NSW GST fight heats up over ‘ludicrous’ Commonwealth Grants Commission decision

Sydney’s biggest infrastructure precinct has been branded a “regional” area by the commission responsible for carving up the GST. Here is what that decision is costing you.

A major airport precinct in Sydney’s west has been rebranded as a regional area — adding to a raft of new area classifications costing NSW $500m in lost GST.

Much of the Badgerys Creek region, which in 2016 was classified by the Australian Bureau of Statistics as a “major city” area has now been changed to “inner regional” despite being the home of the state’s biggest infrastructure project — the Western Sydney Aerotropolis.

NSW Treasurer Daniel Mookhey said the classification, along with the reclassification of towns like Kiama, Stanwell Park, and Googong as “major cities” has cost NSW a collective half a billion dollars in lost revenue.

Neighbouring Sydney suburb of Mulgoa has also been changed to an “inner regional” area.

“(This is) another example of how ludicrous and out of touch this system is,” Mr Mookhey said.

Western Sydney International Airport, completion on the surface construction of WSI’s runway. Photo: Supplied.

“Mulgoa is right at the doorstep of the new Western Sydney International airport, but the Commonwealth Grants Commission downgrades it from a major city to inner regional, it doesn’t make any sense.”

Premier Chris Minns said the classification of south coast retiree haven Kiama as a major city was “laughable”.

The "laughable" reclassification on the front page of The Daily Telegraph on Monday.

“The idea that Kiama should be treated as a major city is obviously laughable to the people of NSW. That’s what is currently happening with the GST carve up,” he said.

“They (the Commission) enter a dark room, they close the doors, god knows how they come up with the inventions.

“Something has to change, the only fair way to split this revenue up is by per capita.”

Chris Minns, Premier of New South Wales. Picture: Gaye Gerard

In its 2024 update, the Commonwealth Grants Commission said the 2021 census statistics had shown the state’s population “is now relatively less dispersed” and “these changes reduced its assessed needs for a range of services and infrastructure, particularly health and social housing” — resulting in $281m being shaved off the NSW GST share.

Another $222m was shaved off because the Commission said Sydney’s population and population density grew more slowly than the national average and it reduced the need for funding for “urban transport services and infrastructure”.

While the Minns government is pushing for a per capita method of splitting the GST with top ups for the smaller states — economist Saul Eslake said the approach will give even more GST dollars to Western Australia.

“What surprises me is Mr Minns and Mr Mookhey are advocating a reversion to equal per capita distribution with top up grants for smaller states,” he said.

“Every premier of NSW since Bill McKell has been arguing for more GST but they are arguing for a system that will give WA an increase twice as big an increase as NSW.

“What a dumb thing to do.”

Mr Eslake is pushing for the federal government to call a productivity commission inquiry to overhaul the troubled GST system.

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