NSW Treasurer Daniel Mookhey lashes GST carve-up calling it ‘absurd’ and demanding change

The NSW Government has lashed the “absurd” carve-up that saw the State take its biggest hit to GST revenue since the scheme was introduced in 2000.

NSW Treasurer Daniel Mookhey said NSW will be $1.65b worse off after the Commonwealth Grants Commission on Tuesday announced “the largest single year reduction to the NSW share of GST since the system was introduced in 2000”.

He said the fall from 92.4 per cent to 86.7 per cent would take NSW to its lowest point since 2018, when former premier Dominic Perrottet slammed the “black magic” formula used by the Commonwealth to split the GST pool.

While NSW was slugged, Victoria welcomed a $3.8b boost that would deliver $23.5b in 2024-25 and Queensland was set to receive $469m less than last year.

The Northern Territory’s share rises $256m — representing the biggest increase per capita, to $995. Western Australia went up by $838m.

The CGC determines how much each State and Territory receives based on their fiscal capacity and needs, with mining royalties, housing stock and population shifts taken into account.

States with weaker economies or higher costs receive a greater share of revenue under the principle of equalisation, and, since 2018, a controversial deal made by former PM Scott Morrison has further awarded a higher proportion to resource-rich WA.

Coal revenue in NSW and Victoria drove the States’ 2024-25 reductions, according to the CGC report, which said the GST pool was set to climb to $89b from $85b next financial year.

“Each year the commission updates the GST relativities to reflect developments influencing states’ fiscal capacities,” the report said.

“Based on the commission’s recommended GST relativities for 2024–25, Victoria would receive a significant increase in its GST distribution compared with 2023–24 (estimated to be $3.7 billion). This is largely driven by its reduced capacity to raise mining revenue relative to other states as well as data revisions from the 2021 Census, which increased its urban population and urban density.

“The Northern Territory is estimated to receive the largest increase in per capita terms ($995 per capita).

“New South Wales’ and Queensland’s GST distributions are estimated to fall, largely due to an increase in their relative revenue-raising capacities.

“Western Australia’s GST distribution is estimated to increase in 2024–25 because of the operation of the GST relativity floor. Its relativity is set to the floor, which increased from 0.70 in 2023–24 to 0.75 in 2024–25. Western Australia continues to have a very strong fiscal capacity, driven by its capacity to raise iron ore royalties.

“However, Western Australia’s relative fiscal capacity is estimated to be lower than last year, largely due to strong growth in coal royalties raising the fiscal capacities of other States. Western Australia is estimated to receive $6.2 billion more GST in 2024–25 than it would have under the previous GST distribution arrangements.”

Mr Mookhey said reform was needed.

“This result shows how out of touch the Commonwealth Grants Commission is. NSW takes most of the nation’s population growth, but is being punished by having its GST cut,” he said.

“It is an absurd process in dire need of reform.

“I agree with former treasurer Perrottet when he railed in 2018 against the ‘black magic GST distribution formula’ which was ‘seeing the hardworking taxpayers of NSW being ripped off by a perverse and unfair distribution model’.”

A Commonwealth review into the CGC’s methodology is due to be completed by 2025 with States urging the Albanese government to continue the “no worse off guarantee”.

Victorian Premier Jacinta Allan welcomed the “much fairer share” of GST her State received.

“I would like to acknowledge that this is how the Commonwealth Grants Commission should work,” she said.

“It should take into account the circumstances of each State.

“This is a really serious matter, which is why we will continue to push for the no worse off guarantee to be made permanent, because that’s only fair.”