Australian Politics and Policy - Senior, 2019a

Western Australia
distinct from the more populous ‘manufacturing’ eastern states. WA’s economy has
depended heavily on exports, principally agricultural commodities and resources.
This has meant that economic decisions that benefit the eastern economies have not
always aligned with WA interests.
One of the earliest indications of how economic differences could prompt
a misalignment of policy preferences between WA and the federal government
occurred with the introduction of a federal tariff in 1902. While the tariff was a
boon for the eastern states, it represented a grave economic liability for the importdependent
west. 30
In more recent times, the federal government’s efforts to tax profits on nonrenewable
resources reignited disaffection. The first iteration, the ill-fated Resource
Super Profit Tax (RSPT) proposed by the Rudd national government in 2010, was
perceived as imposing a disproportionate burden on the WA economy. As then-
Premier Colin Barnett argued:
With 65 per cent of this revenue coming from Western Australia, it was … an
attack on the mining industry and on our resource income base. People talk about
these resources belonging to all Australians. Well, constitutionally, they don’t. They
belongtothepeopleofeachstate. 31
The second coming of the mineral tax, the Minerals Resources Rent Tax, while
a watered-down version of the RSPT, was similarly unwelcomed by the WA government.
When the tax was finally implemented in 2012, the WA government increased
mining royalties, which miners could offset against the federal tax. This action
reduced the federal take of the tax by $160 million annually, 32 thus prompting a
threat from the Commonwealth to withhold infrastructure funding from WA. 33
The sense of disenfranchisement has been magnified by the belief that the
Commonwealth has exploited the state’s resource-rich economy without fair recompense.
The consequences of WA’s booming resource economy have collided with
fiscalequalisationarrangementsthatareslowtoadjusttochangesintheeconomic
fortunes of the states.
WA’s concerns assumed particular urgency when the Commonwealth Grants
Commission (CGC) recommended, in 2015, that WA’s share of Goods and Services
Tax (GST) revenue be reduced from 37 per cent of the per capita average to 30
per cent. The CGC justified its recommendation on the grounds that ‘Western
Australia can raise so much more per capita in mining royalties at average rates,
other things being equal … its capacity to raise revenue from most other tax
bases is also above average, implying it requires less GST’. 34 However, the CGC’s
30 Musgrave 2003, 99.
31 Quoted in Kelly 2010
32 Ker 2011.
33 The federal mining tax was repealed in 2014.
34 CGC 2015.
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