Former Finance Minister Mathias Cormann Backs WA's GST Deal in OECD Submission
In a significant intervention, Mathias Cormann, the former Australian finance minister and current head of the Organisation for Economic Co-operation and Development (OECD), has thrown his support behind Western Australia's Goods and Services Tax (GST) agreement. Cormann has submitted a formal statement to the Productivity Commission, which is currently reviewing the 2018 deal, arguing emphatically that the reforms must remain in place to ensure fairness and stability in Australia's federal system.
Historical Context and Cormann's Role
As finance minister in 2018, Cormann played a pivotal role in legislating the historic GST agreement under the federal Coalition government. This deal guaranteed that WA's share of the annual GST pool, which exceeds $100 billion, would not fall below 75 cents per dollar. Since leaving Australian politics in 2020 and taking up his position at the OECD, Cormann has rarely commented on domestic issues, making this submission particularly noteworthy. He recently received the Companion of the Order of Australia, the highest honor in the Australia Day Honours, underscoring his influential status.
Defending the GST Reforms
In his submission, Cormann highlighted that Australia's reformed GST distribution arrangements represent a model of sophisticated, practical federalism. He emphasized that the system appropriately balances equity with sustainability, drawing from his international experience observing federal systems worldwide. Cormann pointed out that prior to the 2018 changes, WA suffered from an unfair system where the state received less than one-third of its per-capita GST entitlement, despite contributing equally to the pool. This disparity, he argued, had real consequences for WA families, businesses, and public services, creating a legitimate sense of grievance among Western Australians.
Addressing Criticism from Eastern States
The GST deal has faced ongoing criticism from eastern states, especially in light of recent figures showing WA received $43 billion in GST grants since 2019, compared to $14.5 billion it would have received without the reforms. Cormann dismissed these criticisms as unfounded, stating that even with the 75% floor, WA still transfers 25% of its per-capita GST entitlement to support other states, amounting to billions in ongoing redistribution. He described this as a reflection of continued solidarity within the federation. Additionally, the Commonwealth is providing top-up payments, such as the $6.6 billion slated for next financial year, to ensure no state or territory is disadvantaged, which Cormann affirmed is affordable and a sound long-term investment.
Economic and Fiscal Implications
Cormann argued that the reformed GST system has strengthened the fiscal positions of all states and territories compared to pre-reform arrangements. He noted that the system is more stable, reducing the risk of future fiscal crises and the need for Commonwealth interventions. With the Commonwealth Grants Commission recently recommending an extra $1.3 billion for WA in the 2026-27 financial year, bringing its total to $9.3 billion, the debate is likely to intensify. Cormann's endorsement adds weight to calls for maintaining the current framework, positioning it as essential for national economic harmony and growth.
