Western Australian premier Colin Barnett’s threat to “disengage” the state from the broader Australian economy if the GST debate is not resolved in WA’s favour would be almost impossible to implement, according to an expert.
Barnett told the Australian newspaper on Monday that the GST debate – which came to a head at the national treasurers’ meeting last week, when the Commonwealth Grants Commission recommended WA’s GST share slip below 30c in the dollar – was WA’s “Boston Tea Party moment”. WA’s “tea party” could involve refusing to sign federal-state agreements and maybe even stopping trade with the east coast.
Finance minister and WA senator, Mathias Cormann, said on Sunday that he would argue for treasurer Joe Hockey to freeze GST allocations at this year’s rate, meaning WA would continue to receive 37c for every dollar it paid.
Barnett said if the system was not changed, WA would shift its economic focus to Asia at an “accelerated rate”.
“If the GST is not resolved, Western Australia’s future is not with the rest of Australia in a financial or economic sense,” Barnett said.
“If we shift to Asia then more of what is brought into Western Australia, more of our goods and services, will come from Asia and not from the east coast.”
But Jeffrey Wilson, a fellow at the Asia Research Centre at Murdoch University in Perth, said replacing all interstate trade with Asian trade could not happen. “Not without exposing ourselves to the horrific volatility of the resource market, which is exactly the problem at the moment,” he said.
WA’s revenue stream has taken a massive hit from the rapid fall in the iron ore price, which has slipped 60 per cent to below $US50 a tonne, taking a substantial chunk of the WA budget with it.
The federal treasurer Joe Hockey told the Australian Financial Review on Monday that he was preparing for the iron ore price to fall as low as $35 a tonne.
Wilson said WA’s current budget predicament – a perfect storm of low iron ore royalties and a record-low GST allocation – was a product of being exposed to market volatilities which would only get worse if Barnett made good on his threat.
He said that other than China buying a lot of WA iron ore, the state did not boast stronger ties to Asia than any other states in Australia.
“WA’s Asian future is really an iron ore future and nothing else,” he said. “The relationship is very deep but it’s very narrow.”
Wilson said he was “flabbergasted” by Barnett’s comments, which were “the most anti-federal statements a WA premier has made in a postwar period.”
But he said it would play well with a certain subset of the electorate, for whom WA exceptionalism was alive and well, and that the threat was really directed at the political security of the Abbott government.
“This is a West Australian invention, that the rest of the country conspires against Western Australia,” he said. “But it could have impact at the polls because this is not important to people in NSW and Victoria, and it’s very, very important to people in WA.
“Giving it [a better GST allocation] to WA is probably not going to cost the Abbott government a lot of votes at the next [federal] election, but taking it away will cost votes.”
It’s not the first time Barnett has invoked the 1773 Tea Party revolt in America. In a 2012 interview with the West Australian, Barnett called on Tony Abbott to declare a position on GST reform, mentioned that Asia and mining royalties were WA’s “dominant income source” and said, “I’m not saying we are going to have a Boston Tea Party but there are parallels and I think the senior bureaucrats in Canberra in Treasury and other agencies understand that, and that’s a pity. It weakens the Australian federation.”
The Boston Tea Party motif in Western Australian politics appears to date back to Liberal premier Richard Court, in a 1997 budget speech he gave that supported the introduction of the GST.
Shadow treasurer Ben Wyatt said that all this means is the threat is as unoriginal as it is empty.
“It seems to be a common theme from Liberal premiers who are undermined by their own poor economic performance,” Wyatt said. “It’s strong rhetoric but I don’t know what he’s going to do – are we going to dump our iron ore in the ocean?”
Wyatt said WA Labor is in favour of a per capita system but Barnett’s “petulant” comments only served to make WA’s cause more unpopular with other states, Labor or Liberal.
“We have a very unsophisticated argument that we raise with the Commonwealth Grants Commission,” Wyatt said. “And every year we stand here surprised that the other states didn’t take our side.”
