07/04/2015 - 05:01

State funding battle lacks the facts

07/04/2015 - 05:01


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Those who forget history often prefer to fill the void with myths.

SUPPORT: Government grants helped prop up SA’s car manufacturing sector. Photo: © GM Corp

Those who forget history often prefer to fill the void with myths.

No sooner had I finished praising South Australian Premier Jay Weatherill for his far-sighted leadership regarding the nation’s nuclear industry (‘WA stalls on the start line’, March 30) then he plugs into the staggering misinformation campaign about Western Australia’s history as a recipient of Commonwealth Grants.

WA has been campaigning hard to change the way the GST is allocated by the Commonwealth Grants Commission because the boom-time royalties have skewed the redistribution away from this state.

Mr Weatherill reckons the WA government is trying to rob smaller states and territories.

“WA, when they went into this mining boom, got to keep everything for the first three years and now they’re coming out the other end of it they want to change the rules,” Mr Weatherill reportedly said.

“This is classic Western Australia.”

Well, the use of the word ‘rob’ might not be fair, but there’s no doubt that, due to the way the GST was devised, WA benefited from the lagging effect of its calculation. This state definitely saw upside in the sense that, for a short time, its royalty income was not fully recognised by the grants commission.

We could argue forever about the fairness of that system and whether, in the grants commission’s view, WA’s rising costs due to the strains of the boom (including thousands of migrants from the eastern states) were recognised along with the extra income.

But that is merely the GST, a mechanism signed off by the Liberal state government run by then premier Richard Court and his deputy, Colin Barnett, which came into force in July 2000.

So whatever WA’s gains and losses for the GST, they are hardly historic and cannot be the source of the following ignorant statement by Mr Weatherill.

“For most of the existence of the Commonwealth we’ve all been funding them to exist, then they hit the jackpot and now the rest of us have to pick up for them,” Mr Weatherill reportedly stated.

Unfortunately, the champions of the current GST system have repeated the myth of WA as a ‘mendicant state’ so often that it starts to sound truthful.

So, I will remind readers of what I have written before, just so that such views are not simply accepted as truth when they are not.

As I have stated previously, there were very good reasons why, historically, WA was paid more than other states; because then, as now, we are a sparsely populated export-focused region and that made us different from the other states, which were inwardly focused protectionist colonies.

The other states, with bigger populations, had larger manufacturing bases than WA and used tariffs to protect that industry.

Under federation, those tariffs drastically affected WA, which didn’t manufacture as much and was used to importing its goods without such taxes. To compensate WA for the cost of tariffs (without the economic or political benefits of manufacturing here) the other states agreed to pay additional sums each year. In the era of the Great Depression, this protectionism became even more pronounced and cost WA more dearly as an export-oriented state; so much so that this drain on the state’s economic freedom contributed to the secession movement, which in turn provided momentum for the Commonwealth Grants Commission to be created.

There are other, more recent, issues where decisions against WA’s interests (or due to this state’s acceptance of risks) meant that the rest of the nation either paid us more or forewent other revenue. I explained that here: businessnews.com.au/article/Mendicant-no-more-GST-showdown-ahead

So WA was not the mendicant state at all. As SA watches the disappearance of its car industry and frets about the future of submarine building, Mr Weatherill ought to remember it was taxpayers in all other states and territories who helped subsidise those industries, without, in WA’s case, much direct benefit to themselves and at great cost to individuals and businesses.

Instead of being internationally competitive, South Australia and other states chose to buy us off – compensating WA for their own protectionist policies, which for decades made Australia an unnecessarily expensive place for business.

We’ve put up with that burden long enough; protectionism is being consigned to history, as it deserves to be, and we certainly don’t need some political spin that falsely claims we were carried by the rest of the nation during that time.

It simply isn’t true.


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