GST system ‘hurting Australia’

01 November, 2017

Western Australians have been set a task following CCI’s “Join the fight to fix the GST” breakfast on Tuesday – convince our eastern states counterparts of the perverse outcomes of the current GST system.  

More than 200 people from WA business and all sides of the political spectrum joined forces to call for GST reform.

Speakers – including WA Premier Mark McGowan, federal Minister for Social Services Christian Porter and Fortescue Metals Group Non-Executive Chairman and Chair of Minderoo Foundation Andrew Forrest – encouraged the audience to press the case that the GST system reduces incentives for each state to develop their own economies, which in turn was hurting the entire country.

CCI Chief Economist Rick Newnham said the breakfast was a call to arms for all West Australians: “No matter what industry they come from, or what their political persuasion is, the event was about coming together as Team WA to say enough is enough – now is the time to fix the broken GST.”

“WA now accounts for more than 40 per cent of merchandise exports from Australia yet our state’s GST share has fallen to four per cent of the GST pie. This is a stark lesson to other states – develop your economy and you will be punished with less GST.”

“CCI is proud to be the only organisation to propose changing the GST calculation to partial equalisation to the national average, which has now been recommended by the Productivity Commission’s draft report.

“CCI’s proposal was built on three key principles – to be fair for all states, pro-growth, and durable – whatever we design must last. If we want to fix the GST system once and for all, we must continue to convince the nation that reform is in their best interest as well.”

McGowan said the other Premiers didn’t care about WA’s plight and everyone needed to see it as a national problem.

He called on the Federal Government to implement recommendations of the Productivity Commission report into the GST as soon as possible. Or if that wasn’t possible, to top up WA’s share of federal money to the second lowest state until a fix could be implemented.

Porter, who was representing Federal Treasurer Scott Morrison, did not make any announcement on the GST but, encouragingly, reiterated the call to convince the rest of the nation that the current GST system is hurting the national economy.

“We must absolutely stick to this line, which is the true line that the system we have is broken and bad for all Australia – not just bad for WA,” he said.

“We are punishing … the states that make the hard decisions to engage in tax reform and the hard decisions to grow extractive industries.

“The present system disincentivises those hard decisions and punishes those states that make the right call.

“As a team of West Australians, we must be absolutely lockstep in making the case that this system damages the national economy and every single Australian in it.”

If eastern state suppliers and contractors weren’t sympathetic to the argument, Forrest encouraged West Australians to take their business elsewhere.

“We have a job. We get onto our eastern states colleagues, friends, business partners, service providers, customers and if they don’t take your call, I really suggest you shift your business,” he said.

“If they’re not sympathetic to your call, shift your business.

“Explain to them that the Productivity Commission is trying to address, for the benefit of Australia, the lack of incentive in the GST.

“The highest performer tops everyone else up. That eradicates incentive.

“If the GST designers were back in the dark ages with the cells climbing out of the swamp, we’d still be cells in the swamp.”

CCI believes that the Federal Government can immediately implement the Productivity Commission’s recommendations without blowing out its own budget, or the budget of any state government.

This will be outlined in CCI’s transition proposal to the Productivity Commission which will soon be submitted.