Albanese’s GST mauling of NSW Labor mates invites blood at federal poll

The war cry of NSW Labor warriors has long been that they love a brawl. “I like to fight Tories, that’s what I do,” Anthony Albanese famously said in 2012 when he declared he would be backing Kevin Rudd over Julia Gillard. But the battle lines have shifted in the nation’s most populous state. It is not Labor versus the Coalition in NSW right now. It is Labor on Labor.

The schism has been spectacularly exposed through a range of funding disputes, including over health and education, but none more significant than the carve-up of GST payments. NSW has every reason to be ropeable with its federal cousins and Tuesday’s federal budget exposed exactly why. NSW has been dudded. In fact, even more so than we originally thought.

Mate v mate, state v Canberra … Premier Chris Minns and Prime Minister Anthony Albanese will lock horns over the GST.Credit: AP

Earlier this year, when the Commonwealth Grants Commission released its review into how the GST should be divvied up, the NSW government threatened to go to war. The commission’s review meant that NSW, which accounts for about 31 per cent of the country’s population, was facing a big drop in payments to the tune of $1.65 billion next financial year. At the same time, Victoria had its GST share pumped up by a whopping $3.7 billion.

In even worse news for NSW, those early figures were out. Revised numbers in Tuesday’s budget show the state’s loss is even bigger at $1.9 billion.

The formula used to determine GST payments, based on NSW’s calculation, means the carve-up will cost the state budget $12 billion over the next four years. Premier Chris Minns and NSW Treasurer Daniel Mookhey are not trying to hide their anger. Minns and Mookhey call it the great GST rip-off and warn NSW will be the last state to sign on to state/federal funding agreements if changes are not made.

Their Labor counterparts in other states shot back. Victorian Treasurer Tim Pallas called Minns a “tool” and said he was “mathematically challenged”. West Australian Premier Roger Cook, by far the biggest beneficiary of the carve-up, called his NSW colleagues a bunch of “whingers”. Not much love lost anywhere in the Labor tent.

At first glance, GST distribution may well seem as dull as dishwater until you break down what it actually means for the state. NSW says the shortfall is equal to about 10,000 extra nurses and 10,000 more police officers. That is not to mention what it does to the state’s prized AAA credit rating, which is certain to be lost after next month’s state budget.

Budget maven and economist Chris Richardson was quick on Tuesday evening to criticise the enormity of Canberra’s GST largesse for Western Australia. Writing on X, Richardson said the deal to hand over money from federal taxpayers’ to the nation’s strongest state economy – Western Australia – had been costed at $39.2 billion over 10 years. In the budget, that estimate ballooned to $52.9 billion.

“Read it and weep,” Richardson said. “In case you’re wondering, that means we’re set to spend much more money every year on the most expensive marginal-seat strategy this nation has ever seen.”

With a looming federal poll, the Coalition and Labor both consider Western Australia as critical to their electoral hopes so neither will be willing to demand that money be snatched back from the state.

But while it is busy looking west, federal Labor could be risking seats in NSW, the very state it has managed to alienate so specularly. The western Sydney seat of Werriwa, held by Anne Stanley, is seen to be on shaky ground, as is Gilmore, which is Labor’s most marginal seat and is being contested again by former NSW Liberal minister Andrew Constance.

If, as widely expected, a north shore seat is abolished in the looming federal boundary redistributions, Labor-held seats of Parramatta and Reid could shift eastward, making them both more conservative. Labor holds Robertson, on the Central Coast, by only 2 per cent and Hunter and Paterson face their own challenges with the energy transition away from coal.

Pretty quickly, NSW could be just as problematic for federal Labor as seats such as Tangney and Hasluck in Western Australia. At the same time, the NSW Labor government has no appetite for reining in criticisms of the federal ALP, regardless of the electoral cycle.

The beauty of fixed terms in Macquarie Street means there will be no state election until March 2027, well after voter anger might be taken out on federal Labor. NSW can blame its budgetary woes, which will be many, on its federal colleagues.

We have seen the GST surface as a key election issue previously (the 1998 knife-edge poll which saw John Howard re-elected) and we could see it again. NSW Labor has much to lose from the inequitable sharing of this tax and it can’t risk shying away from the fight over fairer distribution. The next federal election could be defined by another GST battle.

This time it will be Labor v Labor.

Alexandra Smith is the Herald’s state political editor.