In Wesfarmers’ plush city office overlooking the busy construction site that was Colin Barnett’s contentious Elizabeth Quay, four powerful West Australians were deep in thought.
It was May 2017. The boom was over and Labor had just swept the State’s 29th premier out of office after almost nine years at the helm. The economy was sagging, weighed down by falling commodity prices, rising unemployment and a sinking housing market.
The view out of the window belied the reality of what was happening away from the glass monstrosities of St George’s Terrace.
Hospitals and footy stadiums, the booty for a once-in-a-century commodity boom, were in the final stages of build, softening the blow to the thousands of tradies and FIFO workers laid off over the previous two years.
But West Australians were hurting. Thousands of interstate workers who had moved here for well-paid jobs were packing up and heading back across the Nullarbor.
While the Big Four were hardly checking for pennies down the back of the couch, their complex and diversified businesses were taking a significant hit as the economy continued to sour.
They were used to getting their own way, but global markets and economic levers beyond their reach were causing havoc. One thing they could fix, they surmised, was WA’s sinking share of the GST.
Sitting around the big square meeting table, there was no more passionate Sandgroper than Andrew “Twiggy” Forrest, the driving force behind Fortescue Metals Group, whose personal wealth was estimated at $4.5 billion.
Next to him was Nigel Satterley, worth a lazy $400 million after building his Satterley Property Group into a land development and sales colossus across WA.
Then there was Michael Chaney, one of the country’s most formidable business leaders. Chair of Wesfarmers. Chair of Woodside. Arguably the sharpest business brain in Australia.
In addition, bringing up the tail was deal maker John Poynton. Throw a dart at his wealth. Anywhere between $50 million to $100 million, say those who know about such things.
Also in the room was Rick Newnham, the Chamber of Commerce and Industry’s chief economist, and Deidre Willmott, a former chief of staff to Colin Barnett and then CCI chief executive, chairing the meeting.
Ms Willmott had been in contact with the group after reading Joe Spagnolo’s exclusive report in The Sunday Times that the four had joined forces to take on Canberra over the GST. Spagnolo quoted the four saying “enough is enough”.
The Sunday Times had launched a Fair Go for the West campaign 21/2 years earlier to tackle the issue.
At the same time, The West Australian was also campaigning for reform. Behind payroll tax, the GST was the most vexed issue facing small business in WA.
Mr Barnett had banged the GST drum long and hard and had warned a succession of prime ministers that the formula for a fair distribution of GST to the States was broken. WA’s portion was sinking. It was fast approaching 40¢ in the dollar, the lowest of any State.
Ms Willmott argued that if Malcolm Turnbull was to support a change to the GST, “you need to make sure you’re making the right economic arguments, because it’s far more complex than anyone recognises at first”.
The group decided to pool their resources. As it would turn out, for an hour every month, for roughly 16 months, they met and discussed the best possible tactics to tackle Canberra’s intransigence and win the GST war.
A meeting with Mr Turnbull was the start.
The PM agreed in late June 2017. The plan was for the WA delegation to fly to Sydney and meet the PM in his Sydney office. Mr Satterley would already be there, Mr Newnham would fly separately and Mr Chaney and Mr Poynton would meet them that morning.
Twiggy was overseas.
“Andrew, John, Nigel and I shared the view that this debate had gone on for far too long and we needed to make the case directly with the prime minister,” Mr Chaney told The Sunday Times.
That morning, Mr Satterley met Mr Newnham at Martin Place where all four had agreed to gather for the easy stroll to the PM’s office. The pair waited for Mr Chaney and Mr Poynton. And waited.
“Ten minutes before the meeting there’s no Michael Chaney and there’s no John Poynton. So it gets to five to, and we have to head up (to the meeting),” Mr Newnham recalled.
“And then get a phone call a couple of minutes before we are about to meet the PM.
“It’s Michael, and he tells me they’ve just landed in Canberra, the storms in Sydney had diverted them, and they are standing on the air bridge between the plane and Canberra airport.
“He says, ‘We’ve got about 20 minutes, can you put the phone on the desk and we can do it that way?”
MOVING THE DIAL
The first thing the pair noticed as they walked into his neat and tidy workplace was his legendary red teapot — and his standing desk.
Nervous with anticipation, they shook hands, exchanged pleasantries and after a cup of green tea, got down to business.
Taken aback a little with the no-show of Mr Chaney and Mr Poynton, Mr Turnbull was told about the travel calamity. Mr Chaney, still standing on the Canberra air bridge 280km away, is dialled in on loudspeaker.
Mr Turnbull listens as Mr Chaney does his pitch, but quickly turns to the two figures in the room.
With various charts and graphs to complement their argument and catch the eye of the former merchant banker, they showed just how much the State had lost since the introduction of the GST.
The key example presented to Mr Turnbull revolved around the creation of an iron ore mine and how WA was being punished for simply building up its economy.
They showed the PM that for every additional dollar of iron ore royalty that WA would raise, it would lose 90¢ of that to the other States. They argued that over the past decade, they had doubled their export capacity, yet it all went across Nullarbor.
Turnbull was flabbergasted. He made an undertaking to look at the matter “very closely”. The two men left the office upbeat and believing they had “moved the dial” on the matter.
“Colin Barnett had done an extraordinarily good job of putting it on the radar and making the case, but there was change when senior business figures such as these became involved,” Mr Newnham said.
But in an odd twist, it was also Mr Barnett’s demise that sparked the most important element of the GST victory — the involvement of the Productivity Commission.
PIVOTAL TURNING POINT
When the Barnett government was defeated, the alarm bells went off in Canberra. With one eye on an election now in full swing, Turnbull and Scott Morrison called a meeting of all WA Liberal MPs to find what went wrong.
The resounding issue was the GST. The WA MPs said Canberra did not understand the depth of feeling on the ground. Ignoring it would be at the Government’s peril.
The magnitude of the Barnett government’s loss helped Morrison pledge to the MPs that he would have another look at the issue.
Liberal Senator Dean Smith believed the only way finally to fix the problem was to get the Productivity Commission involved.
“We had to have the claims (that WA was being unfairly treated) tested by an independent body,” Senator Smith told The Sunday Times.
“In my mind I was trying to consider this: what was an independent mechanism that would test the claims? If they were true, the other States could only fall in line.
“If they were untrue, we would have to go away and forget the whole thing.
“The commission was exactly the right mechanism, because it is independent and a very public process.”
Ultimately, Mr Turnbull agreed to the commission examining the growingly warped distribution of GST billions. It was a pivotal turning point in the battle.
When the commission’s draft report came out in November 2017, it was clear there was a mood for change.
“We had to get the Productivity Commission to lock in behind us 100 per cent, so we put in another submission and more modelling and build arguments around that,” Mr Newnham said.
The second submission outlined a transition path so no one State would be worse off. The NSW and WA governments backed the CCI’s submission, with Premier Mark McGowan and Treasurer Ben Wyatt again on the attack over WA’s bum deal.
Another huge challenge was trying to convince those who live in the bustling east coast cities that a change to the GST structure would also benefit their States.
“We had been advocating for top-up payments to the States and we had estimated that over three years you could transition the States with $5 billion, then no State would be worse off if they changed the GST,” Mr Newnham said.
Meanwhile, the Perth meetings continued as the months rolled on, with Ms Willmott’s replacement Chris Rodwell chairing the discussions. The group agreed that to get the deal done, they had to get the rest of Australia aboard.
They engaged top east coast creative agencies to kick start an advertising and marketing campaign to target people living in Queensland’s many marginal seats.
They also used national polling and focus groups across Sydney, Brisbane, Melbourne and Perth, the premise was that if a parochial Queenslander could be convinced to back WA’s case, then the rest would follow.
Eyes glazed over when they heard the acronym GST. However, ears pricked up when it focused on State sovereignty.
“We explained to them that the GST distribution actually subsidises Queensland, so in effect NSW was paying for Queensland teachers, nurses and police officers, and when Queenslanders were told this, they started questioning why they needed to be subsidised,” Mr Newnham said.
“We explained to them that WA wanted to change the system where there’s increased accountability on State governments to make sure their economies were strong, so they can provide their own teachers and nurses.
“This resonated very strongly with Queenslanders.”
However, the narrative needed to change from “this is unfair for WA” to “this is not in the national interest”.
They did not want a campaign that worked on the “them against us” principle. “You see so many campaigns that try to embarrass people, saying, ‘this is unfair’, or ‘we’re suffering’ or ‘we’re missing out’.
“We had to find a very technical economic argument to convince the Productivity Commission, and a very simple public explanation as to why Australia was suffering as a whole, for punishing WA for developing its economy.”
Then an unexpected breakthrough in July 2018: then treasurer Scott Morrison released the final part of the Productivity Commission’s report and the Federal Government’s interim response to it.
REAPING THE BENEFITS
The news was good: A 70¢ floor for three years, billions in top-up payments and then a minimum 75¢ in the dollar return from 2024-25.
The GST formula had been recalibrated to adjust to the vagaries of evolving economies.
WA was finally being rewarded — not punished — for building its economy.
“I was elated at how close the solution was to what we were suggesting,” Mr Newnham said.
The group was also somewhat stunned at how events unfolded so quickly after such a long GST slugfest, first detected by Gallop government treasurer Eric Ripper in 2006.
“You don’t often have such big changes in Federal-State relations as what was changed here,” Mr Newnham said.
“Every State in the long run is so much better off. We will be reaping the benefit of this for generations.”
Finance Minister and WA Senator Mathias Cormann said this week achieving a fairer GST deal for WA was a “great WA team effort” with Mr Morrison the “architect”.
“It involved all WA Liberal members of parliament, the media — in particular both The Sunday Times and The West Australian leading the charge — the WA business community led by CCI WA as well as the strong and persistent advocacy for a better fairer deal from both the Barnett and McGowan WA governments,” Senator Cormann said.
“In the end though, it was our Prime Minister Scott Morrison who as treasurer was the architect of our better, fairer GST deal for WA, which is also manifestly better for our national economy and left every other State better off.”
Mr Chaney said he had long “lamented the unfairness of the GST formula and believed that it needed to be fixed once and for all”.
“Teaming up with CCI, which had developed the economic argument to fix the distribution in a way that wouldn’t disadvantage any other State, allowed us to make the case in the national interest,” he said.
It also reinforced Senator Smith’s belief that despite political differences “West Australians can all kick in the same direction when we need to”.