The Minns Labor Government is proposing wholesale change to the annual GST carve-up that continues to rip off the people of New South Wales.
The urgent need for reform has been highlighted by the Commonwealth Grants Commission's decision to hand NSW its lowest GST relativity share on record.
Last week's decision will see NSW, Australia's largest state, receive $1.4 billion less GST revenue than Victoria, despite having 1.5 million more residents.
The NSW share of the GST pool has now fallen to 82 cents in the dollar in 2026-27, down from 86 cents in 2025-26, and 92.4 cents in 2023-24.
This decreasing rate of relativity is estimated to have cost NSW $8.6 billion over the past four years. That could have funded:
- Around 13,500 more registered nurses in the NSW public hospital system, or
- Around 14,500 more teachers over four years.
The current distribution calculation is complex and opaque. This not only leads to unpredictable variations for state budgets but also produces unreasonable distributions.
The Minns Labor Government is proposing a fairer way forward.
The NSW submission to the Productivity Commission Inquiry proposes an equal per capita distribution of GST grants, with top-ups funded by the Australian Government from outside the GST pool.
An equal per capita distribution would remove complexity, result in a higher level of transparency and eliminate any possible drag from the current system on the productive capacity of the Australian economy.
If GST was shared on an equal per capita basis, it's estimated NSW would receive an additional $3.2 billion next financial year.
If broad consensus cannot be reached on equal per capita distribution, NSW also proposes an alternate model that returns to the pre-2018 equalisation arrangements from 2030-31, with several modifications:
- The introduction of a relativities safety net floor of 0.50 funded by the Australian Government. This is a reduction from the current 0.75 floor. This would ensure there is a fair distribution to all states of any windfall revenue flowing to only one state.
- Early notification of likely distribution changes through the Commonwealth Grants Commission issuing four-year relativity forecasts.
These modifications will address factors that drove the changes to GST in 2018 and will reduce the negative impact of horizontal fiscal equalisation on the productivity of the Australian economy.
Treasurer Daniel Mookhey said:
"The current system for carving up the GST is busted. NSW carries the Federation all by itself.
"Some of the richest and wealthiest states aren't doing their bit to help smaller states and territories like the ACT, Tasmania and the Northern Territory.
"Even worse, NSW taxpayers have seen more of their money put to work fixing the budgets of Western Australia and Victoria, than their own.
"The whole of the Federation would be better off if we allocated the GST by population share, with the Federal Government using their balance sheet to prop up the smaller jurisdictions.
"That is what we are arguing for. But we are also presenting a compromise proposal to push for change.
"Change like this won't be quick. But I'm glad that since we launched this campaign every state and territory, except Western Australia, has slammed this broken system. "
