Yesterday I posted an extended tirade against the frequently espoused view that “WA doesn’t get its fair share”.

Some secessionist challenged me on Twitter, suggesting that WA has “out-produced” the rest of the country for most of federation.  False!

Here’s an excerpt from a paper by the WA Department of Treasury and Finance:

“…in the early days of Federation, the Western Australian economy bore little resemblance to its present prosperous form. Isolated by geography and unable to exploit the free trade between States that resulted from the newly formed Constitution, it became necessary in 1925 for the Commonwealth to establish a Royal Commission into Western Australia’s financial disabilities. As a result, in 1933 the Commonwealth Grants Commission was formed to oversee a more equitable distribution of Commonwealth finances, which resulted in Western Australia being given the status of “claimant State”, and being in receipt of special grants from the Commonwealth for the next 30 years or so.”

WA was so economically disadvantaged in the 1920s that a Royal Commission was established! In fact, WA’s economy was so stagnant in the first half of last century that it’s “estimated that the level of per capita income reached in 1913 was not surpassed until 1950” (according to another DTF paper).  Doesn’t sound like an economy that “out-produced” the country to me.

So, the very principle of horizontal fiscal equity, with funds redistributed from rich states to poor states, was instigated at the behest of Western Australia. The Commonwealth Grants Commission was created to help WA, and it operated under the same basic principle it does today: it seeks to ensure that citizens of each state can have a reasonable expectation of equal levels of service provision. WA spent the first 30 years of the Commission’s life as a ‘claimant State’, and for the four decades after that it received a share of national income roughly commensurate with its population (ie. it didn’t subsidise, nor was it subsidised by, the other States to any great extent). WA spent roughly two-thirds of federation as a poor state, then a few decades as an average state, and now it’s (temporarily?) a boom state.

It benefited greatly from decades of subsidy from the East. Now that the money flows the other way, the whole process is suddenly regarded as an unfair socialist conspiracy.

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