'Westralia' talks rebellion in tax row

Tony Abbott and co. have been put on notice that Western Australia will 'disengage' if it doesn't get more GST cash. Photo / Getty Images

Premier takes his private jet to Canberra to tell Abbott WA will ‘disengage’ if it doesn’t get more GST cash.

There was a whiff of rebellion ... but only a whiff.

Western Australia's leader spoke of a "Boston Tea Party moment" as a loyal lieutenant invoked the 1933 referendum in which his state voted to secede.

Would border controls soon be competing for attention with tumbleweed across the Nullarbor?

For most Australians, including those in the West, separatist talk is just that - talk.

They've heard it all before, usually when powers-that-be in Perth are squabbling over cash with political counterparts in other parts of the country.

And yesterday the gloves came off as state and territory leaders gathered for a meeting with Prime Minister Tony Abbott in Canberra. Former PM Paul Keating's observation about never standing between a state premier and a bucket of money had rarely seemed more appropriate.

The man who started the brawl, WA's Liberal Premier Colin Barnett, is angry that billions of dollars of goods and services tax raised in the West flows elsewhere. WA's share of the revenue is also to drop by almost A$300 million ($304.6 million) - another blow to an already strapped budget.

The resource-rich state that benefited most from recent mining booms is now hurting financially as a result of collapsing iron ore prices and royalties.

Likening WA's plight to revolutionary 18th century American colonies revolting against unpopular taxes imposed thousands of kilometres away, Barnett spent the week promoting "disengagement" from the rest of Australia.

"If the GST is not resolved, Western Australia's future is not with the rest of Australia in a financial or economic sense," he told the Australian. "Our future then shifts to Asia even more strongly than it is now."

Barnett said east-west trade and federal-state agreements were under threat.

"Stand on the Eyre Highway one day and watch all the trucks and trains coming from the east to the west full of products and cargo, and going back empty - we are a huge customer of the east coast," he 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. Our Boston Tea Party will be shifting our economic focus to Asia at an accelerated rate."

The spark for Barnett's rhetoric is the independent Commonwealth Grants Commission, which uses the principle of "horizontal fiscal equalisation" to allocate GST proceeds based on economic and social need.

WA has lost ground because of the wealth generated by mineral exports, and last week the Commission recommended its share of returned GST should fall from 37.6 cents in every dollar to 30 cents in 2015-16.

Other states are looking forward to a bigger share of the A$57.2 billion pot next financial year; for every dollar raised in South Australia and Tasmania, those states will receive A$1.36 and A$1.82 respectively.

With numbers like that, it's easy to understand why Barnett flew to Canberra crying poor.

That he travelled on a private jet was as misjudged as an attempt to strengthen his case by recalling WA's substantial financial assistance to bushfire, flood and cyclone stricken Victoria and Queensland.

The uproar that followed was as predictable as Barnett's apology to affronted families and victims who might have taken offence.

WA's woes have been exacerbated because the GST redistribution is calculated over a three-year period, and its share reflects royalties from iron ore sales before prices crashed by more than 60 per cent.

To correct that costly anomaly, Barnett now wants the the formula to be calculated annually.

He's far less vocal about the benefits of the existing set-up. Had the change been made four years ago, WA would have reportedly missed out on A$7 billion.

By the time the leaders arrived for yesterday's Council of Australian Governments meeting, battle lines had been drawn.

Victoria's Labor Premier, Daniel Andrews, told Barnett to focus on putting his own house in order.

"They are spending like drunken sailors and they want Victorians to help them pay for it," he said.

A letter to federal Treasurer Joe Hockey signed by all state and territory treasurers - except WA's Mike Nahan - opposed any GST change.

It was unprecedented, and left the out-flanked WA Premier complaining they had "ganged up" on his state. "The point I'm making ... is that the system is flawed," Barnett said. "We receive less dollars than we did 15 years ago. Every other state has seen its GST doubled or trebled."

The states and territories say changing the GST formula would undermine the stability of the federation, and oppose WA's call - supported by some senior ministers in Abbott's Liberal-National Government - to freeze its allocation at the current 37.6 cents.

They've urged the federal Government to look at other ways to help WA, but Abbott - publicly at least - insists it is for the states to resolve.

Barnett says doing nothing "underestimates the tension that's going to arise in the federation".

But don't expect him to be approving "Westralia" passports any time soon.