WA faces big GST interest bill
WA taxpayers face paying tens of millions of dollars in interest on massive loans to prop up Eastern States unless the GST carve-up is changed, Treasurer Mike Nahan has warned.
As a further fall in the iron ore price threatens to punch a billion-dollar hole in the State Budget, Dr Nahan said the GST allocation was now so perverse that West Australians would surrender not only all the State's royalties but also be left to foot an interest bill.
Dr Nahan yesterday pleaded his case to Federal counterpart Joe Hockey, urging a change in the yearly fight over the $56 billion in GST collected from the nation's shoppers.
Dr Nahan wants to ditch the current arrangement that effectively assumes iron ore, which overnight fell to a fresh six-year low of $US54.50 a tonne, is $US130 a tonne.
Instead, the Commonwealth Grants Commission would use a one-year forecast of the price of the mineral when it determined each State's share of the GST.
According to Dr Nahan, that would cause little pain to other parts of the country but return more than $1 billion to the WA Budget.
The current GST carve-up will effectively take all WA's $4.3 billion in royalties and redistribute to the rest of the country.
Dr Nahan said unless the system was changed, an extra $300 million of WA revenue would go to covering day-to-day costs of other States and Territories.
With WA already running a deficit, the State would have to borrow the money and pay interest on that cash.
"We're borrowing money to fund other States," Dr Nahan said. "They're taking $300m off us under the idea that iron ore price is $130. It isn't.
"We're having to borrow for it to fund the recurrent expenditure of other States. It's a perverse system. It wasn't made to do this."
Even a change in the GST for the coming financial year would not be enough to put the State Budget in the black.
At the midyear update, Dr Nahan forecast a $900 million deficit for 2015-16 after a shortfall of $1.3 billion in the current year.
The collapse in the iron ore and oil prices has grabbed even more cash.
While Dr Nahan would not be drawn on the depth of the problem, he said the State was now "pushing $10 billion" in iron ore royalty writedowns.
Another $1 billion had gone because of the fall in global oil prices, which in turn reduced royalties from the North West Shelf.
Dr Nahan said though the Budget faced troubles, the economy was "operating pretty well" given the slowdown in mining.
He said there "had been a touch of the Dutch disease" during the mining boom when high wages from the sector crowded out other parts of the economy but this was now abating.
