Western Australia has repeatedly argued for the long-standing Horizontal Fiscal Equalisation system, in place since 1981, to be overhauled to enable it to receive a greater share of GST payments.
Western Australia has received lower GST payments than states including South Australia because of its high mining royalty income, which has increased from $690 million in 2000-01 to more than $6 billion at the height of the mining boom in 2013 – 14, and remains above $5 billion per year.
“Now that Western Australia has moved beyond the mining boom, the HFE system is working to compensate the state for receiving a slightly lower level of mining royalty income than in previous years,” Mr Penney said.
“The reality is that Western Australia earns 22 times the mining royalty income of South Australia and the HFE system is designed to ensure that as states’ own tax revenues fluctuate over time, each can still deliver a comparable level of services.”
The South Australian Business Chamber recognises that over the long term there are increases and decreases between equalisation figures in each state, and looks forward to the day when the South Australian economy improves to the point where we might become a donor state.
The Commonwealth Grants Commission’s GST relativities for 2018 – 19 demonstrates the existing system does not need to materially change, and the Federal Government should reject any recommendations by the Productivity Commission to alter the existing system to achieve less than full equalisation outcomes.
“We call on our state’s federal ministers and senators, along with our new State Government, to stand up for the tax-paying businesses and residents of South Australia and make it clear to the Federal Government that there should not be any changes to HFE,” Mr Penney said.
