NSW Deficit Soars to $3.6b as GST ‘Rip-off’ Bulldozes Surpluses The New South Wales (NSW) government has plunged into a $3.6 billion deficit, a stark reversal of the surpluses it had forecasted, due in large part to an alleged “rip-off” in GST revenue. Premier Dominic Perrottet blamed the deficit on a “grossly unfair” distribution of GST revenue, which he claimed has short-changed the state. The GST, a consumption tax levied on goods and services, is a major source of revenue for state governments. According to Perrottet, NSW has been receiving significantly less GST per capita than other larger states, resulting in a loss of billions of dollars in funding. He accused the federal government of “ripping off” the state and called for an urgent review of the GST system. The deficit has severely impacted the government’s ability to fund essential services, including healthcare, education, and infrastructure projects. The government has been forced to make significant cuts to spending and increase borrowing to meet its obligations. The Labor opposition has criticized the government for its handling of the GST issue. Leader Chris Minns accused Perrottet of “gross incompetence” and said the deficit was a “direct result of the government’s reckless spending.” The federal government has denied any wrongdoing and defended the GST distribution system. Treasurer Josh Frydenberg said the GST is “fair and transparent” and that NSW is benefiting from the system. Despite the heated debate, experts agree that the GST distribution formula needs to be revised to ensure that states receive an equitable share of revenue. The current formula, which is based on a state’s population and economic activity, has been criticized for favoring smaller and less populous states. The NSW government has threatened to pursue legal action if the federal government does not address its concerns. The issue is expected to dominate the upcoming federal election campaign, with both major parties likely to promise to reform the GST system.NSW Budget Deficit Blamed on GST ChangesNSW Budget Deficit Blamed on GST Changes The New South Wales government has attributed its projected $3.6 billion budget deficit to recent changes in GST distributions, which have reportedly reduced the state’s revenue by $11.9 billion over four years. Key Features of the Budget * New spending to alleviate the housing crisis, enhance health outcomes, and boost education. * Emphasis on absorbing the financial impact of the GST changes rather than imposing austerity measures. GST Changes Impact According to Treasurer Daniel Mookhey, these changes have deprived the state of essential funding, resulting in a deterioration of its financial position. Mookhey contends that NSW is disproportionately contributing to the funding of smaller states, with Victoria contributing only a quarter of what NSW provides. Budget Forecasts * Revised deficit of $3.6 billion for 2024/25 (previously projected at $490 million surplus). * Worsened current year deficit to $9.7 billion (previously estimated at $9.6 billion). Other Initiatives Several funding announcements have preceded the budget, including: * $650 million for essential worker housing. * $3.4 billion for hospital upgrades. * $1.4 billion for regional school expansions. * $8.4 million for a Rental Commissioner to combat rental law breaches. Revenue Measures To offset spending, the budget includes revenue-generating measures such as: * Expanded land tax base. * Increased license fees for boaters. Impact of GST Carve-Up Changes The GST changes have significantly reduced NSW’s projected revenue over the next four years: * 24/25: Minus $3.6 billion (previously projected at minus $1.9 billion). * 25/26: Minus $2.5 billion (previously projected at $0.3 billion surplus). * 26/27: Minus $2.4 billion (previously projected at $1.4 billion surplus). * 27/28: Minus $1.5 billion (previously projected at $2.2 billion surplus).