Victoria already has the lowest credit rating in Australia (AA).
Major ratings agencies — S&P Global, Moody’s, and Fitch — have all warned Victoria that its rapidly rising debt poses a serious risk of another credit‑rating downgrade, which would sharply increase the state’s borrowing costs.
They have specifically highlighted Victoria’s high and growing debt‑to‑revenue ratio, rising interest bills, weak budget discipline, and lack of a credible plan to stabilise debt.
A credit rating downgrade would mean higher interest rates on state borrowing, costing taxpayers more.
The federal government has already provided Victoria with a financial bailout of sorts via a large increase in its GST allocations over recent years, which have come at the expense of NSW:
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 extra GST of only $166 million in 2026-27, well below Victoria’s extra $1,377 million:
NSW will receive only $28.2 billion of GST revenue in 2026-27, $1.4 billion less than Victoria’s $29.6 billion:
This means NSW will receive $1.4 billion less in GST revenue than Victoria in 2026-27, 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. In contrast, 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.
Despite Victoria receiving a greater share of GST than it deserves, state Treasurer Jaclyn Symes still complained that Victoria was being unfairly treated:
“The Commonwealth gave Western Australia a sweetheart deal – and without the no-worse-off guarantee the rest of Australia will pay the price”, Symes said.
“I’m calling for the return to the previous system that was fair and put the needs of all Australians front and centre”.
Symes said she would keep pushing for a fairer GST system.
The reality is that 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.
Victoria, by contrast, is doing very nicely out of the current system.
I roasted Victoria’s GST bailout on this week’s Treasury of Common Sense on Radio 2GB/4BC:
