Malcolm Turnbull’s capacity to do no right is showing no signs of abating with Eric Abetz seizing on the Prime Minister’s proposal for a GST redistribution floor for Western Australia.

“Last year, the Commonwealth Grants Commission, in providing independent advice on the distribution of GST, recommended against changing the current distribution formula to assist Western Australia,” Abetz said yesterday in a joint statement with the smoking ruins of the Tasmanian Liberal post-election parliamentary representation. “It is difficult to comprehend what, if anything, has changed,” he added piquantly.

What’s changed, as Abetz well knows, is that, having narrowly survived the federal election, Turnbull has a powerful WA bloc within his ranks that is staring at the prospect of defeat at the state level next March when the ageing and fiscally incompetent Barnett government looks to enter a second decade in power. Given Turnbull’s fragile position, he’s not in much of a position to hang tough in the face of demands from his colleagues — especially after he so publicly snubbed Julie Bishop over the Kevin Rudd nomination.

That Abetz — in a toxic combination of malice toward Turnbull and representation of a mendicant state — immediately used the issue to fire back at the Prime Minister doesn’t come as a surprise. What is surprising is that Abetz is entirely correct. This is a dud idea, and not just because Turnbull has declined to flesh it out and let another of his West Australian colleagues, Christian “the next Treasurer” Porter fill out some of the details, as Porter was happy to do at length on ABC Radio yesterday.

In fact the proposal is magic pudding budgeting, despite Porter’s assurances that no state would be worse off. This is palpable nonsense: there is a limited sum of money to be allocated from GST revenue; adjusting the distribution to ensure Western Australia’s share doesn’t fall below a certain level must, at least in the world of normal mathematics, mean other recipients get less than they would otherwise have received based on the agreed distribution formula currently in place. Just because the floor wouldn’t commence until 2020, after WA’s share of GST revenue had increased, doesn’t magic away the uncomfortable fact that someone else will be missing out. Porter was at pains to stress this wasn’t particularly about Western Australia — it could be any other state that was dudded of GST revenue because of surging economic growth, as though Tasmania was in danger of experiencing, say, an historic salmon boom that would pump billions into its economy.

The floor is only the latest in a long succession of Western Australian efforts to try to game the GST distribution system to make up for their own profligacy. This is the government whose spending has grown 77% in nominal terms since 2008, a government that by its own admission, spent $8 billion subsidising the North West Shelf project, that has not once but twice had its credit rating lowered in recent years because of perceived lack of will in cutting spending — in February this year, Moody’s cut WA’s rating for a second time since 2014, identifying its unwillingness to cut spending to match falling revenue from iron ore. This is despite the iron ore price still being well above 2007 levels, when the Carpenter government ran a $2 billion surplus.

The appropriate response to Western Australia’s complaints is to give them nothing and take them nowhere. States like Tasmania — where spending has only grown 25% in nominal terms since 2008 — are right to answer “nope nope nope” to the latest idea on federalism from Turnbull, who not so long ago graced us with the state income tax idea.

The issue does, however, create the intriguing possibility of a split between Tony Abbott and his most loyal spear carrier. It was Abbott who first foolishly promised to help Western Australian on the GST without checking with other states when he was opposition leader. In his Samuel Griffith speech last week, Abbott flagged that he was still keen for a federalist model that would shunt back responsibility for education and health to the states — something that is unlikely to endear him to the smaller states who would be disadvantaged by such a shift. But as Abbott also knows very well, a Prime Minister needs to be careful about state election results — if your side loses, colleagues are apt to look beyond the relevant state capital for people to blame.

That’s assuming Turnbull is still prime minister when Western Australians go to the polls, of course.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey