This was originally published on 9th September, 2017, and republished on 4th January, 2022.
Since examining South Australia’s ‘bank tax’, there have been three more occasions where states have gone on the attack against the state of the federation, each more attention-grabbing than the next. The first salvo came from the WA Liberals, with their leader Mike Nahan stating that the party was considering legal action against the federal government over the way GST has been distributed.
This unusual suggestion caused a slight ripple, but seems in hindsight more like a portent of something bigger to come. Secondly came the Victorian government, who flat-out demanded an extra $420 million to account for population growth on the back of arguing that Western Australia had actually been a net beneficiary of federal grants since federation. Finally, the WA Liberals returned with a bigger, though watered-down, warning, passing a motion to examine the feasibility of seceding from the commonwealth.
Other than attempting to give us the truly awful non-word ‘WAxit’, what is the logic behind these actions, and what is the Australian government planning to do about it?
As explained last time, the GST shoulders much of the blame for the poverty of the states. Originally pitched as their salvation, the agreement that brought the GST in further removed from them the ability to collect their own revenue, making them reliant on federal grants. Because the GST pie is a finite resource, the states can only get a proportion of it each year that collectively sums 100%. Almost inevitably, this has left the states unhappy with their slice, with their only available recourse being to yell loudly and hope someone will hear them.
But what they yell for also matters, and given the collective sum of the GST can be no greater than 100%, if all the states are demanding more of the GST, some will instead get less. South Australia seems to have realised this — or, at least, dare not ask for more GST given they already receieve a generous slice of it — and has decided to look elsewhere for more income with the bank tax. Western Australia, on the other hand, has spent years complaining about its share of the GST, leading the issue to become a lightning rod for the many and varied complaints that WA has had about the Australian federation since before it reluctantly joined in 1901.
It is somewhat difficult to know how seriously to treat secessionism in Australia. Unlike other countries where it’s been threatened — Britain, Canada, most European nations and even the United States — there isn’t a significant cultural divide between Western Australia and the ‘eastern states’. There is, however, a large and sparsely populated stretch of land between them, in which can be found a lot of sand and shrubland as well as some valuable rocks, and it is these factors that explain why WA has never been particularly enthusiastic about being part of Australia.
Prior to federation, West Australians were concerned by the lack of transport and communication between them and the rest of their future countrymen, especially given the federal government would be taking over policy in those areas. Furthermore, the first of those valuable rocks — gold — had been found in the east of the state, providing the first really significant wealth generator for the colony just as the eastern colonies had entered a depression. Would WA be expected to carry the load for the rest of the country, when it was only just beginning to be able to provide for itself?
Though history — as seen through the eyes of the Australian government, at least — tells us that WA was massively in favour of federation by the time the question was put to a referendum in 1900, the result was mostly the work of Goldfields workers, the vast majority of whom were ‘t’othersiders’, hailing from the east and who would mostly return to the east once they were done with the gold rush. Removing the votes from the Goldfields would make the referendum result around 50–50, and this was after workers in the Goldfields had threatened to split away and form their own state covering the south-east of the state if the rest of WA did not vote in favour of joining the federation. Regardless, the question was answered in the affirmative and Western Australia became the last Australian colony to choose to join the federation, a fact which is reflected in it being the only Australian state not mentioned in the preamble to the constitution.
This did not necessarily mean West Australians were happy about it, despite the building of the Trans-Australian railway, finished in 1917. Indeed, it had not gone unnoticed during the debate over whether to join that much of the colony’s income — around a quarter of it in 1891 — was through taxes charged on imports from the other colonies. After all, Western Australia had little in the way of industry, relying on imports for manufactured goods, and exporting raw materials. Not only would federation mean a loss of that income, it would potentially also result in protectionists coming to power federally — good news for Victorian manufacturers, not so good for West Australian farmers, who mostly traded internationally rather than with the other colonies.
Their fears were realised. Tariff barriers were a large impediment to the Western Australian economy, and the distance of most West Australians from the national capital compounded the idea that WA was being ignored and mistreated. Within five years of federation, a resolution for a secession referendum had been passed, but it wasn’t acted on until the onset of the Depression. In the meantime, a federal Royal Commission had taken place to examine why WA was consistently in need of economic assistance, with one of the commissioners concluding that WA should never have joined the federation in first place, such were the impediments placed upon it by doing so. By 1933, most Westralians were in full agreement, with a secession referendum being held and concluded in favour of leaving the federation by a 2-to-1 margin — though the Goldfields were still quite opposed to leaving.
The Commonwealth, unsurprisingly, was having none of it, and while the West Australians went off the London to plead their case, the federal government set up the Commonwealth Grants Commission (CGC) later in 1933, which ended up giving grants to WA for another four decades. Western Australia’s status as a ‘mendicant state’ being propped up by the federal government for decades is often brought up as a counter-argument whenever the secession question rises up again, but rarely is the reason for their poverty mentioned, thus further contributing to the sense that WA is getting a raw deal from the ‘eastern states’.
The free trade push of the 1980s transformed the WA economy by making it viable, but also ended up creating a new twist on the secessionist argument. Previously, it was that being a part of federation was causing WA’s impoverishment by forcing it into a protectionist system; now, it is that the same federation is taking all the benefits of WA’s economy for itself, leaving WA in debt.
But it doesn’t seem like modern secessionism is quite as cutting and serious as it was in the 1920s and 30s. Even Norman Moore, secessionist-in-chief of modern WA, conceded that any notion of WA leaving the federation soon is “pie-in-the-sky”, no matter how much he would like to see it. What it is is an attempt to get the federal government to listen to their grievances, but it’s hard to see it as much of a threat when even its supporters don’t actually think it is a possibility, thus negating its power as a negotiation tool — a problem which Moore recognises, which is why he advocates secession in the first place. The people of WA may wish for another CGC-type solution in the short term, but that would not solve the long-term problem of the federal government sucking up power from each and every one of the states, to which there are only two solutions: to abolish the states, or to give them their powers back in full.
Will the federal government fix this problem? Probably not. It isn’t in their interest to do reduce their own powers, and they have had the backing of the High Court historically whenever a state (or states) have challenged their most recent power grab, but they are unlikely to try to abolish the states due to the sheer amount of time, money and effort it would take to succeed, far too long for one election cycle. So the expansion of the federal government will continue relatively unabated, as it has since federation, Western Australia will continue to feel cheated, and the federation will continue to be dysfunctional.