Keep promise on GST, says NSW Treasurer Daniel Mookhey

The NSW government will bet the state’s bottom line and financial assumptions on Anthony Albanese extending the no-worse-off guarantee, as it prioritises essential services and slashes ‘fantasy projects’.

NSW Treasurer Daniel Mookhey in his parliamentary office in Sydney, preparing to hand down his first budget. Picture: John Feder

The NSW government will bet the state’s bottom line and financial assumptions on Anthony Albanese extending the GST no-worse-off guarantee, as it prioritises essential services and slashes “fantasy projects”.

On the eve of the first Labor budget in 13 years, NSW Treasurer Daniel Mookhey says he was left an “empty cupboard” by the previous Coalition government and hinted a surplus is unlikely in Tuesday’s papers.

With the GST compromise allowing Western Australia a greater slice of consumption tax set to expire in 2027-28, Mr Mookhey has said all future planning will assume its continuation – essentially throwing down the gauntlet to the federal government to keep the no-worse-off guarantee for good.

“Otherwise it would have very serious consequences for the state’s finances,” Mr Mookhey said.

NSW is expected to receive about $3.8bn in “no-worse-off” payments over the next two financial years and, to contextualise, if it was not continued, it could require the termination of more than 8000 nurses or teachers, or the introduction of new taxes.

“We are going to be upfront that we want that guarantee to continue,” Mr Mookhey said.

The guarantee was established after the GST floor was introduced in 2018 to make sure all states and territories were no worse off and received a guaranteed minimum 70 per cent share of GST revenue.

The Morrison-era rule requires the federal government to compensate states for shortfalls in their GST revenue share between the old and new distribution arrangements until 2026-27.

Any shake-up of the GST could see the Prime Minister having to balance the demands of eastern states wanting more revenue and WA’s Labor government fighting for the status quo.

The move to assume the continuation of the no-worse-off guarantee in future budgets is a call to Anthony Albanese to ensure its continuation. Picture: Julian Andrews

Mr Mookhey has promised a low-spending budget on Tuesday and threw cold water on former treasurer Matt Kean’s forecast there would be a modest 2024-25 surplus.

“It’s fair to say the previous government’s projections were based on quite a few budget tricks,” he said.

Tuesday’s budget, he also said, was less about flash and more about consolidation of cash.

“It’s a hard balance to get right, but NSW will see the work we’ve done on Tuesday,” he said.

Mr Mookhey on Friday said he had inherited a budget that assumed about $7bn of “unfunded expenditure and missing money” and $1.2bn in unlegislated taxes and revenue measures, and how the previous government committed $27bn in new spending in the nine months leading up to March’s election. “They failed to mention that before the election,” he said. “They left an empty cupboard and no note.”

Tuesday’s budget, Mr Mookhey said, was all about “fiscal repair”.

“We didn’t go to the last election making promises we couldn’t afford with money we didn’t have,” he said.

“Fantasy projects” across infrastructure will be targeted, with funding diverted to those aligned with “the public’s priorities”.

Penrith Stadium will be refurbished rather than rebuilt, the same as Ultimo’s Powerhouse Museum; tunnels through the Blue Mountains and Sydney’s northern beaches have been scrapped, and there is a new Circular Quay redesign, expected to save $315m.

Cutting the number of top-paid public servants is expected to save about $745m while the government expects to save $5bn by scrapping the Dungowan Dam or raising the walls of Wyangala or Warragamba dams.

Asked if that lacked ambition, the Treasurer said it was about funding what people “need and expect now”. “I prefer we spend money on real projects rather than pay a king’s ransom planning projects that will never be delivered,” Mr Mookhey said.

The move was not a cave-in to union demands, he said, adding that was an “unfair” description.

Funding for complete overhauls of Penrith Stadium and Ultimo’s Powerhouse Museum has been diverted.

The Powerhouse Museum in Ultimo, Sydney.

“We’ve had robust conversations but we’ve adopted a more cooperative attitude, rather than a confrontational one,” Mr Mookhey said.

A pay rise for the state’s teachers had been offset, and was indicative of the government’s approach, the Treasurer said, although the opposition claimed the final $1.4bn in savings will come at the cost of job losses.

Although the first for the party since Eric Roozendaal’s in 2010, Mr Mookhey stressed Tuesday’s budget was about rebuilding.

“(One of) the sharpest-rising pressures on the budget is the massive acceleration in interest payments that we’re having to forecast so, like a lot of families and businesses, we’re asking the hard questions of ourselves,” he said.