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

Australia’s most populous state will be $1.9 billion worse off next financial year thanks to a bigger-than-expected drop in GST payments announced in the Budget.

The share NSW will receive from federally collected goods and services tax is one of the few areas where Treasurer Jim Chalmers has cut spending, despite 500,000 new migrants expected to move to the state over the next four years.

The tax generated about 23 percent of state revenue last fiscal year, with the cut marking a downturn the biggest drop in GST funding since the tax was introduced by the Howard government in 2000.

Budget papers last year showed NSW would receive 29.1 per cent of GST revenue, or $27.7 billion, in 2024-25, but that has been revised down to 27.5 per cent in Tuesday’s federal budget, or $25.8 billion.

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

The share NSW will receive from the federally collected Goods and Services Tax is one of the few areas where Treasurer Jim Chalmers has cut spending, despite 500,000 new migrants expected to move to the state over the next four years (stock image)

Mr Minns has called for per capita tax rationing rather than the current way, which is based on advice from the Subsidies Committee, using a formula designed to give each state approximately the same level of provide public services.

“We have made it clear that per capita distribution of the GST is the only fair way to ensure states like NSW can grow,” he said.

“I didn’t expect the budget to change that, but I’m hopeful that now that the federal government has listened to us on infrastructure in Western Sydney, we can make some progress on some of these other urgent issues.’

Despite the GST drop, the Albanian government has given NSW a boost by restoring a number of infrastructure projects that were canceled last year.

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

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

Western Sydney Airport will receive an additional $300 million for operating costs and a Circular Quay Renewal Program will receive $220 million.

$2 million will also be provided to improve Wi-Fi and mobile connectivity along the heavy rail route between Wyong and Hornsby.

And a whopping $55 million has been earmarked for a plan to develop the Newcastle-Sydney high-speed rail line, which will deliver no actual infrastructure.

NSW Premier Chris Minns (pictured with wife Anna) is furious after the federal budget revealed NSW will take a $1.9 billion hit in GST revenue next financial year

Government-run schools in NSW will also receive a $110 million funding increase over the previous financial year, well below the $800 million the NSW government said was needed.

Dr. Chalmers promised a surplus of $9.3 billion in his third budget on Tuesday evening and pledged that the government’s aid measures would not increase inflation.

For Australian families, 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 included little for benefit recipients asking for higher payments, or for motorists facing rising fuel prices.

Dr. Chalmers said the budget also provides broader relief, including by freezing drug costs, supporting low-income renters, making student loans fairer and helping retirees by freezing the deemed rate.

The government’s updated Phase 3 tax cuts will deliver an average benefit of $1,888 per year – $36 per week – to all 13.6 million taxpayers from July 1.

“For 84 percent of taxpayers and 90 percent of women, that’s a bigger tax cut than under the previous government,” Dr. Chalmers said.

The 2024-2025 budget also predicts inflation will reach the 2-3 percent target by Christmas, up from 3.45 percent now.

That is much faster than the Reserve Bank’s expectations published last week, which did not take into account the fiscal measures.

It also raises hopes of a rate cut before the next federal election, due in May next year.

But Dr Chalmers stressed the Australian economy will come under pressure as growth slows in China and tepid in Europe, tensions persist in the Middle East and Ukraine and global supply chains fragment.