Carve-up of $95b GST haul a headache for Albanese
“Queensland deserves better than this callous carve-up, which will leave Queensland missing out,” he said.
One of the big swing factors was the extra spending incurred by both Victoria and NSW during the COVID-19 pandemic. The two had argued to the grants commission that they had borne more of the financial brunt dealing with the health and economic fallout from COVID than other administrations.
How the GST is carved up
- When the GST was introduced in 2000, then-prime minister John Howard promised all of it would be shared among the states and territories. How it was allocated would be decided by the long-standing Commonwealth Grants Commission.
- Every year, the commission examines how much money each state and territory needs to deliver an “average” level of service to its residents, from education to policing.
- This is affected by a large range of factors including population growth, mineral royalties and social factors like Indigenous and remote populations.
- The commission recommends how the GST should be shared to the treasurer of the day. No treasurer has ever overruled the commission’s findings.
- In 2019, amid fears that WA could end up without any portion of the GST, the Morrison government put in place a system that would guarantee its share while also injecting extra funds into the GST pool to ensure no other state or territory would be worse off.
The commission agreed, delivering an extra $900 million to Victoria and $700 million to NSW, while reducing Queensland’s GST share by $800 million and WA’s by $375 million.
Queensland was the only state or territory to have their GST cut. NSW, while its share of the entire GST pool fell, will receive an extra $900 million.
The biggest winner was Victoria which had been the only state since Federation to have delivered more revenue to other parts of the country. After the commission’s report, it will now receive more than $1 of GST for every dollar of tax raised within its jurisdiction, making it a mendicant state.
Victoria received an additional $3.7 billion in last year’s GST allocation.
Apart from extra money due to the pandemic, it benefited from the rise in the coal royalties enjoyed by NSW and Queensland while it got an additional $500 million due to the growing density of Melbourne which has increased pressures on the city’s urban transport network.
More pressure on Melbourne’s transport network has contributed to a boost in GST.Credit: Eddie Jim
Victorian Treasurer Jaclyn Symes said since the introduction of the GST, the state had subsidised every other jurisdiction by a combined $31 billion.
“The commission confirms that our population and economy are growing and this has driven a need for more services and infrastructure which we are delivering,” she said.
Despite the boost, Symes said the no worse off guarantee – due to end in 2029-30 – had to be locked in permanently otherwise Victoria would lose around $1.8 billion a year.
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WA will get an extra $400 million in GST payments next financial year, taking it to $7.8 billion. If not for the Morrison deal, WA would have received just $1.9 billion while NSW would have received an additional $2.2 billion.
Economist Saul Eslake, a critic of the GST deal, said that Victoria’s new position as a state that received more money from the GST than it raised was a sign it had become a “relatively poor state”.
Eslake said Victoria’s capacity to raise revenue would look stronger in coming years, with lower coal prices influencing GST calculations for Queensland and New South Wales from next year.
Prime Minister Anthony Albanese, campaigning in WA, said his government supported the GST deal.
“We are providing increased support for Western Australia without any of the other states being disadvantaged because of the arrangements with Western Australia,” he said.
The Coalition also supports the current GST deal.
A review of the GST system by the Productivity Commission, which will examine which it is working “efficiently, effectively, and as intended” is due to be started and completed next year.
