Former Finance Minister and OECD head Mathias Cormann throws support behind WA GST deal

Mathias Cormann — the former finance minister and now head of one of the world’s most influential economic organisations — has weighed into the fierce GST debate, telling the Productivity Commission in emphatic fashion WA should not be stripped of billions in revenue secured in a new agreement six years ago. Mr Cormann, who was finance minister in 2018 when the federal Coalition legislated in the Parliament a historic new deal which meant WA’s share of the annual $100 billion plus GST pool would be no less than 75 cents in the dollar, has told the commission that the reforms must stay. “As someone who now works at the international level observing federal systems around the world, I can say with confidence that Australia’s reformed GST distribution arrangements represent a model of sophisticated, practical federalism that appropriately balances equity with sustainability,” Mr Cormann, now boss of the Organisation for Economic Co-operation and Development said in his submission to the Commission. Mr Cormann’s support comes as WA’s new GST deal continues to attract criticism from the eastern States’ in the wake of figures which show WA received $43b in GST grants since 2019 compared to the $14.5b it would have received without the reforms. That 2018 deal is currently being reviewed by the Productivity Commission. The Commonwealth Grants Commission on Friday released its recommendations for the next financial year’s GST carve-up of the $103b national pool of funds. WA is expected to receive $1.3b extra in GST funds in 2026-27 — $9.3b compared to $7.9b this financial year — adding more fuel to the fire. Mr Cormann, who recently received a Companion of the Order of Australia, the highest appointment in the Australia Day Honours, has rarely commented on issues involving local politics since leaving the Australian Parliament in 2020 before being appointed head of the OECD. But he has now weighed into the GST debate, saying the State he once represented federally as a Senator deserved every cent it was getting in GST dollars. Mr Cormann says prior to the changes in 2018, WA had suffered from an unfair system that was not only disadvantaging the State, but also had consequences for the nation. “Western Australians were contributing to the GST pool like all other Australians, yet receiving less than one third of what they would receive on a simple per-capita distribution, while simultaneously being expected to maintain comparable service levels to other States _ while dealing with the pressures of growth on infrastructure and services, including stronger population growth, that had led to this outcome,” he said. “This was not merely a technical accounting issue. It had real consequences for WA families, businesses and public services. “It created a legitimate sense of grievance among Western Australians — that they were being penalised for their State’s active economic development and success, leveraging its resource endowment, which was ultimately benefiting the nation via broader economic growth effects, increased taxation, investment and development.” He said the notion that the current system was somehow favouring WA were unfounded. “Even at the 75 per cent floor, a resource-rich State in WA’s position would still be transferring 25 per cent of its per-capita GST entitlement to support other States,” he said. “This represents billions of dollars in ongoing redistribution and reflects continued solidarity.” The 2018 GST deal means the Commonwealth is tipping in billions of dollars each year to ensure no State or Territory is disadvantaged by the new arrangements, such as the top up payments of $6.6b being made next financial year. This has attracted severe criticism from whingers in the east. But Mr Cormann says the new GST arrangements are “affordable”. “The Commonwealth’s additional funding commitment is affordable and represents a sound long-term investment in Federal stability,” Mr Cormann said. “All States and Territories have stronger fiscal positions under the reformed system than they would have had under the pre-reform arrangements. “The reformed system is also more stable, reducing the risk of future fiscal crises for individual jurisdictions and the Commonwealth interventions that would be required to address any arising crises.”