In a recent development that has flown under the radar of public attention, the expiration of a Morrison-era deal to ensure that no state was worse off has raised significant concerns within the New South Wales (NSW) budget.
Buried deep within the pages of NSW Treasurer Daniel Mookhey’s first budget was a warning about the GST (Goods and Services Tax) safety net, challenging his federal counterpart to take action and make the “no-worse-off” guarantee permanent. This critical issue, often overlooked, has the potential to result in inefficient taxes and jeopardize essential services.
The “no-worse-off” guarantee, a commitment made during the Morrison government’s tenure, was designed to ensure that no state or territory would be financially worse off as a result of changes to the GST distribution formula.
This guarantee was a crucial mechanism to maintain equity among the states and ensure that essential services, such as healthcare, education, and infrastructure, would not be compromised due to fiscal imbalances.
In 2018, the Morrison government altered the distribution of GST to address concerns from Western Australia, introducing a guaranteed minimum of 70 cents per dollar of GST revenue in 2021-22, with a scheduled increase to 75 cents per dollar by 2024-25.
As part of this transition, any state that would have received less funding than under the previous formula was provided with additional financial support. NSW is anticipated to receive approximately $3.8 billion in no-worse-off payments over the upcoming two fiscal years.
The budget document, made public on Tuesday, strongly cautioned that the impending expiration could have catastrophic consequences.
The funding in question is vital for hiring over 8000 nurses or teachers, a prospect that Mr. Mookhey stressed is simply unaffordable for the state. He emphasized that losing even a single healthcare worker is a concern, let alone the prospect of losing 8000 of them.
The most recent addition to the roster of Labor-led states is now adding its voice to the growing chorus calling on the government to take swift action and implement reforms to the GST system. Back in March, Victorian Treasurer Tim Pallas made a similar plea, advocating for the top-up provision to be permanently established to guarantee stability in state budgets.
