Australia’s most populous state will lose $1.9 billion next financial year due to a bigger-than-expected drop in GST payments announced in the Budget.
New South Wales’ share of the federal goods and services tax is one of the only areas where Treasurer Jim Chalmers has reduced spending, despite 500,000 new immigrants expected to move to the state over the next four years.
The tax provided about 23 percent of the state’s revenue last year and the reduction represented the biggest drop in GST funding since the Howard government introduced the tax in 2000.
Last year’s budget documents show New South Wales was due to receive 29.1 per cent of GST revenue, or $27.7 billion, in 2024-25, but that was revised down in the federal budget last year. Tuesday at 27.5 percent, or $25.8 billion.
NSW Premier Chris Minns is furious at the impact of the GST and has demanded the Treasurer provide an explanation.
Treasurer Jim Chalmers delivered his third federal budget Tuesday night
The portion that New South Wales will receive from the federal goods and services tax is one of the only areas where Treasurer Jim Chalmers has reduced spending, despite 500,000 new immigrants expected to move to the state over the next four years (archive image)
Minns has called for the tax to be rationed per capita rather than the current form, which is based on advice from the grants commission that uses a formula intended to provide each state with roughly the same level of public services.
“We have been clear that a per capita GST split is the only fair way to ensure states like New South Wales can grow,” he said.
“I didn’t expect the budget to change that, but I’m hopeful that as the federal government has heard from us on western Sydney infrastructure, we can make progress on some of these other pressing issues.”
Despite the drop in the GST, the Albanese government gave New South Wales a boost in terms of reinstating some infrastructure projects that were canceled last year.
About $900 million will be spent on road projects around the new Western Sydney Airport: $500 million for the Mamre Road Stage 2 upgrade and $400 million for Elizabeth Drive.
In other infrastructure funding, $112 million will be provided to extend the M1 Pacific Highway to Raymond Terrace.
Western Sydney Airport will receive an additional $300 million for operating costs and a Circular Quay redevelopment program will get $220 million.
$2 million will also be provided to improve Wi-Fi and mobile connectivity along the commuter rail route between Wyong and Hornsby.
And a whopping $55 million has been allocated for a plan on how to develop a high-speed rail between Newcastle and Sydney, which will not provide any real infrastructure.
NSW Premier Chris Minns (pictured with wife Anna) is furious after the federal budget revealed NSW will take a $1.9 billion hit in GST revenue next financial year .
Government-run schools in NSW will also receive a funding increase of $110 million over the previous financial year, which is well below the $800 million the NSW government said that were necessary.
Reaching a $9.3 billion surplus in his third budget on Tuesday night, Dr Chalmers promised the government’s aid measures would not increase inflation.
For Australian families, key cost of living relief includes a surprise $300 energy rebate for all families and the revised Stage 3 tax cuts promised by the government.
However, this year’s budget contained little for welfare recipients asking for higher payments, or for motorists facing rising fuel prices.
Dr Chalmers said the budget was also providing help more broadly, including freezing the cost of medicines, supporting low-income renters, making student loans fairer and helping pensioners by freezing the rate interest.
The government’s renewed Stage 3 tax cuts will deliver an average benefit of $1,888 a year ($36 a week) starting July 1 for 13.6 million taxpayers.
“For 84 per cent of taxpayers and 90 per cent of women, this is a bigger tax cut than they would have had under the previous government,” Dr Chalmers said.
The 2024-25 budget also sees inflation reaching the target of 2-3 per cent by Christmas, up from 3.45 per cent currently.
This is much faster than the Reserve Bank’s expectations published last week, which did not take into account the budget measures.
It also raises hopes of an interest rate cut before the next federal election, scheduled for next May.
But Dr Chalmers warned the Australian economy will face pressures: growth will slow in China and be tepid in Europe, tensions will continue in the Middle East and Ukraine and global supply chains will fragment.
