New South Wales (NSW) and Queensland will be under pressure to cut services or raise taxes thanks to the new GST carve-up but there’s no expectation of a broader hit to the national economy.
That’s the verdict of AMP chief economist Shane Oliver, with experts largely unsurprised an independent body recommended Victoria gain a bigger chunk of revenue in 2025/26.
The state is in line to receive an additional $3.9 billion (US$2.5 billion) compared to 2024/25 due to a recent population boom and because it does not benefit as other states do from mining profits.
NSW will be up $1.3 billion (US$0.8 billion), Western Australia $395 million (US$249 million), South Australia $361 million (US$227.6 million), the Northern Territory $267 million (US$168.4 million), Tasmania $177 million (US$111.6 million) and the Australian Capital Territory (ACT) $56 million (US$35.3 million).
In total, Queensland will be down $2.37 billion (US$1.5 billion) on the previous financial year after it gained from booming coal exports.
“If you’re in New South Wales or Queensland, it’s not so good news so it does raise pressure on those states to perhaps raise taxes or cut services, I think—particularly in Queensland,” Oliver told AAP.
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He said the new distribution would not impact the Australian economy much overall but was positive for Victoria.
“It takes some pressure off the Victorian budget which has been in a difficult position in recent times owing to a bigger hit from the pandemic, partly in response to the way it was managed in Victoria and also blowouts in infrastructure costs,” he said.
The Commonwealth Grants Commission’s recommendations drew sharp criticism from state and territory leaders, with NSW Treasurer Daniel Mookhey pushing for significant changes to how the funds were distributed.
Queensland Treasurer David Janetzki called on federal treasurer Jim Chalmers to reject the advice.
However, leaders tended to accept it, professor Robert Breunig from the Australian National University’s Crawford School of Public Policy said.
“For the government to do something different would be politically, I think, extremely dangerous because then they would be playing politics across states,” he said.
The 2025 recommendations come with the added attention of an upcoming federal election, which must be held by May 17.
Breunig said the carve-up could have political consequences because some voters might not make a distinction between a recommendation put forward by the commission and a decision made by the federal government.
“In places like Queensland that looks like it has taken quite a bit of a hit (and) New South Wales people probably feel like they’ve been hard done by relative to Victoria,” he said.
“That could cost Labor in the current election, absolutely.”
