Federal Member for Fairfax

Media release

Mining states’ share of GST returns will better reflect royalty volatilities under legislation to be today introduced into the Australian Parliament by WA Senator Zhenya ‘Dio’ Wang.

In support of calls by the WA Government for the Federal Government to overhaul its methodology for distributing GST among states and territories, Senator Wang’s Bill simply amends the Commonwealth Grants Commission Act 1973 to account for the impact of mining revenue annually, instead of over three-year averages.

Annually accounting for mining royalties would increase Western Australia’s share of GST from just 30c to about 85c in the dollar per capita in 2015/16 – or about $3500m in additional GST revenue at a time when royalty revenue has plummeted – while making no other change to the assessment and distribution of GST revenue to other states.

Senator Wang said the present equalisation formula was not working correctly, as two states were bearing the brunt of extreme royalty fluctuations. Annual accounting of royalty revenue provides for an immediate, real-time buffer against extreme peaks and troughs and stability in budget formulation.

“The dysfunctional method for calculating the distribution of GST to states and territories has resulted in WA’s share being at record national lows of just 30c in the dollar in conjunction with plummeting iron ore royalties, which account for about one-fifth of WA’s income,” Senator Wang said.

“The Federal Government has expressed sympathy for WA’s predicament regarding large, volatile revenue sources and asked the Commission in December how to mitigate this, to ensure that states’ shares of the GST in a given year are appropriate for their fiscal circumstances in that year.

“In today’s resources environment, when commodities prices are moving to spot prices, three-year averaging is unacceptable. Annual assessment is a fairer way of equalising GST distribution using the correct data – when royalties rise sharply, non-mining states will be immediately rewarded with a greater share of the GST. But when mining drops rapidly, WA and Queensland are protected.

“This Bill makes sure distribution works properly and equalisation occurs immediately.”
Senator Wang has sought meetings with WA’s Premier and Treasurer to discuss the Bill and said he did not want a vote to be rushed, with an inquiry to enable all stakeholders sufficient time to properly consider the overall benefit.

“We welcome other states to embrace the mining industry and to seek to increase their own mining revenue,” he said. “This measure will ensure that they too in the future are protected from the problem we see in WA today.”