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Today, the Commonwealth agency tasked with allocating GST payments revealed the distribution figures for the states and territories for the year 2026-27. This annual announcement outlines how financial resources will be divided across the nation, impacting local budgets and public services.
Western Australia (WA) emerges as the standout beneficiary of this distribution, despite holding the title of the strongest state budget in the country. In the upcoming allocation, WA is slated to receive a substantial $9.3 billion. This amount marks an increase of over $1.3 billion from the previous year, highlighting a significant boost in funding.
Moreover, the current allocation represents a dramatic $6.6 billion more than what WA would have received prior to a pivotal change in the GST payment calculation method. This change, implemented in 2018 by the Turnbull government under the stewardship of then-treasurer Scott Morrison, altered the financial landscape for the states.
The original GST distribution model aimed to allocate funds based on the revenue-generating capacity of each state or territory. This approach was intended to ensure that all areas could offer comparable services to their residents, regardless of local economic strengths or weaknesses.
But that system was changed by the Turnbull government and then-treasurer Scott Morrison in 2018.
The new policy – which has been backed by the current government – introduced a new model for distributing GST, which set a floor for payments, meaning each state or territory receives no less than 75 cents for every dollar of GST it raises.
But WA isn’t the only state getting a bigger slice of next year’s $103 billion pie.
Queensland’s GST distribution will increase by $1.7 billion next financial year, the most significant dollar increase of all the states, due to falling coal prices which have reduced the state government’s revenue.
Victoria’s percentage share will fall slightly, with dollars redirected to Queensland and WA due to the aforementioned drop in coal and iron ore royalties.
But Victoria will still receive about $1.7 billion more than NSW, even though NSW has a larger population.
GST “relativities” – the scores used to determine how much funding a jurisdiction receives – in South Australia and the ACT marginally decreased, and Tasmania and the NT’s share increased slightly, owing to changes in First Nations populations and people living in regional areas.
The 2026-27 carve-up deal has again cast criticism over the vexed policy, which the agency responsible for the distribution today admitted disproportionately benefits WA.
In a submission to the Productivity Commission, the Commonwealth Grants Commission said Western Australia has received around $23 billion more GST revenue in the last five years than it would have if the floor did not exist.
“In the current economic circumstances, most states receive less GST revenue than would be needed to provide the average level of services,” the submission read.
“At the same time, Western Australia receives more GST revenue than would be needed to provide the average level of services.”
The Productivity Commission is reviewing how GST is divided between the states and territories.
Public policy expert Robert Breunig has previously called the deal a “disaster”, while fellow respected economist Saul Eslake has been even more scathing, calling it “the worst public policy decision of the 21st century thus far” and WA’s recent arguments “vacuous” and “without foundation whatsoever”.
An interim Productivity Commission report is expected in November.
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