The Morrison Government’s proposed changes to the formula for distributing GST revenue was rejected earlier this month by the majority of state treasurers. While the reforms received support from Western Australia’s Treasurer Ben Wyatt, the other state treasurers warned that the federal government must guarantee that no state or territory will be worse off.
Today, the Coalition has capitulated, ensuring no state will be worse-off during the eight year transition to the new model. From The AFR:
Prime Minister Scott Morrison and Treasurer Josh Frydenberg have compromised and agreed to underwrite potential losses for any state should they not be covered by the extra $1 billion a year the government was prepared to add to the GST revenue pool.
The guarantee will not be in perpetuity, as the states demanded, but just during the transition to the new distribution formula until 2026-27. Over this period, any state which received less money than it otherwise would have under the existing formula, and which would not fully compensated for by the extra Commonwealth contribution, will receive a top-up.
The Coalition’s primary motivation for changing the GST was to pork barrel Western Australia, thereby shoring up its voter support in the lead-up to the upcoming federal election. The states are right to reject it.
