Latest news with #Eslake
Perth Now
13 hours ago
- Business
- Perth Now
‘Un-Australian': GST change set to cost $60bn
The 'worst policy change in the 21st' century is set to blow out the national budget by $60bn and keep one state in the black for years to come. The goods and services tax (GST) carve up was back in focus this week as state treasurers came out with their budgets. Queensland, NSW, Western Australia, and the ACT all delivered budgets, with one state standing above them all. Mining-rich WA is in the black, with costs tipped to come in at $2.5bn less than predicted spending. The rest, budget deficits. Western Australia has cashed in on changing GST rules. NewsWire / Nicholas Eagar Credit: NewsWire WA Treasurer Rita Saffioti used her speech to focus on the relative strength of the economy compared with other states while warning of an uncertain global outlook. 'This budget is about fortifying WA amid global shocks,' she said. Independent economist Saul Eslake argues that WA has achieved a surplus for the last seven years on the back of soaring GST revenue. 'Between 2016 and 2025, Western Australia essentially had the country by the shorts and they squeezed as hard as they could,' Mr Eslake told NewsWire. 'I call it the worst public policy decision of the 21st century.' So what changed for the WA government to achieve seven years of surplus. WHY IS WA THE LUCKY STATE? Much of WA's success comes back to two changes. The first was a change to the GST in 2018, with Mr Eslake arguing that the then Liberal federal government wanted to appease WA where it held an overwhelming majority of federal seats. Then treasurer Scott Morrison announced a review of Australia's horizontal fiscal equalisation (HFE) system, which determines the distribution of goods and services tax (GST) revenue among states and territories. Then treasurer Scott Morrison enacted the GST reforms. NewsWire / Martin Ollman Credit: News Corp Australia After a Productivity Commission inquiry, the system changed so that all states and territories received 70c for every dollar of GST raised in 2022-23. That figure increased to 75c a dollar in the new agreement, WA's GST share was 30 cents in the dollar. High iron ore prices at the time could have meant WA got just 15.6 cents of every dollar of GST raised. 'So what Morrison did was commission the Productivity Commission to do an inquiry into horizontal fiscal equalisation,' Mr Eslake said. 'The terms of reference for that were written in Mathias Cormann's office. It was a classic example of (fictional TV character) Sir Humphrey Appleby's advice that you never call an inquiry unless you know what it's going to say.' HFE's aim is to ensure that every state and territory should have an equal opportunity to provide public services. The key word is should, as states and territories are free to raise additional revenues how they please as well as fund their own state-based services. 'That principle is they are equalising the fiscal capacity of the states and territories,' Mr Eslake continued. 'And the point of that, it matters far less where you live when it comes to the quality of schooling your kids get, the quality of healthcare that you and your family get, the quality of policy or environment you get.' The price of iron ore stayed high. Rebecca Le May Credit: NCA NewsWire Mr Eslake used the example of the US, which does not have HFE, meaning different states have varying life outcomes. 'If we didn't have it, then Victorians and NSW people would have much better public services and pay lower taxes, all else being equal, than Tasmanians or South Australians,' Mr Eslake said. 'And I would argue, and traditionally most Australians have accepted, that's something that makes Australia a better and fairer place than America in particular.' The second major change for WA was the rise of China, or as Paul Keating famously said, the state got 'kissed on the a*se by a big Chinese rainbow'. This kissing, Mr Eslake argues, turned WA from being propped up into a donor state. '(In the early 2000s) WA got a bigger share of whatever federal grants were going around than they would have got if it was distributed equal per capita,' he said. 'Because the (Commonwealth) Grants Commission recognised that when gold was fixed at $35 an ounce, and iron ore was only trading at $20 a tonne and they weren't selling much of it, they couldn't raise much money for mineral oil fees, but they had a relatively high cost of providing services.' NSW used its budget to call out WA's share of GST. NewsWire/ Gaye Gerard Credit: News Corp Australia BUDGET BOTTOM LINE To get other states to support these changes, a no one is worse off provision was added, with the federal government topping up any shortfalls in GST revenues. This policy was also extended until 2029-2030 under the Albanese government. This NOWO provision turns a $9bn budget blow into a $60bn black hole. 'This is the biggest blowout in the cost of any single policy decision ever with the possible exception of the NDIS, which as (economist) Chris Richardson says is at least set up for a noble purpose,' Mr Eslake said. 'It's what is allowing Western Australia to run a budget surplus while everyone else, including the feds, are running a deficit. 'In the longer run, what it will mean is residents of Australia's richest state, WA, will have better public services and lower taxes than people who live in the eastern states, which I say is un-Australian.'
West Australian
20-06-2025
- Business
- West Australian
‘Crocodile tears': Home loan change could add to worsening housing crisis
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Perth Now
20-06-2025
- Business
- Perth Now
‘Crocodile tears': Warning over key change
It's now easier for Australians to buy a home, but a key change to credit limits could push up the price of housing, a leading economist warns. The Australian Prudential Regulation Authority (APRA) announced on Thursday that Higher Education Loan Program (HELP) debts would be excluded from the credit limit for prospective homebuyers from September 30. Independent economist Saul Eslake told NewsWire that the change's two most obvious effects would be to 'allow some people who'd buy a home anyway to buy a more expensive one and (to) allow some people who wouldn't have been able to buy a home because of their student debt' to do so'. It's now a little easier to buy a home. NewsWire/ Gaye Gerard Credit: News Corp Australia 'The net effect of those two factors will be to increase the demand for housing,' he said. 'The likely result is that it will, along with other things that governments are doing, put further upward pressure on the prices of property.' Mr Eslake said the change meant some people would be able to enter the housing market more quickly than otherwise but 'it would come at the expense of others'. 'The primary beneficiaries of this change will be those who will already own property will be able to sell it to people at higher prices than otherwise,' he said. 'That's consistent with the 60 years of evidence that we have, going back to the first homeowners grant scheme introduced by the Menzies government in 1964 that tells us that anything that allows Australians to pay more for housing than they'd be able to otherwise results in more expensive housing and a smaller proportion of the population owning it.' Mr Eslake added it was 'obvious' the money saved on HELP debt cuts would now be going towards a more expensive house. Independent economist Saul Eslake says the government cries 'crocodile tears' for first-home buyers while introducing measures that increase housing prices. Chris Kidd Credit: News Corp Australia 'The reason that governments keep doing these things despite the evidence and despite all of the crocodile tears they routinely share about the difficulties faced by would-be first-home buyers is because they know that there actually aren't very many of them,' Mr Eslake said. 'On average, 110,000 a year, whereas there are 11 million people who own their own home. There are 2¼ million who own at least one investment property. That's an awfully much bigger number of votes for policies that keep house prices going up than there are for policies that might restrain the rate at which house prices keep going up.' Mr Eslake said the reason the housing crisis continued to worsen was 'because a majority of the population do not want it to be solved and politicians know that'. 'Until enough people my age, either out of an altruistic concern for the ability of their children and grandchildren to be able to do what they did, or perhaps more likely out of being pissed off at having to be the bank of mum and dad, until enough of them really want that to change, it isn't going to change.'
Sky News AU
04-06-2025
- Business
- Sky News AU
'Un-Australian': Western Australia's $60 billion sweetheart GST deal safe under Coalition, despite massive budget blowout
The Coalition has confirmed it will not propose any changes to the controversial GST arrangement that disproportionately benefits Western Australia. It comes amid renewed calls from NSW, Queensland and Victoria to revisit the national carve up of GST revenue, which hands WA better services despite lower taxes. Shadow treasurer Ted O'Brien and shadow finance minister James Paterson told Sky News the Coalition's position would not change the existing arrangement. 'The Coalition will not be proposing changes to the current GST settings with respect to Western Australia,' the shadow economic team said. The statement reinforces the Coalition's acceptance of the 2018 GST deal, which guarantees WA at least 75 cents for every dollar of GST raised in the state. NSW, Victoria, and Queensland typically receive less than 75 cents per dollar of GST raised within their borders and do not have a guaranteed minimum. The arrangement also includes a 'no worse off' guarantee designed to protect other jurisdictions from losing funding, but critics say it has come at a heavy cost. Independent economist Saul Eslake was scathing in his response to the Coalition's decision, telling Sky News it shows they were 'not serious about returning the budget to balance'. Mr Eslake has previously described the WA GST deal as the 'worst public policy decision of the 21st Century', citing two key reasons. Firstly, he argues the deal fundamentally undermines the purpose of the GST system, which is meant to ensure states and territories have the capacity to provide similar public services while imposing comparable tax burdens. Instead, the deal allows WA, Australia's richest state, to enjoy better public services while paying lower state taxes. 'The 'WA GST deal' which Albanese champions means that residents of Australia's richest state, WA, will get better public services whilst paying lower state taxes than other Australians,' he said. 'It is giving WA $7 billion in 2025-26, and at least $8 billion per annum in 2026-27 through 2029-30. 'More than WA needs in order to be able to provide the same standard of services whilst levying the same burden of taxes as the average of all states and territories. Which I think is 'un-Australian'.' Secondly, Mr Eslake said the massive cost blowout of the deal, which has surged from $9 billion over eight years to nearly $60 billion over eleven years, marks it as one of the most expensive policy failures. 'That's the biggest blow-out in the cost of any single policy decision, ever, with the possible exception of the NDIS, which was at least for a noble purpose," he said. Calls to revisit the GST carve-up have intensified from the eastern states which argue the current system is unfairly weighted in WA's favour. NSW Treasurer Daniel Mookhey and Queensland Treasurer David Janetzki have both urged the federal government to reconsider the arrangement and pursue a model based more on population. WA Transport Minister Rita Saffioti accused eastern commentators of being 'obsessed with wanting to tear WA down' on Tuesday. 'If you're a true economic commentator, you would realise that WA is driving the national economic agenda,' she said. Prime Minister Anthony Albanese has likewise stood firm on the deal, saying he supports the position on WA GST given he did not propose changes in the election campaign. 'We support the position on WA that I took to the election, that I took the 2022 election, and that were enshrined at the National Cabinet,' Mr Albanese said on Tuesday. 'Importantly, as well, part of that is that no state's been worse off (under) that guarantee—and that guarantee is in place.' The deal was originally set to expire in 2026-27 but has been extended until 2029-30 as part of a broader agreement with states on the National Disability Insurance Scheme. Mr Eslake has urged bipartisan cooperation to end the costly arrangement, proposing the Productivity Commission be tasked with designing a simpler, more transparent system for distributing GST revenue. 'If the Coalition were to offer the government bipartisan support for reversing the 2018 changes… then the government would have absolutely no valid reason not to accept that," he said.
Sydney Morning Herald
03-06-2025
- Business
- Sydney Morning Herald
‘How do they sleep at night?' Allan and Minns governments, experts demand Albanese fix GST
The Minns Labor government and its treasurer, Daniel Mookhey, have been pushing for an overhauled distribution model that would give states GST corresponding to their population. 'NSW will continue to argue for a fairer carve up of GST on a per capita basis,' a government spokeswoman told this masthead. 'That would include support for the smaller jurisdictions as required. This would help eliminate the wild fluctuations which hinder states from being able to properly budget for future GST contributions.' Queensland's Coalition Treasurer David Janetzki warned Labor against 'locking in a Western Australia sweetheart deal for political reasons' and SA Labor Treasurer Stephen Mulligan argued the GST model gave WA 'an unfair financial advantage'. Albanese and his ministers will spend two days in Perth this week and hold a cabinet meeting in a state that has received lots of attention from this government. Labor last week approved an extension of the North-West Shelf gas project off the state's coast, watered down a petroleum rent tax last term, and backed off on legislating a new environment protection agency last year, partly due to concerns from the mining state. Loading Independent economists Saul Eslake and Chris Richardson want Labor to seize the moment to scrap the WA deal. The cost blowout is the largest in the federal budget and only comparable with the NDIS, according to Eslake, who has been a frequent critic of the WA arrangement. Eslake said Albanese's big win meant he did not require a group of seats in any one state to remain in power. 'This government didn't introduce the worst public policy decision of the 21st century. But they extended it, and they defended it. And if they are serious, then they have a chance to end it,' Eslake said. 'Given that Anthony Albanese and Jim Chalmers profess to believe in equality and in sound financial management, how can they sleep at night knowing they are giving the richest state in the country $8 billion more than it needs while simultaneously saying they can't afford to increase the JobSeeker allowance?' In 2016, under pressure from the politically influential WA government, Morrison came up with a plan under which no state's GST share could fall below 75 cents for every dollar of the tax raised within its jurisdiction. This was designed to offset WA's frustration that it had fallen to a much lower share than 75 per cent because the GST formula punished WA for its ability to raise billions in mining royalties. The top-up was initially forecast to cost $2.3 billion over four years, but, combined with another policy to make sure no other states were worse off, the total package of changes combined to push the expected cost of Morrison's original plans to $60 billion by the end of the decade. WA's GST share was expected to lift due to a forecast fall in iron ore prices and royalties, but that did not occur, baking in the costs to taxpayers across Australia. Unlike other states struggling to manage budgets, WA is projected to bank cumulative surpluses worth about $20 billion over the eight years to 2026-27. Richardson said the only way the WA deal would end was if the Coalition agreed not to turn the issue into a political issue to gain votes in the state. He said Chalmers must give the Productivity Commission an appropriately expansive terms of reference for its review of the GST next year, which he said would inevitably find that the WA deal was the equivalent of the country 'smoking 100 notes'.
