Albanese rejects states’ rebuke of $89.5bn GST cash carve up, refuses push for allocation overhaul

Prime Minister Anthony Albanese has rejected claims that Queensland and NSW are being swindled in the cash carve up of Australia’s $89.5bn GST pool.

Speaking in Sydney on Thursday, Mr Albanese refused to intervene in the GST allocation process, saying the system had not changed under his government and it would remain at arm’s length.

“This is not a government process, it’s an independent process,” Mr Albanese told reporters.

“What I don’t think any state would want is for the federal government to be able to make decisions on a political basis, that’s why we have a Commonwealth Grants Commission,”

Every year, the Commission assesses the spending and revenue raising ability of each state, and then makes recommendations to the government on how the GST revenue pool should be distributed.

But after a determination by the Commission on Tuesday, NSW Treasurer Daniel Mookhey and his Queensland counterpart Cameron Dick demanded an overhaul of how revenues raised via the GST are dispersed among the states and territories.

Under the determination announced by the Commission, NSW will be $188m worse off next financial year, predominantly due to the royalties it levels against coal and petroleum products.

Labelling the system as “absurd”, Mr Mookhey said the continuation of the current allocations process was untenable.

“The people of NSW should not be missing out on the resources they need to access world-class public services,” Mr Mookhey told reporters on Wednesday.

“Yesterday’s decision by the Commonwealth Grants Commission shows just how out of touch they are – NSW should not have to pay the price.”

To the north, Queensland will suffer the biggest blow to its budget, taking a $384m trim on its GST allocation in the 2024-25 financial year, as the state similarly reaped higher tax revenues from coal royalties.

Mr Dick said the cut would make balancing the state’s upcoming June budget more difficult.

“This shows why it is so important that the federal government comes to the table to fairly fund Queensland infrastructure,” he said.

The skirmish over GST distribution comes ahead of a meeting of Commonwealth, state and territory treasurers scheduled for Friday, with a federal government proposal for states to pick up the tab of the soaring cost of the National Disability Insurance Scheme set to be high on the agenda.

Mr Mookhey added the NSW government would potentially be a holdout on future federal-state partnerships if the Commonwealth didn’t move to overhaul the system.

“I’ve made it very clear NSW will now be the last state standing when it comes to engaging with the Commonwealth on key agreements, including our health system, including our education system,” he said.

Victoria is set to be the biggest beneficiary of the updated arrangements, with the state’s budget set to reap an additional $3.8bn in the next financial year, bringing the state’s total payments to $23.7bn.

But the state’s premier, Jacinta Allan said the yearly debate over the GST’s collection and contribution was frustrating her state’s efforts to invest more in schools, hospitals, kindergartens and TAFE.

“We need our budget certainty to be able to deliver those services,” Ms Allan said after delivering an address to the Committee of Economic Development in Australia in Melbourne on Thursday.

“We will continue to push very, very strongly for the retention of the no-worse-off guarantee.”

WA Premier Roger Cook also weighed into the debate, labelling NSW Premier Chris Minns and Treasurer Daniel Mookhey “whingers” for complaining over the GST’s redistribution.

“They’re ridiculous, that they are cutting up rough in the way that they’re engaging in this debate,” he said.

The state will receive an extra $838m under the 2024-25 allocation, taking total payments to $7.3bn.

Meanwhile, the federal budget will incur a $5.2bn hit in the 2024-25 financial year due to “no worse off” GST deal designed to placate WA, which would have otherwise seen GST raised in the state sent to its eastern neighbours.

Under the 2018 deal struck by then-Treasurer Scott Morrison, every state was guaranteed they would receive no less than 70c in every dollar from GST raised in that state.

From next financial year, the floor will rise to 75c in every dollar, with economists forecasting the deal will cost the federal budget tens of billions over its duration.

Additional reporting: Blair Jackson