NSW is taking a $850 million hit to its budget

Photo: Carsten Koall / Getty Images

New South Wales treasurer Gladys Berejiklian received a major budget haircut yesterday after the Commonwealth Grants Commission (CGC), which decides how much GST revenue each state and territory receives, reduced the state’s allocation by around 1.4%.

She said NSW will lose around $850 million in GST payments in 2016-17 as a result.

The realignment of the grants has sparked the usual round of hang-wringing from state treasurers, with Berejiklian complaining that NSW is continuing to subsidise the weaker performing states.

“We are essentially a victim of our own success when it comes to GST revenue – this is the biggest single year loss due to a change of relativity for any state since the GST began,” she said.

Around one quarter of the state’s budget comes from GST revenue, and Sydney’s booming real estate sector delivered a major windfall to Berejiklian, with a monster $7 billion in stamp duty revenue last year $1 billion higher than forecast in the previous budget.

NSW was already bracing for a cut from the CGC, with December’s half-yearly review predicting a $670 million drop in the GST grant. The state’s share of GST is falling from 30.4% to 29%, but there is a bright spot – the growth in GST revenue means the actual cash allocation for NSW will rise by $197 million to $17.598 billion in total.

The big winners in the 2016-17 grants are Victoria and Queensland, which both score more than $1 billion in extra GST funds. Queensland will receive an extra $1.324 billion, up 0.9% to 23.6%, and Victoria, $1.074 billion, an increase of 0.5% to 22.9%.

South Australia’s treasury coffers will also be boosted by $554 million more cash thanks to a 0.4% boost to 10.1%, taking its total GST revenue to $6.11 billion.

The Grants Commission believes both Tasmania and the Northern Territory have a stronger fiscal capacity “driven by a fall in their costs of providing services”.

“For Tasmania, this was due to a fall in its relative wage costs. For the Northern Territory, it was due to a fall in its relative population growth, which reduced its need to invest in new infrastructure,” the CGC says.

That means Tasmania’s share has been cut by 0.1% to 3.8%, but the growing GST pie means the state will actually receive at extra $50 million, taking its total to $2.299 billion.

The Northern Territory’s grant is also cut by 0.4%, but still rises by $5 million to $3.291 billion compared to 2015-16.

Despite a vociferous campaign by Western Australian premier Colin Barnett for a greater slice of GST revenue, the state, now struggling as the mining boom ends, is getting an increase of just 0.1% to 3.4% in 2016-17. WA’s allocation is just $2.037 billion, up just $148 million, including GST growth.

WA feels cheated because it receives less that 30 cents in the dollar in terms of GST paid by the state.

The premier has blamed the GST grants for WA’s financial troubles, with the budget deficit forecast to hit $3.1 billion this year.