NSW will be $1.65 billion worse off next financial year according to the Commonwealth Grants Commission after it reduced the State’s share of GST from 92.4 per cent to 86.7 per cent.
The figures are contained in the annual GST Revenue Sharing Relativities report released today.
The six percentage point adjustment to GST relativities is the largest single year reduction to the NSW share of GST since the system was introduced in 2000.
It takes the State’s share to the lowest it’s been since 2018-19, when former treasurer Dominic Perrottet railed against the “black magic” formula that saw NSW’s relativity reduced from 87.7 per cent to 85.5 per cent.
The NSW Government made it clear at its first budget in September that a lot of external factors had to go right for the State to return to surplus.
The hard journey to budget repair has just been made significantly harder, three months out from the NSW budget.
Recent decisions at the Commonwealth level, including the withdrawal of $3.2 billion of infrastructure funding as well as ongoing uncertainty over schools and health funding agreements, do not help.
The NSW Labor Government, as previous state governments have noted, is at the mercy of drastic fluctuations via the GST distribution calculation.
The NSW Government will continue fighting for a fair share for its citizens and for revenue certainty into the future, including the extension of the No Worse Off Guarantee beyond the current expiration date of 2029-30.
The Commonwealth is currently undertaking a five yearly review of how it determines states’ shares of GST. That review is expected to be finalised next year.
It’s another reminder of the critical need for NSW to continue carefully managing the State’s finances, the same way that every NSW family is having to do.
The NSW Labor Government inherited the largest debt ever passed from one government to another, as well as the largest deficits recorded in NSW history, jeopardising the delivery of essential services in the process.
In its first year, the NSW Labor Government has reined in the previous government’s waste, adjusted the debt trajectory and reinstituted fiscal discipline.
Treasurer Daniel Mookhey said:
“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.
“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’.”
Minister for Finance, Courtney Houssos said:
“We have been honest with the people of NSW about the challenges our budget is facing since we were first sworn in.
“We will maintain our fiscally prudent approach, focused on rebuilding our State’s essential public services.”
