GST Revenue Windfall to the States and Territories

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GST Revenue Windfall to the States and Territories

No. 083

GST REVENUE WINDFALL TO THE STATES AND TERRITORIES

The States and Territories are benefiting from a cumulative GST windfall of

$11.8billion to 2007-08, which is more than triple the estimate at the inaugural

meeting of the Ministerial Council for Commonwealth-State Financial Relations

(MINCO) in March 2000.

The continued strength of the economy is delivering to the States and Territories

massive revenue windfalls from the GST.

With each successive update of the GST projections, the States and Territories

are receiving an ever increasing amount of revenue. These amounts have not been

factored into their budgets and represent a straight-out financial bonus.

The release of the Final Budget Outcome and the Pre-Election Economic and Fiscal

Outlook in recent days contains GST data that again confirm this trend (see

figures at Attachment

A).

This latest data reveals that over the period to 2007-08, the total cumulative

gain to the States and Territories from the GST will be $11.8billion (Attachment

B).

The latest aggregate windfall is $2.9 billion higher than the $8.9 billion

cumulative gain projected at the time of the 2004-05 Budget in May 2004. This

indicates that in the space of barely four months, the States and Territories

have received yet another massive and unexpected financial bonus.

To appreciate the sheer magnitude of the States and Territories financial

bonanza, it is useful to revisit the projected impact of the GST on State and

Territory finances at the time of the first meeting of Treasurers

at the inaugural MINCO meeting in March 2000.

At that time it was expected that the gains from the New Tax System would take

some time to flow through, but that by 2007-08 all States and Territories would

be receiving a windfall under the New Tax System compared with the previous

system of Financial Assistance Grants and the State and Territory taxes that

were abolished. Over the entire period from 2002-03 to 2007-08, the States and

Territories were originally forecast to be receiving a $3.7 billion windfall

compared with the previous system.

The States and Territories have been unambiguous beneficiaries of the GST.

This revenue is an ever increasing source of funds to finance their schools,

hospitals and police services.

MELBOURNE

17 September 2004

Download ATTACHMENT

A .pdf 13KB)

Download ATTACHMENT

B .pdf 16KB)