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CCI welcomes Prime Minister’s GST commitment

The Chamber of Commerce and Industry WA (CCI) today strongly welcomes the Prime Minister’s confirmation that the Federal Government’s proposed GST legislation will include all three pillars of the GST reform package – a floor, additional funding and a change to the broken GST formula – leaving no state worse off.

When the GST was introduced it was never envisaged that the system would come under so much strain. The new system protects against these extreme outcomes occurring again and ensures that every state is better off.

According to CCI modelling, if a floor is implemented with no change to the formula or additional funding, WA will be left $1.7 billion worse off, while NSW will lose $351 million, Victoria $425 million and Queensland $518 million, relative to a ‘floor only’ change. Recipient states will also lose large amounts – South Australia $257 million, Tasmania $112 million and the Northern Territory $258 million. Labor is yet to commit to a change in the formula putting this additional GST funding to the states at risk.

The Productivity Commission has made it clear that without a change to the GST formula the national economy will suffer, holding back business investment and job creation for decades to come.

There is enormous sympathy across Australia for WA’s low GST share. No other state has ever had its GST share fall below 83 cents, while WA’s fell all the way to 30 cents.

According to exclusive national polling of 2,350 Australians commissioned by CCI, 70 per cent of Australians believe that WA’s GST share fell to an unacceptable level – below 35 cents – and most Australians (52%) believe that if it is in the national interest to change the GST distribution it should be changed.

Right now, 90 per cent of WA’s iron ore royalties are distributed to other states through the GST system and these royalties will continue to be redistributed to other states if the GST formula is changed.

It is wrong to say that other states would “miss out” if another mining boom were to occur in WA, and in particular a lithium boom, after a change to the GST formula.

Every state benefits from the development of WA’s resources, and will continue to benefit if the system is changed. The difference is that WA will have an even greater incentive to develop its own economy without fear of being punished with less GST – and every state will benefit from that.

Fixing the GST is the most important issue to West Australians, second only to cost of living and 68 per cent of West Australians believe the GST distribution should focus on the national interest instead of a political fight between the states and territories.

This demonstrates that while West Australians were the most vocal in calling for GST reform, they want a GST system where Australian stands to benefit. No state or territory should be punished the way WA has been for developing its own economy.

CCI urges Opposition Leader Bill Shorten and each state Premier to now back the Federal Government’s entire proposed model given that every Australian stands to benefit, including a change to the formula.

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