash prizes and also spends millions on Western Australian charitable institutions. There is a Casino in Perth that has poker machines and other forms of gambling, however,  poker machines and other gaming devices are not legal anywhere else in Western Australia.

The rest of Australia embraced widespread poker machines and gambling activities. This brings huge amounts of money  to those governments now clamouring to get their hands on WA’s GST. Surely, they must be made to divulge to the Commonwealth Grants Commission how much money they acquire from gambling and have that income added to the mix before more money is taken out of WA’s GST.

So, Western Australians believe each state should keep all of its GST (as they did with their state taxes) and the Grants Commission should allocate funds  from taxpayers’ money to any  mendicant states that do not raise enough revenue for its Public Works.

If the GST  is going to be carved up among the states, then states who acquire huge sums of money from widespread gambling must be required to declare those funds.

Seems fair!

On breaking a promise.

I have written many blogs about Donald Trump but not so many about Australian politics.                    Yesterday, the Australian Labor government in Canberra brought down a reformist budget.                       It attempted to partly undo the effects of the "Middle Class Welfare"  legislation of the Howard-Costello conservative government which just over twenty five years ago made it possible for investors to turn the housing market into a  speculators dream. A Homeowner was able to buy another house and "negatively gear" it so that all of the costs in renting it out could be claimed as a deduction against income earned when tax time came around each July. So attractive was this tax reduction scheme that some people acquired many rental properties as negatively geared investments. In fact, they felt inclined to purchase more and more negatively geared rentals to further reduce their total income tax.                  Labor governments opposed this system as it meant young home buyers were being out bid  at home auctions by well healed and negatively geared bidders who owned many rental homes.                            This Labor budget of 2026 has courageously tried to undo the damage being  done by the "Middle Class Welfare" legislation                                                                                                                                                                                                                                                                                                                The conservative media, as usual, have nothing good to say about Labor’s budget. They talk about broken promises as if no other political Party has ever changed its mind. It was John Maynard Keynes who once addressed the question of broken promises when he said, " when the facts change I change my mind , Sir. What do you do?

Who can forget Tony Abbott in 2013, three days before a federal election saying he was at one with Labor on Gonski and there would be no cuts health, education or welfare and definitely no cuts to the ABC and SBS. A few months later he presented his budget and made drastic cuts to all of these vital areas and many more. The conservative media were ecstatic about Abbott's budget and its numerous totally broken promises.

This 2026 Labor budget has addressed some of the middle class welfare that Howard and Costello introduced in 1999 that turned the housing market into an investment bonanza for those who already had a house. Since 1999 house prices have risen by about 400% while salaries have risen by about. 200%.

The ratio between house prices and salaries was getting wider and wider each year and making it almost impossible for young people to get into the housing market where they were outbid by house owners who owned several other houses.

Instead of criticising Treasurer Jim Chalmers for breaking a promise given before the 2025 election not to change the negative gearing policies of Howard and Costello, the media should admit that this is the right decision to address a widening gap between the haves and have nots. In fact it highlights the great tragedy that Australia inflicted upon itself when it rejected then labour leader, Bill Shorten , in the 2019 election.

Shorten wanted to get rid of negative gearing and capital gain tax exemptions entirely. He also wanted to get rid of Franking Credits . This was another of Howard and Costello’s middle class welfare policies that enabled shareholders to claim a tax refund when they had not paid any tax in the first place.

Shorten’s removal of negative gearing, capital gains tax exemptions and franking credits would have provided many billions of dollars to fully fund the National Disability Insurance Scheme and resuscitate Medicare which the conservative LNP government was underfunding.

Shorten lost that 2019 election and Australia got the LNP Morrison government which continued to underfund Medicare, the CSIRO, education, social welfare, the ABC and SBS. While the Morrison government short changed the many agencies that Labor had wanted to bolster it inflicted Robodebt onto the poor and unemployed. It also indulged itself in Rorts for Regions where federal money was spent exclusively in Liberal and National Party electorates,

During the Covid pandemic, 2019-2022, the Morrison government rightly sought to provide aid and financial stimulus to industry just as Labor would have done. The problem though, was that the Morrison government, in this period, gave billions of dollars to rich and profitable companies that did not need the money, did not ask for it, did not spend it and, most importantly, did not have to pay it back. They kept it and gave bigger dividends to their shareholders. In this way the LNP, who always boast that they are the best money managers, ran up a debt of 600 billion dollars,

We need to remember that when these profligate LNP members now criticise Labor for having a debt of nearly one trillion dollars without owning up To the $600 billion that they contributed to that debt.

Like many Australians I am pleased to see at last a Labor government with the courage to address fundamental flaws in our taxation system. These changes will get the speculators out of the housing market and once again make it possible for young people to purchase their own homes without having to outbid rich bidders with an extensive government subsidised real estate portfolio.