States and territories have today been put on notice that NSW will advocate hard for substantial change in the system of distributing GST funds collected by the Commonwealth.
At a meeting of the nation’s treasurers, NSW Treasurer Daniel Mookhey proposed reforms to overhaul how the GST is distributed across the states and territories.
He also said the GST distribution should in future be determined by the Commonwealth Grants Commission (CGC) on a per capita basis with the Commonwealth stepping in to support horizontal fiscal equalisation for the smaller states.
This would eliminate the wild fluctuations which prevent states from being able to plan for future GST contributions to their budgets.
NSW’s share of the GST pool was slashed from 92.4 per cent per capita to 86.7 per cent per capita in one hit this week, just three months out from the state budget.
That amounts to a $1.65 billion impact in a single decision at the Commonwealth level.
Mr Mookhey laid out a series on proposals for how the CGC’s approach could be improved, including:
- Providing its updates to cover four-year budget forward estimates, rather than the single-year approach currently employed, so the full implications of CGC decisions is transparent.
- Issuing a draft determination aligned with the states’ and territories’ half year review cycles so that states can properly prepare their budgets.
- Sharing data on service delivery costs provided by states and territories which are used for the determinations, to improve transparency and accountability.
NSW will advance these propositions with the Federal Treasurer directly.
NSW maintains there are tough conversations ahead regarding other Commonwealth funding obligations.
That includes making sure NSW doesn’t miss out on money for schools and hospitals, that it gets the funding it deserves in the middle of a housing crisis and that missing infrastructure money is clawed back.
Mr Mookhey acknowledged the constructive approach of Federal Treasurer Jim Chalmers in bringing forward the GST discussion.
Treasurer Daniel Mookhey said:
“A system this absurd cannot last. It is not set in stone and it is time for it to change.
“This will be to the benefit of all the states and territories, including the smaller ones.
“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.”