NSW Deficit Balloons to $3.6b as GST ‘Rip-Off’ Erodes Surpluses New South Wales (NSW) has plunged into deficit, with a $3.6 billion shortfall forecast for the 2023-24 financial year. This dramatic reversal of fortune comes amidst soaring inflation and what the state’s Treasurer, Matt Kean, has termed a “GST rip-off.” Kean has accused the federal government of withholding GST revenue from NSW, which has contributed significantly to the deficit. According to the Treasurer, the state has been receiving less GST per person than other jurisdictions, leading to a loss of billions of dollars in revenue. “The GST system is no longer working for NSW,” Kean said. “We’re getting short-changed, and it’s costing our state billions of dollars that could be invested in essential services.” The GST is a consumption tax levied on most goods and services in Australia. The revenue collected is distributed among the states and territories based on a formula that considers population and other factors. However, NSW has been arguing that the formula is unfair and has been pushing for reform. The state’s deficit has also been exacerbated by other factors, including the rising cost of living, which has put pressure on government spending on healthcare and other services. The government’s decision to cut stamp duty on certain properties has also contributed to the revenue shortfall. The deficit has raised concerns about the state’s financial sustainability and may force the government to reconsider its spending priorities. Kean has indicated that the government will need to make “tough decisions” to balance the budget. The federal government has rejected NSW’s claims of a GST “rip-off,” arguing that the distribution of GST revenue is fair and transparent. The federal Treasurer, Jim Chalmers, has said that the GST formula is regularly reviewed and adjusted to ensure equity among states. Despite the ongoing debate over GST distribution, the NSW deficit is a significant setback for the state’s finances. It highlights the challenges of balancing economic recovery with fiscal responsibility amidst rising inflation and economic uncertainty.NSW Budget Deficit Blamed on GST ChangesNSW Budget Deficit Blamed on GST Changes NSW has attributed its projected $3.6 billion budget deficit to “absurd” changes in GST distribution, reducing hopes of a surplus for the foreseeable future. Key Features of Budget Treasurer Daniel Mookhey’s budget will prioritize spending on housing, health, and education. It will also highlight the impact of recent GST changes, which are expected to cost NSW $11.9 billion over four years. Deficit and GST Impact The 2024/25 budget deficit is expected to be $3.6 billion, up from the December forecast of $490 million. This year’s deficit has also increased slightly to $9.7 billion. Mookhey argues that the GST changes are disproportionate and a “rip-off” for NSW, which he says will contribute significantly more to smaller states than Victoria. Funding Announcements Prior to the budget, numerous funding announcements have been made, including: * $650 million to house essential workers * $3.4 billion for hospital upgrades * $1.4 billion for regional school construction and upgrades * $8.4 million for the Rental Commissioner to address dodgy agents and law breaches Revenue Measures To increase revenue, the budget will: * Expand land tax to more landlords and businesses * Raise license fees for jet skiers and boaters GST Carve-Up Changes Impact The total impact of GST changes on NSW’s budget over four years is estimated at $11.9 billion, resulting in projected annual deficits.NSW Deficit Balloons to $3.6 Billion as GST ‘Rip-off’ Erodes Surpluses New South Wales has recorded a massive budget deficit of $3.6 billion in the first half of 2023, a sharp reversal from the surpluses the state has enjoyed in recent years. Treasurer Matt Kean has blamed the deterioration on a “rip-off” from the federal government, alleging that the GST distribution formula is unfair to NSW. The state has been advocating for a change to the formula, arguing that it is being short-changed relative to other states. The deficit is significantly higher than the $1.6 billion deficit forecast in the state’s mid-year budget update in December. It is also a major blow to Kean’s reputation as a fiscal disciplinarian, having previously pledged to return the state to budget surplus by 2024-25. The state’s revenue has been hit by a 4.5% decline in GST revenue, amounting to a loss of $1.9 billion. The federal government has defended the GST distribution formula, arguing that it is based on a complex set of factors and that NSW receives its fair share. The deficit has raised concerns about the state’s ability to fund essential services and infrastructure projects. The government has been under pressure to increase spending on health, education, and public transport. Kean has vowed to “explore all options” to reduce the deficit, including efficiency measures and potential tax increases. However, he has ruled out raising the state’s debt ceiling. The budget deficit is a major political headache for the Perrottet government, which is facing an election in March. The opposition Labor Party has seized on the issue, accusing the government of financial mismanagement.