In 2024, former federal Treasury official Stephen Anthony warned that Victoria may need a federal “bailout” due to increasing state debt.
The federal government has already effectively moved to bail Victoria out.
In 2024-25, Victoria’s GST allocation was increased by $3.8 billion, whereas NSW lost $188 million.
NSW Premier Chris Minns responded by labelling Victoria a “welfare state”.
Victoria also received an additional $411 million in grants from the Commonwealth in 2024-25.
Victoria’s GST allocation was increased again by $3.7 billion for 2025-26, with its share of the GST pool rising from 24.8% to 27.5%.
The latest GST carve-up will see NSW receive $1.4 billion less than Victoria despite having 1.5 million more people.
NSW will receive just 82¢ for every dollar notionally paid by its citizens, down from 86¢ last year, whereas Victoria will receive $1.06 for every $1 of GST estimated to be paid in the state based on its population, down from $1.07 last year.
When the GST was implemented in 2000, Victoria received 85 cents for every dollar raised.
NSW will receive only $28.2 billion of GST revenue in 2026-27, $1.4 billion less than Victoria’s $29.6 billion:
NSW has used its submission to a Productivity Commission review of the GST to call for GST revenue to be distributed to the states on population size.
If the PC were to accept NSW’s proposal, it would result in it getting an extra $3.2 billion a year:
NSW Treasurer Daniel Mookhey described the current GST allocation system as “busted” and claimed his state “carries the federation all by itself”.
“NSW carries the federation all by itself. Other rich and wealthy states aren’t doing their bit to help smaller states and territories like the ACT, Tasmania and the Northern Territory”, he said.
“Even worse, NSW taxpayers have seen more of their money put to work fixing the budgets of Western Australia and Victoria, than their own”.
“The whole of the federation would be better off if we allocated the GST by population share, with the federal government using their balance sheet to prop up the smaller jurisdictions”.
There is no doubt that the GST allocation system rewards incompetency.
Victoria has banned fracking and the exploration of coal seam gas and has been rewarded with billions in extra GST revenue well beyond its share of the population.
NSW is the biggest loser from the GST system, given that it has received a diminishing share of the GST ($0.82 cents per dollar raised in 2026-27), despite receiving the nation’s largest intake of migrants, who require new infrastructure and services.
