Nahan GST plan aims to net billions
Mike Nahan has unveiled a dramatic blueprint to overhaul the way the GST is spread among the States in a move that could deliver billions in extra cash for WA.
But the WA Treasurer has conceded there is nothing that can be done to protect the Budget from the collapse in iron ore prices, revealing he is facing a revenue shortfall of up to $2 billion this year.
Dr Nahan, who yesterday briefed Federal MPs on WA's GST woes, directly sought support from Federal Treasurer Joe Hockey to change the way more than $55 billion in GST is allocated by the Commonwealth Grants Commission.
WA will get just 37� of every dollar in GST raised within the State, the lowest share since the advent of the GST system in 2000.
Under Dr Nahan's proposals, the grants commission would change the way it treated iron ore royalties. Instead of taking a three-year average of iron ore prices, the commission would only take into consideration average prices over one year.
He said under the existing system, WA was being penalised for iron ore prices that could be up to three years old. "We're sending royalties to the east coast that simply don't exist. It's ghost money," Dr Nahan told _The West Australian _.
Together with entrenching permanently the discretionary power of the Treasurer to ensure at least some royalty payments stay with WA under the grants commission, the State would be up to $1 billion a year better off under Dr Nahan's proposals.
Both ideas are on the agenda of a review of the grants system put in place by Mr Hockey.
But Dr Nahan conceded any change will not be enough to offset the impact on this year's Budget by the sharp fall in iron ore prices which have fallen to a new five-year low of $US77.50 a tonne.
In May, Dr Nahan predicted an operating surplus this financial year of $175 million.
He said the falling iron ore price would cost the Budget between $1.5 billion and $2 billion.
Dr Nahan said the current grants system had to be overhauled given it did not reward States that tried to grow their economies.
He said the royalties raised on iron ore mined in WA had effectively given people in Tasmania an incentive not to move.
