NSW’s $500m GST revenue squeeze ignores state catering for more than a third of Australia’s new migrants

The Daily Telegraph, 19 March 2024

Population growth fuelled by soaring migration is set to cut the amount of goods and services tax revenue coming to NSW by $80 per person next financial year, heaping pressure on the state government to fund hospitals, schools and roads with a decreasing share of Commonwealth government cash.

Analysis by The Daily Telegraph shows that even on conservative population estimates, the amount of GST revenue per capita will slump from $2902 in 2023-24 to $2822 in the coming 12 months. In total, NSW will get $300m less in GST next financial year than in 2023-24 – which state government officials say is $1.66bn less than we should have got.

The unprecedented cut to NSW’s GST share has now led to calls for an overhaul in how payments are calculated.

Premier Chris Minns on Monday declared it was unreasonable for NSW to do the heavy lifting in settling new migrants while taking a “decreasing share” of government spending.

In January this year, Australia recorded its highest-ever level of permanent arrivals, surpassing the previous record, which was December last year. Mr Minns said about 37 per cent of new migrants settle here.

It came as NSW Union leaders launched a blistering attack on the Albanese government over “ridiculous and unfair” GST carve up, accusing the commonwealth of “pulling the plug” on funding for essential workers and using the country’s largest state as a “cash piñata”.

Treasurer Daniel Mookhey has also demanded change, likening an unprecedented cut to NSW’s GST share last week to controversial calls from the NRL Bunker.

To keep the GST share at this financial year’s levels, NSW’s total funding would have to increase by nearly $400m.

The Commonwealth Grants Commission claims GST revenue per person will actually increase for NSW next financial year. 

The CGC’s website claims NSW will be getting $2,838 per person in GST funding for 2024-25, up from $2834 in 2023-24.

It is unclear how the CGC reached this conclusion, given the total amount of funding is falling and the state’s population is growing rapidly.

The Telegraph contacted the CGC for clarification at 4pm on Monday but its office had closed for the day.

Mr Minns on Monday said NSW will not be able to pay more money into federal programs while payments from GST are decreasing.

“If you want reform in health care, education, NDIS, we can’t come to the table and do what you need us if you’re going to keep squeezing us with GST revenues,” he said.

“It’s not reasonable to take 37 per cent of inbound immigrants every single year, but to do it with a decreasing share of the Commonwealth spending,” Mr Minns said.

The NSW government’s planning is based on population growth of annual population growth of about 85,000.

But the state is adding people at a far greater rate, due to record migration. 

In 2022, the Australian Bureau of Statistics’ “medium series” forecast put NSW’s on track to grow by 130,000 this financial year and nearly that much again in 2024-25. 

Even those forecasts are being outstripped. 

The medium numbers forecast NSW would have a population of 8.32m in June 2023. The actual result ended up being 8.34m.

Last week’s decision to cut NSW’s GST share will lead to NSW getting the second least, per person, among all states. While NSW accounts for 31.2 per cent of the population, we will receive 27.1 per cent of the GST.

Writing in today’s Telegraph, Mr Mookhey has called for the CGC to tell states what they can expect “for the next four years” to give more certainty.

He has also called for an initial “draft ruling” that can be appealed, and for the CGC to “require all states to tell each other what it costs to deliver the same service so we can all keep each other honest”.

NSW Union leaders also weighed into the GST debate on Monday, after The Daily Telegraph revealed country towns like Kiama and Googong had been rebranded as “major cities”, reducing the amount of GST funding NSW receives.

Unions NSW Secretary Mark Morey labelled the GST situation “absurd”.

“NSW has the tap running for essential workers while the Federal Government keeps pulling the plug and draining it,” he said.

Health Services Union NSW boss Gerard Hayes said the GST heist would lead to even more healthcare workers abandoning NSW for other states.

“NSW is supposed to the gateway to Australia yet the Commonwealth seems to think it is a cash piñata that should be repeatedly belted,” he said.

“If we keep funnelling money out of NSW, the health workforce will go with it,” he said.

Macrobusiness.com.au chief economist Leith van Onselen said the Commonwealth government should be on the hook to pay for increased migration, not just the states.

“If the federal government is going to flood major jurisdictions with extra people they should pay up,” he said.

“The federal government should be paying the states a fixed sum per new resident – say $50,000 per resident – to cover their infrastructure impact, their needs for services, things like that,” he said.

High migration numbers threaten making the current housing crisis even worse in Sydney, where rental vacancies are at record lows.

The current rental market in Sydney was a nightmare to deal with for 21-year-old Georgina Marston, who’s had to live in student accommodation at the University of Sydney just to have a roof over her head.

“I had two months to find somewhere to live in Sydney, close to the uni that I could afford on my own as my parents live three hours away in Bathurst,” she said.

When asked about migration and NSW growing more, Ms Marston said that it “wasn’t fair”.

“All this does is put more people in here who can afford it and it pushes out those who can’t. Especially with NSW having such a high concentration of Australia’s most popular universities.”

Beyond just housing affected by the high number of migration are places like hospitals, with long wait times affecting families like Cam Dowsett’s.

“Last time I took my son to the hospital and it’s usually a nightmare, like if we go to RPA [Royal Prince Alfred]. We were there for a couple of hours,” the 37-year-old father of two said.