The Turnbull government is insisting on a 'no losers' solution to salve WA's grievance over the GST by not stripping money off the other states to avoid angering them.
With WA's economy continuing to flounder, Finance Minister Mathias Cormann - who along with Foreign Minister Julie Bishop is the most senior WA Liberal in the government - made it clear that the state would have to wait until its GST share recovered sufficiently before a floor was introduced.
Prime Minister Malcolm Turnbull's visit to the west this week is being dominated by WA's gripe over the GST distribution formula - which means the state will get back just 34¢ in the dollar this year - as he tries to shore up the Liberal Party's standing in Perth.
Mr Turnbull has proposed introducing a floor once WA's GST share rose to compensate it for its ailing domestic economy as well as ordering a Productivity Commission inquiry. The floor was mooted to be 70¢, which was originally forecast to be reached in 2019-20 but the state's Treasury has pushed that date back because of gradually improving iron ore prices.
Iron ore price complications
The difficulty facing WA was illustrated on Monday when the iron ore spot price had its biggest one-day leap since November and surged to almost $US74. As iron ore prices are revised upwards, that boosts WA's share of royalties but flows through to help depress its GST share.
Senator Cormann told ABC radio the government had provided $1.2 billion in top-up payments to WA in the past three budgets in recognition the state's share of the GST was inadequate and unfair.
But he ruled out taking money off other states immediately to boost WA's coffers, with a floor only to be introduced as WA's share recovered.
"By putting in place a floor after a certain threshold has been exceeded which is expected to happen over the next few years, you, of course, wouldn't have to take money away from any other state," he said.
Pub test
Mr Turnbull said WA Premier Mark McGowan should use his influence with fellow Labor states and Opposition Leader Bill Shorten to gain their support for changing the GST formula.
"Clearly, what we need to do is come to a landing where we have a GST allocation formula that is fair and is seen as being fair across the country," he said.
"In other words, that it passes the pub test not just in Western Australia but in Queensland, South Australia and New South Wales."
After meeting WA counterpart Ben Wyatt, Treasurer Scott Morrison noted the urgency of striking a solution to WA's gripes.
"We are very well aware of how serious this issue is in Western Australia and there is an election in around two years' time from now – just under that and we are working to solve that problem," he said.
Mr Morrison said he was powerless to intervene after state Treasury officials warned a fall in population would cost the state almost $2 billion in GST revenue over the next four years. Census figures from 2016 showed 60,000 fewer people living in WA than previously estimated, which feeds into the GST calculations.
"As Treasurer under the Federal Financial Relations Act, I have no legal ability to ignore the numbers of the Chief Statistician. There's just no flexibility on that," Mr Morrison said.
