Other States have claimed that Western Australia has historically benefitted from the distribution of Commonwealth grants – principally GST grants and its predecessors (financial assistance grants, tax reimbursement grants and special grants paid in recognition of State disadvantages).

However, for most of the 20th century Western Australia’s export orientated economy was heavily disadvantaged by Commonwealth tariffs which were set up to protect the manufacturing industries of the Eastern States.

The extra funding received by Western Australia in this period was effectively compensation for Commonwealth tariff policies, and indeed the Commonwealth Grants Commission (which recommends the distribution of GST grants among States) was set up in the 1930s partly in response to concerns about Western Australia’s disadvantages from federation, including tariffs.

Since sustained tariff reform began in 1988-89, Western Australia has been a net contributor to other States through the distribution of GST grants and their predecessors. The following table shows the subsidies received by Western Australia (i.e. funding additional to Western Australia’s population share of GST grants and its predecessors), both in nominal terms and present value terms (adjusted to 2017-18 dollars for the time value of money).
Nominal + Present Value
$b     $b
1988-89 +0.2 +1.4
1989-90 +0.2 +1.2
1990-91 +0.3 +1.2
1991-92 +0.3 +1.1
1992-93 +0.3 +0.9
1993-94 +0.2 +0.6
1994-95 +0.1 +0.4
1995-96 +0.1 +0.2
1996-97 -0.0 -0.0
1997-98 -0.0 -0.1
1998-99 -0.0 -0.1
1999-00 -0.1 -0.3
2000-01 -0.1 -0.2
2001-02 -0.2 -0.3
2002-03 -0.2 -0.3
2003-04 -0.1 -0.3
2004-05 +0.1 +0.2
2005-06 +0.1 +0.1
2006-07 -0.0 -0.0
2007-08 -0.3 -0.5
2008-09 -0.7 -0.9
2009-10 -1.0 -1.3
2010-11 -1.5 -1.9
2011-12 -1.4 -1.7
2012-13 -2.2 -2.6
2013-14 -3.0 -3.3
2014-15 -3.6 -3.9
2015-16 -4.3 -4.5
2016-17 -4.3 -4.4
2017-18 -4.4 -4.4
Total -25.7 -24.0

Furthermore, the subsidy that Western Australia now provides through HFE is just one part of Western Australia’s contribution to the Federation. More broadly, Commonwealth revenues derived from Western Australia (such as GST and company tax) exceed the Commonwealth spending on Western Australia (such as GST grants and welfare payments). Based on analysis by the Western Australian Department of Treasury, using latest available data, Western Australia’s net contribution was around $21.7 billion in 2015-16 (details are reported in Appendix 11 of Western Australia’s 2017 18 Budget Paper No. 3). Western Australia is estimated to have provided a net contribution to the Commonwealth since 1986-87.

The above issues were discussed in Western Australia’s first submission to the current Productivity Commission HFE Inquiry, which can be found here (see pages 12 15):
http://www.treasury.wa.gov.au/uploadedFiles/_Treasury/Publications/Western-Australias-Submission-to-the-Productivity-Commissions-Inquiry.pdf

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