NSW to petition for major reform over GST carve-up

Australia’s most populous state will petition Jim Chalmers to overhaul the “absurd” system that distributes GST to states and territories.

NSW has put states and territories “on notice” as it moves to petition the Commonwealth government to reform the “absurd” billion-dollar GST carve-up that has created a war of words among Labor leaders.

Following a meeting between state treasurers and federal Treasurer Jim Chalmers, NSW Treasurer Daniel Mookhey said he had called for an overhaul of the system.

Mr Mookhey has accused the independent Commonwealth Grants Commission (CGC) of robbing Australia’s most populous state, with NSW receiving $310m less in this year’s carve-up.

Meanwhile, Victoria has been given an extra $3.7bn, while Queensland also lost out, receiving $468m less than the year before.

NSW Treasurer Daniel Mookhey said the system was ‘absurd’ and needed to change. Picture: NCA NewsWire/ Nikki Short

Mr Mookhey called for the CGC to provide updates to cover four-year budget forward estimates, instead of handing down annual deliberations, and issue draft determinations aligned to a state or territory’s half-yearly financial review cycles that would allow treasuries to prepare for their budget.

In a bid for more transparency and accountability, Mr Mookhey also called for states and territories to share their data on service delivery costs that are used to calculate the carve-up.

Mr Mookhey said the proposed reforms, which NSW will advance directly with Dr Chalmers, would benefit all states and territories.

“A system this absurd cannot last. It is not set in stone and it is time for it to change,” he said.

“We all have a responsibility to ensure every state in the federation can thrive.

“I thank federal Treasurer Jim Chalmers for facilitating these discussions constructively. There are plenty of hard conversations ahead.”

‘Welfare state’: War of words over GST

Before the meeting, a fiscal fracas appeared to erupt between Labor-controlled NSW and Victoria, with NSW Premier Chris Minns labelling Victoria a welfare state and the Victorian Treasurer Tim Pallas returning fire.

Mr Minns said under changes to the system made in 2018, his state now received 86 cents in the dollar when it was 94 cents before, leaving a $1.65bn hit to NSW’s 2023-24 budget.

NSW Premier Chris Minns is unhappy with the GST carve-up. Picture: NCA NewsWire / Nikki Short

“A lot of that money is going to be sent to Western Australia, which is chock full of cash from the mining boom, or down to Victoria, which is now a welfare state receiving a bunch of money from the pockets of NSW families,” he told Sky News.

Iron ore royalties, the backbone of WA’s economic prosperity, have fallen during the past three years, while coal royalties have increased five-fold.

Mr Minns claimed “NSW just can’t eat last every single time the states get around the table”.

Victoria’s share of the GST pool will increase to $22.2bn next year, a rise from 21.9 per cent to 24.8 per cent of the total pool. Despite a decrease in the carve-up payment to NSW, the state will still get the largest payment, $24.2bn.

Victorian Treasurer Tim Pallas says the NSW Premier needs a GST lesson. Picture: NCA NewsWire / Luis Enrique Ascui

Mr Pallas said the claim – that money from the “pockets of NSW families” was going to Victoria – meant Mr Minns didn’t understand the system.

“Contrary to Premier Minns’ view, NSW does not provide Victoria with a GST windfall,” Mr Pallas said.

“Victoria will receive an extra $1.5bn from Commonwealth receipts, not from other states, but by payments from the Commonwealth to top up the pool.”

He accused Mr Minns of being “just so Sydney” by bemoaning Melbourne’s success.

“If Premier Minns is concerned about mendicant states, I would remind him that NSW has been an infrastructure welfare recipient from the Commonwealth at the expense of Victorians for decades,” he said.

Speaking to reporters on Friday morning, Mr Minns returned serve to Mr Pallas.

“The only thing worse than Victorians taking our money is them crying about it afterwards, and this is exactly why we have to fix the system and move to a per capital system,” he said.

Mr Minns says he isn’t being ‘petty’. Picture: NCA NewsWire / Nikki Short

“I don’t think it passes the sniff test to split up hundreds of billions of dollars over the next 10 years worth of revenue on anything other than the number of people that live in your community.”

While Mr Minns said he didn’t think anything would change as a result of federal Treasurer Jim Chalmers’s joint meeting with state and territory treasurers, he said the state could hold out on supporting Commonwealth reforms and initiatives unless it got its “fair share of GST revenue”.

“I’m not saying that to be petty or vindictive … but if we’re going to take such a massive hit on GST carve-up and infrastructure spending, well, it’s got to come from somewhere,” he said.

States urged to calm down

Ahead of Friday afternoon’s meeting, both sides of federal politics called for calm from the states.

Deputy Liberal leader Sussan Ley said the country’s treasurers should be working together constructively.

“I think this is all sounding a bit shouty and loud, and I would suggest to the Labor leaders that maybe they dial down the testosterone,” she said.

Her Sunrise panelmate, Education Minister Jason Clare, said the “argy bargy” broke out every year when the Commonwealth Grants Commission handed down its decision.

“The key point to make here is that this is independent of the Australian treasurer, it’s independent of the Australian government, it’s the grants commission that make the determination about how the GST is allocated across the states,” he said.

Originally published as NSW to petition for major reform over GST carve-up