How much damage will the inability of the major parties to do anything other than pander to the petro-state of Western Australia do to the federal budget? Two recent updates have confirmed the cost is growing rapidly.
We recently noted that economist Saul Eslake, lone crusader against the special deal that hands WA billions more GST revenue than it’s entitled to and compensates the other states from the federal budget, had calculated that the cost of the deal — negotiated by Malcolm Turnbull and Scott Morrison and extended by Anthony Albanese and Jim Chalmers — was heading towards $40 billion over 11 years.
But Eslake’s end-of-year update off the back of new WA government fiscal data now estimates the cost would escalate to $54 billion by 2030. That’s $54 billion unavailable to the federal government, which faces years of deficits, while the WA budget is deep in the black.
Meanwhile another update has confirmed the ongoing cost of federal Labor’s willingness to allow the WA fossil fuel industry — and its parliamentary wing in the form of the Cook government — to dictate how fossil fuels should be taxed.
It’s clear what a spectacular failure Labor’s “reforms” to the petroleum resource rent tax (PRRT) — which the fossil fuel industry’s political agents negotiated in 2023 to prevent any WA political fallout — have been.
Tipped in the budget papers to produce an extra $2.4 billion over five years at the time, PRRT collections instead have gone backwards. Between the 2023 and 2024 budgets, forecast PRRT revenue was downgraded by more than $3 billion over five years. Between last year’s budget and the December MYEFO, receipt forecasts fell a further $1.9 billion.
The government will blame falling energy prices, but the Asian price of gas is currently above where it was in mid-2023, even if it’s a fraction of the 2022 price when the Morrison government, in its last budget, forecast $2.4 billion a year from the PRRT. Over the next four years, Labor’s “reformed” PRRT is expected to generate on average just $200 million more a year in revenue compared to 2019 forecasts, when the gas price was a third of its current level.
Who’d have guessed that allowing large corporations to dictate how much tax they pay ends up with them paying less tax?
Even without embracing the Greens’ proposal for a new PRRT regime that would generate more than $30 billion in extra revenue over four years, serious reforms to the PRRT could lift revenue from a trivial sub-$2 billion a year to $5 billion a year without making much of a dent in even the significantly lower profits that companies like Woodside and Santos reported in 2024. But there’s zero chance of that while federal Labor is in thrall to WA corporations and their political minions.
How to end what is a quantifiable perversion of fiscal policy, costing tens of billions of dollars, by a state controlled by deeply malignant and corrupt economic and political actors? Labor’s and the Coalition’s betrayal of good policy is driven by their fear of losing WA seats. Subjecting them to the same fear in eastern states is the only answer: voters need to turn on major party incumbents and replace them with community independents, establishing an even bigger crossbench, eliminating the possibility of majority governments and turning far more seats into marginals that the major parties will have to work hard to hold.
Half a dozen seats up for grabs in Western Australia will be dwarfed by dozens of seats at risk in the eastern states with voters tired of a tax system skewed in favour of fossil fuel giants and special deals for politically sensitive areas.
The hilarious claim advanced by major party politicians and their media shills is that only majority government delivers stability and sensible policy. The poison Western Australia has injected into the federal budget is the perfect illustration of the silliness of that argument. There are no benefits any longer in having majority governments in Australia. And certainly not fiscal benefits.
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