Victoria Nets $3.6 Billion in GST Windfall Despite Economic Management Issues

The GST redistribution process is always highly contentious.

A receipt showing General Sales Tax (GST) is shown alongside Australian notes and coins in Sydney, on July 4, 2018. AAP Image/Sam Mooy

Victoria is set to receive an additional $3.6 billion from the politically sensitive GST redistribution process, benefiting from its booming population and a lower reliance on mining royalties.

In contrast, Queensland, which is recovering from the after-effects of Cyclone Alfred, will face a $1.2 billion cut.

The Commonwealth Grants Commission (CGC), in its latest report released on March 14, justified Victoria’s increased share by pointing to its lack of a coal-mining industry, which limits its ability to easily generate revenue.

The report also highlighted that Melbourne’s post-pandemic population growth (driven largely by international migration) creating greater demand for infrastructure spending.

Additionally, changes in the assessment of state COVID-19 expenses increased Victoria’s share, as the state’s pandemic-related spending exceeded the national average.

Victoria’s COVID-19 response has been a long-running contributor to the above issues, which has led to high debt due to prolonged lockdowns, and subsequent tax measures to try pay-off those costs.

This in turn, has forced a high volume of business closures, and landlords to sell-off their assets.

Queensland the Only State to Lose Out

Meanwhile, Queensland, despite receiving the largest net inflow of domestic migrants, is set to lose $1.2 billion in GST revenue for 2025–26, bringing its allocation down to $16.6 billion.

The CGC attributes this decline to significant growth in Queensland’s coal royalty revenue, driven by both higher global coal prices and an increase in the coal royalty rate.

“Queensland has the largest share of production of high-value coal,” the report states, noting that the state’s below-average pandemic-related expenses further reduced its GST allocation.

With the national GST pool increasing from $91 billion in 2024–25 to $95 billion in 2025–26, Queensland Treasurer David Janetzki has condemned the politically-sensitive redistribution, arguing that it unfairly penalises Queenslanders.

“This recommendation would severely compromise Queensland’s capacity to deliver essential services and infrastructure for our growing state,” Janetzki said.

Meanwhile, the commission allocated an additional $942 million to New South Wales.

“This must be called out for what it is—shonky shifting of Queenslanders’ money for a better payout for New South Wales and Victoria,” Janetzki added.

He has urged federal Treasurer Jim Chalmers to reject the report, arguing that Queensland is suffering the biggest revenue reduction since the GST system was introduced in 2000.

Mike Callaghan, chair of the commission, defended the report, stating, “The Commission’s overall approach is designed so that the GST distribution is not influenced by states’ individual policy decisions.”

WA Continues to Reap Benefits

Western Australia remains a major beneficiary of the 2018 GST distribution reforms. These changes introduced a GST relativity floor of 0.75, ensuring WA never receives less than 75 percent of its per capita share of GST revenue.

As a result, WA is expected to receive almost $6 billion more in GST payments in 2025–26 than it would have under the previous formula.

Independent economist Saul Eslake called the 2018 decision “the worst public policy decision of the 21st century,” criticising both the Morrison and Albanese governments for maintaining a system that guarantees Australia’s richest state an inflated share of GST revenue.

“This cost will be borne by the federal budget—money that could have been much better spent in other ways, or not spent at all, thus reducing the budget deficit,” Eslake told The Epoch Times.

The latest GST funding allocations are based on a rolling three-year average, with COVID lockdown years now excluded from calculations.