ADJOURNMENT

Senator DEAN SMITH (Western Australia) (20:44): There is a simple way for Australians on the eastern seaboard to think about Western Australia's GST deal. Forget for a moment the predictable interstate grievance, the east coast versus west coast rhetoric and Roger Cook's description of the Productivity Commission as a collection of east-coast clowns. Ask instead a more important question: what is in the national interest?

If Western Australia is generating almost half of Australia's goods exports, providing billions in company tax and royalties, sustaining the nation's trade balance and underwriting a significant part of our national prosperity, should Canberra design the GST system to punish that success, or should we ensure Western Australia has the capacity to keep building the ports, roads, energy infrastructure, industrial precincts and communities that allow that economic engine to keep running?

That is the real argument for retaining the 2018 GST reforms, but it comes with an important qualification. Western Australia's GST deal should not be treated as a blank cheque for the Cooke Labor government. The pressure from taxpayers in Sydney, Melbourne, Brisbane, Adelaide and Hobart should not be directed at dismantling the GST reforms.

It should be directed at WA Premier Roger Cook and treasurer Rita Saffioti to demonstrate that the proceeds are being spent wisely, particularly on productive economic enabling infrastructure that keeps Western Australia producing, exporting and contributing to the rest of the country. That is a much better national debate than another Canberra revenue grab. The Productivity Commission has reopened old wounds by describing the 2018 reforms as a 'costly mistake' and recommending a transition back towards the pre-2018 system.

Its case, of course, deserves to be heard like every other. The commission calculates the reforms have cost the Commonwealth almost $23 billion to 2024-25, largely because Canberra has compensated the other states through the no-worse-off guarantee. It says WA received enough GST in 2024-25 to meet 113 per cent of its assessed fiscal needs, while other states were at 98 per cent before Commonwealth top ups.

Those numbers explain why premiers and treasurers elsewhere are circling. New South Wales Premier Chris Minns wants change. South Australian Treasurer Tom Koutsantonis calls the arrangements unfair, and Tasmania's Eric Abetz wants the pre-2018 system restored.

That is understandable. State premiers are paid to maximise revenue for their states, but Australians should remember why the reforms were necessary. What had happened?

Western Australia's GST relativity did not merely become a little less generous; it collapsed. The Commonwealth Grants Commission records WA's relativity falling as low as 0.29999. That is just short of $0.30 in every dollar.

Before WA's extraordinary decline, New South Wales's historical range since the GST began had been around 83c. Today, under the supposedly outrageous WA deal, Western Australia is not receiving a dollar for every dollar of GST distributed on an equal per capita basis. In 2026-27, Western Australia and New South Wales have the same relativity of 0.81964, about 82c in the dollar.

Queensland receives about 87c, Victoria $1.06, South Australia $1.36, Tasmania $1.88 and Northern Territory $5.24. WA is receiving the equal lowest GST payment per person in the country. The 2018 reforms did not give Western Australia more than everybody else.

They put a floor beneath how far its share could collapse. Nor was the legislation smuggled through Parliament by West Australian separatists. It passed both houses of this parliament in November 2018 without a division.

Labor did not marshal its MPs and senators to vote against it. That bipartisan history matters. What was regarded as an acceptable national settlement in 2018 cannot suddenly become an outrageous concession simply because Canberra is searching for money eight years later.

There is another fact eastern Australians deserve to hear. Western Australia is still subsidising the federation. The WA government calculates that, even with the reforms, it contributes about $2 billion a year through the GST system to other states and has contributed around $21 billion since the reforms commenced.

WA produces more than 45 per cent of Australia's goods exports while receiving only nine per cent of the GST pool. The larger economic reality is clear. It is a national asset.

WA mines, LNG projects, railways, ports and supply chains generate Commonwealth tax, jobs and investment across Australia. They help create the economic capacity from which Canberra funds everything, from Medicare to defence. The rest of Australia has a direct interest in keeping it productive.

That is where Roger Cook and Rita Saffioti should face much greater scrutiny. Defending the GST deal is the easy part of their job; spending it properly is the harder part. Every dollar squandered on poorly conceived projects, bureaucratic expansion, political advertising or prestige spending makes the case for Chris Minns and his fellow premiers so much easier.

Every dollar invested in freight links, ports, roads, water, energy reliability, regional housing and infrastructure that unlocks private investment strengthens the national case for retaining the reforms. This is where the Productivity Commission debate should now turn. Instead of asking, 'How do we take more money from Western Australia?' ask, 'How do we ensure Western Australia uses its fiscal capacity to expand the national economic pie?' That is genuine productivity questioning and debate.

There is something peculiar about a Productivity Commission recommendation that risks weakening incentives for development in the state containing so much of Australia's export economy. The commission argues there is little evidence that GST arrangements materially change state policy decisions and says 'dominant-state effects' from mining can be addressed more directly.

But incentives matter. Tell a state government to approve a mine, build the road, accommodate the workers, provide the hospitals and schools and facilitate billions of dollars of investment, then substantially reduce its GST entitlement because of the resulting royalty capacity, and you hardly have a federation encouraging development. The old system produced precisely the political breakdown that led to reform.

There is also an uncomfortable fiscal backdrop to this GST debate. Canberra has a spending problem. The no-worse-off guarantee is funded by the Commonwealth at a time when the federal budget suffers structural spending problems.

That makes the WA GST arrangement a tempting pot of money for the Commonwealth. But dismantling the deal is not budget repair; it is redistribution masquerading as reform. It does not make government more efficient, reduce Commonwealth expenditure or create a single new dollar of national wealth.

It simply changes who gets the money. The answer to Canberra's spending pressures should not be to raid a settlement negotiated and legislated just eight years ago. The better bargain is obvious: keep the GST reforms, keep the floor, keep Anthony Albanese to his repeated promise that Western Australia is safe with its GST deal—but demand much more accountability from the Cook government.

If Roger Cook and Rita Saffioti insist WA will not back down, then show Australians what the money is being used for. Show how the reforms are supporting productivity-enhancing infrastructure in the Pilbara and export regions, attracting private capital and generating national revenue. When WA Labor wastes money, eastern state premiers are entitled to call it out.

But the answer is not to return Western Australia to a system under which its GST share collapsed to around 30c in the dollar. There is a fundamental distinction between making WA poorer and making WA Labor more responsible. Australia benefits enormously from WA being wealthy, productive and ambitious.

We should want new mines, gas and critical minerals projects proceeding; ports operating efficiently; and infrastructure built ahead of demand. When Western Australia succeeds, Commonwealth revenues rise and Australians thousands of kilometres away share in the proceeds. The GST debate should not be another argument about dividing a fixed cake.

The national objective should be to bake a bigger one. The 2018 reforms recognised there had to be a limit to how severely the federation penalised its strongest economic contributor. Senate adjourned at 20:54