New South Wales will receive its lowest GST relativity share since the GST was introduced, leaving Australia's largest state with $1.4 billion less GST revenue in 2026-27 than Victoria, despite having 1.5 million more people.
The complex and opaque calculations used by the Commonwealth Grants Commission once again highlight a broken and unfair system in urgent need of reform.
As cost-of-living pressures continue to rise for families, essential workers and young people, the Minns Labor Government is again calling on the Commonwealth Grants Commission to reform its GST distribution formula, which has left Australia's largest state sending nearly one in every five dollars of the GST we have paid across the border to other states.
In the latest determination, NSW's share of the GST pool has fallen to 82.0 cents in the dollar, down from 86.0 cents last year, and 92.4 cents in 2024. This means that for every dollar that NSW residents hand over in GST, the State gets back 82 cents.
Today's determination leaves NSW with its lowest share since the GST was introduced in 2000.
Despite this, NSW continues to maintain its strong credit ratings and is currently rated AAA by Moody's and Fitch Ratings, and AA+ by S&P Global, after inheriting record state debt of $188 billion from the former Liberal-National Government.
Since coming to office, the Minns Labor Government has focused on repairing the state's finances and being disciplined in its spending. Annual expenses growth was 2.8 per cent in the first two years of this Government, the lowest rate for any Australian government, and below inflation. This is compared to expense growth averaging over 6 per cent in NSW between 2011 and 2023. Gross debt is projected to be the second lowest in the country, after being forecast to reach over $188 billion in 2026 by the former Government.
The Government will continue to invest in the infrastructure and essential services required to support the state's families, workers and young people.
As part of the current Productivity Commission inquiry, the Government will also continue to advocate for fairer reforms to the Commonwealth Grants Commission's GST distribution system.
This includes that GST distribution would be fairer on a per capita basis, with the Commonwealth stepping in to support horizontal fiscal equalisation for the smaller states.
The Minns Labor Government has introduced a suite of reforms to cut red tape, provide cost-of-living relief for families and attract major capital investment to New South Wales including:
- Landmark reforms to the state's planning legislation.
- Reforming workers compensation to reduce premiums for businesses.
- Introducing a toll-cap and lifting the Liberal-National Government's unfair freeze on wages.
- The establishment of the Investment Delivery Authority.
This is all part of the Minns Government's plan to build a better NSW with more homes, jobs and services, so people have somewhere to live and work in the communities they choose.
Acting Treasurer Courtney Houssos said:
"This decision again demonstrates the need for a fairer allocation of how the GST is distributed across the states and territories.
"Successive NSW governments have identified the need for reform. We will continue to engage with the Commonwealth and work towards a more transparent system which can deliver NSW our fair share.
"Having inherited a record deficit from the previous Liberal-National government, we are working hard to improve the state's fiscal position so it can withstand external shocks.
"We will maintain our fiscally disciplined and prudent approach, as we continue to invest in the schools, hospitals and essential public services that families and households rely on."
