NSW Premier Chris Minns Outraged as State's GST Share Drops Amid WA Windfall
The Commonwealth Grants Commission has unveiled its recommendations for the distribution of a projected $102.5 billion in goods and services tax (GST) revenue for the 2026-27 financial year, sparking significant controversy. New South Wales (NSW) emerges as the primary loser in this complex allocation, with its share relative to population shrinking from 0.86 to 0.82. This reduction has ignited fierce criticism from NSW Premier Chris Minns, who labelled the system as unfair and "past its use-by date."
Western Australia's Sweetheart Deal Yields $5.5 Billion Boost
In stark contrast, Western Australia (WA) is set to receive an additional $5.5 billion in GST revenue, thanks to a legislative change enacted in 2018. This deal guarantees WA a minimum share of GST, irrespective of its fiscal needs, a move that independent economist Saul Eslake has repeatedly condemned as the "worst policy decision of the 21st century." Despite WA being the fiscally strongest state in the federation, with a series of budget surpluses fueled by the iron ore boom, it will receive a relativity of 0.82, matching NSW's share.
Mike Callaghan, chair of the Commonwealth Grants Commission, defended the allocation methodology, emphasising that it is based on transparent economic and budgetary data. He noted that excluding the impact of the 2018 legislation, NSW's relativity would have been 0.89, not the lowest on record as claimed by Minns. However, the reality remains that NSW's allocation, while increasing in absolute terms to $26.1 billion, represents a diminished proportion relative to its population.
Victoria Sees Slight Dip but Overall Revenue Increase
Victoria experiences a minor decline in its GST relativity, from 1.07 to 1.06, yet due to the larger overall GST pool, the state's revenue is forecast to rise to $27.9 billion in 2026-27, up from $26.4 billion. This highlights the nuanced impacts of the distribution formula, which aims to balance fiscal capacities across states and territories. Nonetheless, the overarching issue centres on WA's preferential treatment, which reduces the available GST pool for other jurisdictions.
To mitigate any adverse effects from the 2018 deal, the Commonwealth provides "top-up" payments, totalling $5.5 billion in 2026-27. Since 2018, these payments have accumulated to $36 billion, a figure that Eslake criticises as unsustainable, especially when other states grapple with budget deficits and mounting debt. He described the situation as "heads, Western Australia wins and tails, the federal government loses," questioning the rationale behind subsidising Australia's wealthiest state.
Calls for Reform and Ongoing Inquiry
Premier Minns advocates for a fairer GST system based on population, arguing that while support for smaller jurisdictions like the ACT, Northern Territory, and Tasmania is reasonable, it is illogical to extend such benefits to large, wealthy states like Victoria. The Productivity Commission is currently investigating the 2018 GST reforms, with an interim report expected by August and a final report by year's end. This inquiry may pave the way for potential adjustments to the allocation framework, addressing the growing discontent among affected states.
As the debate intensifies, the economic implications of the GST distribution continue to reverberate across Australia, underscoring the need for a balanced and equitable approach to federal revenue sharing.
