Productivity Commission slams Australian GST allocation deal

An interim report by the Productivity Commission has criticized Australia’s Goods and Services Tax (GST) allocation system, labeling the 2018 reforms a “mistake” that could cost federal taxpayers up to $60 billion by 2030.

The report examines the deal negotiated under former Treasurer Scott Morrison, which established a 75-cent floor for Western Australia and a “no-worse-off guarantee” (NWOG) for other states. While intended to stabilize Western Australia’s revenue following the mining boom, the commission found the system has created a “perverse” two-tier allocation model. This structure may result in inequitable outcomes, such as a bushfire in New South Wales potentially triggering financial windfalls for Western Australia.

The GST revenue pool is projected to reach $103 billion in 2026-27. Under current arrangements, the NWOG is expected to cost the federal budget significantly more than originally estimated. The Productivity Commission is scheduled to deliver its final report by December 31, though any structural changes to the distribution formula will require legislation in the Federal Parliament.