View from The Hill: Pragmatism holds Albanese to bad GST carve up, but Productivity Commission remains burr under saddle
- Written by: Weekend Times
Anthony Albanese insists there will be no retreat from his promise that Western Australia’s over-generous slice of the GST will remain intact as long as he is prime minister, regardless of the
Productivity Commission’s compelling argument for it to be scrapped.
“I’ve said it multiple times. I’ve signed people’s body parts, for goodness sake”, he said when visiting the state this week.
Perhaps scrawling something on a reporter’s arm, as he did in 2024, gives a special character to a promise, distinguishing it from, for example, a pre-election commitment not to change the capital gains tax or negative gearing, or a pledge at Garma to always attend that festival while he is prime minister.
In fact, the strongest protection for that GST promise is that Labor now holds 11 out of 16 federal seats in Western Australia. Conversely with the Liberals, who forged the WA deal under Scott Morrison – they desperately need to win some of those seats and holding firm to the GST agreement is seen as vital for that.
But the Productivity Commission is undeterred by the put-downs of its recent scathing interim report on the deal received from both sides of politics. Under its chair, Danielle Wood, who was appointed by Labor, the commission is showing it is willing to join the fight for reform publicly.
On Tuesday commissioner Angela Jackson, a co-author of the review (which was required by legislation), went on News24 to argue its case – that the present heavy skew to WA in the distribution between the states is both costly and unfair.
She pointed out the changes in the first six years ended up costing almost $23 billion rather than the initial estimate of $5 billion.
“Further to that, what we found was that the intent of the reforms hadn’t been met”. Not only were not all states better off, as was the intention, but WA was the only state better off as a result of the deal.
“What we found was that the reforms really have led to a system that’s far less equal in terms of its primary objective, and less efficient, and costing a lot more than anticipated,” Jackson said.
The commission will proceed to its final report, after a period for consultation.
The commission is the high church of economic rationalism when it comes to reform. Its ancestor, the Tariff Board, led the argument in the 1960s and early 1970s for Australia to cut its protection of industries. It took a long time and quite a lot of pain for that to be achieved over the next decades.
The commission was delighted at Chalmers’ declaration immediately after the last election that “productivity” would be at the centre of the government’s second-term agenda. Jackson referenced this in her Tuesday interview. The commission produced a multitude of recommendations before the subsequent economic roundtable, held in August 2025. Some, especially focused on reducing regulation, were taken up; the more radical (such as changing company tax) were not.
Like its predecessors, the Albanese government is periodically impatient with the commission, which not only comes up with some difficult-to-deal-with proposals but can be a burr under the saddle. Its presence can be a reminder of how far the government deviates, for pragmatic and political reasons, from gold standard reform. Wood from time to time calls out the government on specific issues.
Albanese revealed the government mindset when he said of this review (which he misleadingly claims was “commissioned by the Morrison government”): “When you commission the Productivity Commission, you shouldn’t be surprised that you get the sort of economic rationalist view of the world coming out”.
The baked-in nature of the GST deal for WA carries a wider message: the near impossibility of the wholesale overhaul of the taxation system that many experts say is needed.
These experts would favour not just a shake up of the state distribution, but a higher, more comprehensive GST, paying for lower income tax (a reassignment that would also require compensation for those on low incomes). But who can see the circumstances returning that initially allowed John Howard to introduce the GST in the first place and thus would enable making his GST fit for modern purpose?
These days the veto clout of those who object to changes appears stronger than it once was. In the current case, it is the power of a state. It is not just the GST that the Cook Labor government has clout with Anthony Albanese: it stopped biodiversity legislation going ahead before the last election (the government revisited it post election). As independent economist Saul Eslake puts it, “what WA wants, WA gets”.
Even limited change brings a big backlash, as happened with the government’s budget initiatives on tax.
The latter were complicated by the prime minister’s broken promises. But to go to an election with bold economic reform promises that can involve losers is these days seen as a political no-no. That means parties are timid or that, as Albanese did, they give assurances and then ditch them later (or “change position”, as the PM prefers to put it).
Albanese will make a lot of promises before the 2028 election. Obviously voters can be confident he will keep most of them if re-elected. But, because of his earlier breaches of faith, voters won’t be as confident of the inviolability of any particular promise. As for the WA deal, it will stay in place as long as it serves raw politics, rather than the memory of inked skin.
Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
