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National

Mark McGowan's $5.7b budget surplus boasts likely to attract the ire of eastern states premiers

Mark McGowan may have opened a Pandora's box with his repeated budget boasts. (ABC News: James Carmody)

They were words uttered with relish.

Several times as he delivered his second budget since taking the reins of the Treasurer's portfolio, West Australian Premier Mark McGowan suggested his eastern states counterparts would be "green with envy".

The reason was simple enough.

For the second straight year, McGowan was posting an eye-watering surplus.

This time it was $5.7 billion for the 12 months to June 30, compared with $5.8 billion for the previous year.

But in reality, it all amounts to the same thing – McGowan is rolling in cash at a time when treasurers the world over are dealing with record deficits and debt levels.

More than one motive at play

The Premier's motives were threefold.

Undoubtedly, McGowan is proud of the budget he is overseeing after inheriting a set of finances in 2017 he described at the time as "the worst since the Great Depression".

Just as importantly, he's also seeking to cast Labor as a party for responsible economic management, an area where the Coalition at a federal level has traditionally held an advantage.

McGowan made repeated reference to the likely reaction by other premiers to WA's budget surplus. (ABC News: Andrew O'Connor)

But as is almost always the case, McGowan is backing his own self-interest in bringing on a row with treasurers on the east coast over the merits and fairness of 2018 GST deal.

That agreement, which was thrashed out by the Federal Parliament following years of fierce lobbying by WA, effectively put a floor under the rate any state could receive from the GST pool.

It meant that no state's share would fall below 70 cents for every dollar of the tax it sent to the Commonwealth.

As he was so keen to point out on budget day, McGowan noted that WA's receipts would have fallen to barely 15 cents in the dollar this financial year without the floor.

Within a couple of years, he said it would have plummeted to a negligible one cent in the dollar.

The difference is measured in billions.

Mining royalties were a big contributor to the budget surplus, along with GST dollars. (ABC News: Rachel Pupazzoni)

For the current financial year, WA is expected to collect about $5.5 billion in GST, with this figure rising to more than $7 billion by the end of the budget outlook.

McGowan stressed WA's share would remain between 70 and 75 per cent, arguing this meant WA had subsidised other states to the tune of $2.5 billion this year and $32 billion over a decade.

Such arguments are likely to hold little water with eastern states governments desperate for every cent they can find.

Already, New South Wales and Victoria have led calls for the GST deal to be redrawn to fix what they say is a broken system that benefits WA and no-one else.

Driving their calls is the parlous position of their budgets, with both NSW and Victoria headed for debt mountains approaching $150 billion and deficits nudging $20 billion a year.

Pre-empting their complaints, McGowan said eastern states were facing a "reckoning" as interest rates rose and debt costs ballooned.

"We still subsidise the other states enormously," he said.

"We kept them afloat during COVID when they were locked down and shutdown and they needed those enormous payments from the Commonwealth to survive.

Keeping a tight rein on WA's border during much of the pandemic, enabled much of the state's economy to keep ticking over. (ABC Goldfields: Jarrod Lucas)

"Western Australia didn't do any of that.

"I realise there's not much gratitude from the eastern states but that's the truth."

Four years is a long time in politics

And it's a basic truth in politics that parochialism is a sure winner, and McGowan's willingness for a fight over the GST suggests he wants nothing more than to stoke those coals.

But with a review of the deal due in 2026, when there are no guarantees McGowan will still be at the helm, he also invites trouble for WA by drawing so much attention to the matter.

Asked whether he would still be around in four years, the Premier said he "hoped" so.

But four years is a long time in politics and there's every chance it will be up to successor to defend WA's GST arrangement.

With apologies to Paul Keating for massacring this quote, but the former Labor prime minister once observed that no-one should ever get between state premiers and a bucket of money.

Come 2026, it's a fair bet that whoever is WA premier will be standing precisely in that position.

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