WA to pay down debt with GST windfall

The state government has confirmed it will use an estimated $1.7 billion GST windfall to pay down its debts, after the legislation cleared federal parliament today.

Under the legislative changes, the overall GST pool for states will be boosted with $9 billion of federal money over 10 years and an additional $1 billion in perpetuity once fully implemented.

WA Treasurer Ben Wyatt said the state would direct the first three years of the top-up payments into the debt reduction account.

“Today is a great day for Western Australia,” he said.

“Today we end decades of political squabbling and point scoring with action that puts the state’s finances back on a path to sustainability.

“Of course the irony is that much of this money was assumed to arrive in former treasurer Christian Porter’s budget of 2011-12 and was spent accordingly, so our action today is merely continuing to right the wrongs of the previous Liberal-National government.

“The McGowan government has always said it will manage the finances in a mature, responsible fashion, and utilising this additional GST revenue will be no different.

“We have been workman-like since coming to office and today we reap the rewards of that approach, with the debt reduction account to deliver ongoing savings in our interest bill.”

The new standard for distributing the tax's revenue will be measured against the stronger of NSW and Victoria.

The GST floor will be initially set at 70 cents, ratcheting up to 75 cents in 2024-25.

The laws were triggered by WA recently receiving just 30 cents in the dollar, while other states and territories with smaller populations got more.

Labor supported the legislation, which passed the Senate on Wednesday, after the coalition government inserted a guarantee no state would be worse off under the changes.

Finance Minister Mathias Cormann said the previous arrangements were unsustainable.

"The government has long recognised what has been happening with WA's share of the GST was unfair and had to be fixed," Senator Cormann told parliament.

"We have provided a national solution to a national challenge that was in the too hard basket for too long."

During the transition period between 2021-22 and 2026-27, states and territories will get the better of the old or the new system.

Chamber of Commerce and Industry of WA chief economist Rick Newnham said it was a momentous occasion for the state.

"Together, West Australians have won a David and Goliath battle to fix the GST," he said.

"We have achieved what was widely regarded as justified but impossible, making history for WA."

Opposition leader Mike Nahan also said it was a historic win for the state.

"These much-needed reforms have been a long time coming, thanks to the persistence of the federal Liberal government are now a reality,” he said.

“These are changes that have been championed by WA Liberals, state and federal, for many years in the face of resistance from eastern states politicians and outright opposition from WA Labor until they were elected to government last year.

“WA Liberals have long argued that the formula was broken and needed to be fixed.

“Like any significant reform, change takes time to win the critics and naysayers over.

“Today, those reforms have finally gone through the Senate and WA is the main beneficiary of those changes.”