NSW forecast to record a deficit until 2027-28 due to $11.9bn GST rip off

Due to the impact of the GST, the New South Wales state budget is expected to run deficits for another four years in a row through the 2027/28 financial year, resulting in a loss of $11.9 billion for the state.

When presenting the state budget on Tuesday, New South Wales state Treasurer Daniel Mookhey will say the government will “absorb” the black hole in the budget through a deficit rather than imposing “austerity measures” such as tax increases or drastic spending cuts.

“Helping families is our most important job during the worst cost of living crisis in NSW in a generation,” he will say on Tuesday.

“We refuse to respond to the Grant Commission’s absurdity by imposing austerity in NSW. That would lead to misery.”

Before the Commonwealth Grants Commission (CGC) decision earlier this year, NSW was forecast to have a surplus of $300,000 in the 2025-26 financial year, rising to $2.2 billion by 2027-28, according to the state budget tabled on Tuesday.

Now the deficit for the 2024-25 financial year will increase from $1.9 billion to $3.6 billion. NSW is also projected to remain in the red in the 2025-26 ($2 billion), 2026-27 ($2.4 billion) and 2027-28 ($1.5 billion).

However, the government will carefully offset the revenue shortfall without introducing new taxes – a Labour election promise. To do this, it will reduce the cost of living pressure on families and thus reduce the budget black hole.

“Our cautious spending will result in the deficit falling from $9.7 billion in 2023/24 to $3.6 billion in 2024/25. An improvement of $6 billion,” he will say.

“In years 25-26, the deficit will fall back to $2.5 billion thanks to strict spending discipline. Then in years 26-27, it will probably be $2.4 billion. Finally, in years 27-28, it will fall to $1.5 billion.”

“Overall, 8.6 billion better than 22/23.”

In January, Mr Mookhey said he would petition his federal counterpart, Jim Chalmers, to reform the way the CGC determines its GST allocation, calling for a per capita allocation method that would favour more populous states such as NSW.

He said the proposed changes should also increase transparency and accountability and that states should disclose their data used to calculate apportionment.

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