A speech by NSW Treasurer Daniel Mookhey to be delivered today to the McKell Institute details how the shortfall in GST revenue allocated to NSW will impact on the budget he is due to deliver in June.
The treasurer says the Commonwealth Grants Commission’s carve-up of funds to states will cost NSW $11.9 billion over the next four years. That’s more in lost revenue than COVID-19, Mookhey says. It is the equivalent of losing 19,000 healthcare workers, the ability to hire 19,000 teachers or 16,000 police officers for the next four years, according to the Treasurer.
Mookhey says the state’s AAA credit rating will almost certainly be downgraded as a result of what he calls the GST “rip-off”. The state’s premium credit rating has been a feather in the cap of the NSW economy for a long time and it should not be given up lightly. It brings very real benefits. The rating is a measure of how risky a borrower is regarded to be and of the borrower’s expected willingness and capacity to repay any debt on time. The potential damage is that lower credit ratings will increase the cost of future borrowing.
NSW Treasurer Daniel Mookhey and other state treasurers believe there are huge problems with the GST system.Credit: Louise Kennerley
A state budget surplus forecast for the next financial year has now evaporated but Mookhey says protecting family budgets takes precedence over the credit rating. Given the very real hardship evident in a large part of the community due to the cost-of-living crisis and high mortgage and rent prices, this is an argument that is likely to be greeted sympathetically by taxpayers.
The latest budget blow comes as a survey by Resolve Strategic for the Herald shows deepening concerns about family budgets to a point where 55 per cent of voters say they would struggle to pay for a major expense, such as repairing a car or buying a fridge. That figure was an increase from 41 per cent in February last year.
Mookhey tells us that despite the state temporarily being forced to go into the red, we should expect a continued longer term focus on cutting state gross debt. He describes this as an insurance policy for the next economic shock that at the same time slashes interest payments. Most would accept the wisdom of having a buffer against uncertainty and what may be just around the corner.
Clearly as a state, we should be aiming for balanced budgets over the medium and long term, but given cost-of-living pressures and the very real threat of rising unemployment and hardship, it seems reasonable to go into short-term deficit to maintain living standards. A small increase in unemployment last week confirmed the jobs market remains tight amid lacklustre consumer spending.
We have already witnessed some public mudslinging between states and the Albanese government over how the GST is divided and no doubt there will be more to come. Mookhey’s speech is certain to fan the flames of controversy surrounding the inequitable slicing of the GST cake.
Impact of GST carve-up reveals urgent need to fix a bad system
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21.04.2024
A speech by NSW Treasurer Daniel Mookhey to be delivered today to the McKell Institute details how the shortfall in GST revenue allocated to NSW will impact on the budget he is due to deliver in June.
The treasurer says the Commonwealth Grants Commission’s carve-up of funds to states will cost NSW $11.9 billion over the next four years. That’s more in lost revenue than COVID-19, Mookhey says. It is the equivalent of losing 19,000 healthcare workers, the ability to hire 19,000 teachers or 16,000 police officers for the next four years, according to the Treasurer.
Mookhey says the state’s AAA credit rating will almost certainly be downgraded as a result of what he calls the GST “rip-off”. The state’s premium credit rating........
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