NSW threatens to delay major deals unless Anthony Albanese coughs up more GST funding

An almost $12bn budget black hole in NSW has threatened to delay deals on the NDIS and education, sparking a fresh fight over a contentious GST carve up.

State Treasurer Daniel Mookhey claimed the “absurd” GST allocation will cost NSW $11.9bn over four years and “almost certainly” lead to the state losing its AAA credit rating.

As a result, he argued, the state budget had no spare capacity to help out the federal government.

“We are simply making the point that … we don’t have spare change to be able to assist the Commonwealth in meeting their responsibilities when it comes to things like the NDIS,” he told ABC on Monday.

“The fact that New South Wales has now lost more revenue from the Commonwealth Grants Commission than we did during COVID-19 from a global pandemic means that we simply don’t have spare change anymore.”

The GST carve up has become a political lightning rod in recent years after the then-Turnbull government tweaked the formula to placate Western Australia.

Last year Prime Minister Anthony Albanese caved to demands of the states, gifting more than $10.5bn in GST top ups and billions for healthcare in return for a deal on increasing the states share of NDIS funding.

But the independent commission’s ruling earlier put NSW and Queensland in the losers seat – receiving $310m and $469m less respectively.

Victoria was the big winner, gaining an extra $3.7 billion.

Mr Mookhey will use a speech in Sydney on Monday to reignite his call for the GST distribution to be overhauled.

He wants a switch to a per capita model which he claims would be fairer, and will say if the change is not made, some tough decisions would be needed to be made in the state budget come June.

Federal Treasurer Jim Chalmers said it was “entirely unsurprising” NSW would have its hand out asking for more money, noting it was already receiving billions in other funding.

“Decisions around the allocation of the GST are taken by the independent Commonwealth Grants Commission at arm’s length from the Albanese government – that’s been the case for a long time under federal governments of both political sides,” he said.

“We do recognise the pressure on state and territory budgets.

“But it would be easy, but wrong, to blame the Commonwealth government for those pressures.”