Thanks for explanation about the WA GST top-up not necessarily being economically distorting. On a recent trip to WA, the public realm seemed gold plated. On an earlier trip I went down down to Augusta on the south coast where there is a beautifully equipped commercial fishing port that was clearly underused, having been funded under the then Nationals Revenue for the Regions program.
The aspect that annoys me apart from the obvious unfairness is the notion from commentators that federal taxation revenue is someone exogenous - though I'm probably not using this term in the strict economic sense. Morrison's announcement of the top up was not accompanied by any serious critique from other states & most media commentators who brought his line that there would be no losers because the federal gov would pick up the tab - as though we don't all share in the federal funding pie.
Well said. Note that the 'WA bailout' will help any State whose relativity falls below 75% (QLD and NSW have come close), not just WA.
The only point I'd add is about incentives: if a politician in a state benefiting from the deal knew that most of the royalty revenue they collected from a mining project would simply flow to other states a couple of years later (the GST calculation is lagged), they might be more inclined to weigh other factors (e.g. NIMBYs) more heavily and block the project.
Basically, without the deal you risk turning WA - where politicians frequently campaign to remove federal barriers to investment - into something that more closely resembles modern Victoria.
That's one of the dangers in obsessing over how to slice the pie instead of how to grow it: in the long run, total revenue and the GST distribution could be smaller for everyone.
Thanks for explanation about the WA GST top-up not necessarily being economically distorting. On a recent trip to WA, the public realm seemed gold plated. On an earlier trip I went down down to Augusta on the south coast where there is a beautifully equipped commercial fishing port that was clearly underused, having been funded under the then Nationals Revenue for the Regions program.
The aspect that annoys me apart from the obvious unfairness is the notion from commentators that federal taxation revenue is someone exogenous - though I'm probably not using this term in the strict economic sense. Morrison's announcement of the top up was not accompanied by any serious critique from other states & most media commentators who brought his line that there would be no losers because the federal gov would pick up the tab - as though we don't all share in the federal funding pie.
Well said. Note that the 'WA bailout' will help any State whose relativity falls below 75% (QLD and NSW have come close), not just WA.
The only point I'd add is about incentives: if a politician in a state benefiting from the deal knew that most of the royalty revenue they collected from a mining project would simply flow to other states a couple of years later (the GST calculation is lagged), they might be more inclined to weigh other factors (e.g. NIMBYs) more heavily and block the project.
Basically, without the deal you risk turning WA - where politicians frequently campaign to remove federal barriers to investment - into something that more closely resembles modern Victoria.
That's one of the dangers in obsessing over how to slice the pie instead of how to grow it: in the long run, total revenue and the GST distribution could be smaller for everyone.