Victoria’s share shrinks as WA gains amid east coast concerns
Victoria’s slice of the national GST pie is set to shrink as Western Australia emerges as the clear winner in this latest split, renewing its east coast push to end the “sweetheart deal” that has delivered windfalls to the resource-rich west.
According to the decision of the independent grants commission, Victoria will receive $29.6 billion from the $103 billion GST pot this year; That’s an increase of $1.4 billion over last year, even though the state’s share decreased by 0.1 percentage point.
Despite being the strongest performer financially, it was Western Australia that gained the most from the new distribution, with its share of GST rising from 8.3 per cent to 9.1 per cent.
WA will receive an extra $6.6 billion thanks to a special deal implemented by Scott Morrison and approved by Anthony Albanese, bringing the total to $9.3 billion.
The deal, which will cost 17 times more than originally promised, is now under review by the Productivity Commission and the Victorian government is using the review to call for the deal to be scrapped.
Finance Minister Jaclyn Symes has argued that if the federal government does not want to return to the previous system, it should at least make the “no worse off” guarantee permanent, which would compensate other states if WA gets a larger share.
“The Commonwealth has given Western Australia a very nice deal and with no guarantee that the worst won’t happen, the rest of Australia will be paying the price,” he said.
“I am calling for a return to the previous system that was fair and put the needs of all Australians first.”
Queensland will receive the biggest direct increase in the $1.7 billion GST rollout, according to this year’s rollout announced on Friday.
NSW will see its share of the GST fall to just 25.5 per cent of the national pool, despite the state making up about 31 per cent of the population; The commission attributes the cut to the state’s “above-average growth in land values” and lower spending on natural disaster relief.
Victoria’s share of the national pie will decline slightly from 27.3 per cent to 27.2 per cent; This means the state will get back $1.06 for every $1 of GST estimated to be paid to the state based on its population; This rate is down from $1.07 last year.
But despite having around 1.5 million fewer people, it will receive $1.4 billion more from the GST pool than NSW when the “no worse payment” system is implemented.
“Victoria’s ability to raise revenue from its own taxes is below the national average,” the commission said, pointing specifically to the decline in land sales.
The independent grants commission, which oversees how the $103 billion fund is allocated, said every state and territory will receive more GST in 2026-27 than the previous year due to a projected increase in overall GST revenue.
Symes said he would continue to push for a fairer GST system, saying Victoria had received about $31 billion less in tax than its share of the population since the tax was introduced.
“We welcome [commission’s] “It’s a recommendation that recognizes Victoria’s population growth, infrastructure needs and lack of mining concessions,” he said.
Low coal and iron ore prices in WA and Queensland – which increased GST revenue for resource-rich states and reduced it for others – and the phasing out of huge pandemic costs were key drivers of Victoria’s reduced share of funding.
The commission uses the three-year average to decide which states need the most funding. The commission cut $853 million from Victoria’s assessed needs as heavy spending in the 2021-22 COVID-19 lockdown year was replaced by more stable health spending figures.
Victoria also lost around $257 million in GST funding as updated models revealed its urban population and relatively lower number of prisoners would make the justice system cheaper to run.
But a $558 million boost from revisions to disaster relief helped minimize the downturn, while lower property prices saw Victoria gain $429 million as its market cooled faster than the national average and its ability to raise its own revenue from stamp duty remained lower.
Additionally, the state’s strong population growth following the pandemic-era slump added $241 million to its assessed needs for urban transportation infrastructure.
The Commission uses a complex model to determine the GST distribution, which is often decided based on needs and takes into account each state’s ability to generate its own revenue.
This means resource-rich states that receive mining royalties, such as WA and Queensland, generally receive a smaller share of the GST, with the distribution recalculated annually by the commission.
But under legislation passed by the Morrison government in 2018, all states are now guaranteed a floor of 75 cents on the dollar, after WA’s share of revenue fell to around 30 cents for every dollar of GST collected in the states.
The agreement also ensured that WA could not have a GST relativism lower than the lowest GST relativities in Victoria and NSW. This year it will be 82 cents to the dollar, the same GST relativism as NSW.
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