The Budget’s biggest loser: The one Aussie state set to be worse off

Australia’s most populous state will be $1.9billion worse off next financial year courtesy of a larger than forecast drop in GST payments announced in the Budget.

The portion NSW will receive of the federally collected tax on goods and services is one of the only areas where Treasurer Jim Chalmers has reduced spending, despite an expected 500,000 new migrants moving to the state over the next four years.

The tax provided about 23 per cent of the state’s revenue last financial year with the reduction representing the biggest single drop in GST funding since the tax was introduced by the Howard government in 2000. 

Budget papers from last year show NSW was set to receive 29.1 per cent of the GST revenue, or $27.7billion, in 2024-25 but that has been revised down in Tuesday’s Federal Budget to 27.5 per cent, or $25.8billion.

NSW Premier Chris Minns is fuming over the GST hit and has demanded the Treasurer give an explanation.

Mr Minns has called for the tax to be rationed out on a per capita basis instead of the current way, which is based advice from the grants commission using a formula intended to provide each state with roughly the same level of public services. 

‘We’ve made it clear that a per capita split on the GST is the only fair way of ensuring that states like NSW can grow,’ he said.

‘I didn’t expect the budget to change that, but I’m hopeful that as the federal government has listened to us on Western Sydney infrastructure, we can make some headway on some of these other pressing issues.’

Despite the GST drop, the Albanese government did provide a boost for NSW in terms of reinstating some infrastructure projects that were cancelled last year.

About $900million will be spent on road projects around the new Western Sydney Airport – $500million for the Mamre Road stage 2 upgrade and $400million for Elizabeth Drive. 

In other infrastructure funding, $112million will be provided to extend the M1 Pacific Motorway to Raymond Terrace.

The Western Sydney Airport will get an extra $300million for operating costs and a Circular Quay Renewal Program will get $220million.

There will also be $2million provided to improve Wifi and mobile connectivity along the commuter-heavy train route between Wyong and Hornsby. 

And a whopping $55million has been allocated for plan on how to develop high speed rail between Newcastle and Sydney – which will deliver no actual infrastructure.

Government run schools in NSW will also get $110million funding increase from the previous financial year, which is well short of the $800million the NSW government said was needed.

Delivering a surplus of $9.3bn in his third Budget on Tuesday night, Dr Chalmers promised the government’s relief measures would not increase inflation.

For Australian families, the key cost-of-living relief includes a surprise $300 energy rebate for all families, and the government’s promised revised Stage 3 tax cuts.

However this year’s budget contained little for welfare recipients calling for increased payments, or motorists facing growing fuel prices.

Dr Chalmers said the budget was also delivering help more broadly, including by freezing the cost of medicines, supporting low-income renters, making student loans fairer and helping pensioners by freezing the deeming rate.

The government’s revamped stage 3 tax cuts will deliver an average benefit of $1888 a year – $36 a week – from July 1 for all 13.6 million taxpayers.

‘For 84 per cent of taxpayers, and 90 per cent of women, (that’s) a bigger tax cut than they would have under the previous government,’ Dr Chalmers said. 

The 2024-25 budget also forecasts inflation to hit the target 2-3 per cent by Christmas, down from 3.45 per cent now.

That’s much faster than the Reserve Bank’s expectations released last week, which did not take in the budget measures.

It also raises hopes of an interest rate cut before the next federal election, due by next May.

But Dr Chalmers flagged the Australian economy will face pressures, with growth slowing in China and tepid in Europe, tensions continuing in the Middle East and Ukraine, and global supply chains fragmenting.