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NSW half-yearly budget review reveals $11b plunge in NSW's GST
By Matt Wade
NSW will suffer the biggest ever cut in GST funding next financial year as other states with weaker economies get a larger share of the tax.
GST revenue flowing into the NSW government's coffers will plunge by almost $1 billion in 2016-17, the biggest annual fall in GST funding for any state since the controversial tax was introduced 16 years ago.
And the gap between GST raised in NSW and what it receives in return will get even bigger by the end of the decade.
The state's half-yearly budget report, released on Tuesday, said that in 2019-20 NSW households will be taxed $23.7 billion in GST but the state will receive just $17.8 billion in return – a difference of $5.9 billion.
Treasurer Gladys Berejiklian announces the half-yearly budget forecast at the Four Seasons Hotel in Sydney. Credit: Ben Rushton
"This is by far the most any state has given to the other states in the history of the GST," it said.
The budget report predicted NSW would "continue to outperform the national economy", supported by a record pipeline of public infrastructure projects, a lower exchange rate and low interest rates. It forecast budget surpluses averaging $1.8 billion over the next four years.
But Treasurer Gladys Berejiklian said NSW taxpayers were "victims of our own success" when it came to the GST carve-up.
"Our reward for delivering the best budget in the nation and getting our fiscal position right is to lose $5.9 billion in GST revenue in just one year [2019-20]," she said. "This lost revenue could fund more than 50,000 additional nurses or 55,000 teachers."
Under the federal government's GST distribution formula, states normally get a smaller share of the national GST pool when their tax revenues rise due to strong economic growth.
If GST revenues were returned to the state it was raised in, NSW would get an extra $17.8 billion in the next four years. If GST revenues were split on a per capita basis – the formula NSW argues for – the state would have an additional $13.5 billion over four years.
The budget report said state government-influenced price growth in Sydney – comprising public transport, electricity, water and some vehicle charges – has been the lowest of the mainland capital cities on average over the past five years.
"As a result, an average Sydney household is around $100 a year better off than it was two years ago," it said.
The NSW government will spend $73.52 billion on its operations and services this financial year, about $230 million more than the June budget forecast.
Revenue is also projected to be higher than forecast in June, with a $220 million drop in GST revenue more than offset by higher stamp duties.
The state coffers received a one-off $489 million boost in stamp duty from the partial long-term lease of electricity distributor Ausgrid.
More than 40 per cent of the estimated infrastructure spending by all states and territories this financial year will be in NSW, the budget report said.
But Ms Berejiklian warned that revenue growth would decline in future due to the reduced share of the GST and softer conditions in the Sydney property market.
A surplus of $4 billion is expected this financial year but by 2019-20 the figure is forecast to be $893 million.
"Smaller surpluses are expected in 2018-19 and 2019-20, primarily as a result of revenue growth softening as NSW's share of GST declines," the report said.
Despite the state's strong budget position, Ms Berejiklian said the state's AAA credit rating would be in jeopardy if the federal government lost its top rating.
"We want the federal government to keep its triple-A," she said. "It's important for the nation but it's also important for NSW … the credit rating is dependent on the federal government as well."
International ratings agencies have warned the federal government is at risk of losing its AAA rating.