Australia’s Goods and Services Tax (GST) distribution model is “broken,” and the two most populous states — New South Wales and Victoria — are bearing the brunt.
At the heart of the problem is a deal originally struck to quell anger from Western Australians over GST revenue sharing. That arrangement has now ballooned into a $60 billion drain on the federal budget, generating fresh resentment across the federation. The imbalance means that the states contributing the most to the national economy are being short-changed in return, fuelling calls for urgent reform.
The fiscal tension arrives at a particularly bad time. Consumer confidence in Australia has hit rock bottom, with Australians’ faith in the value of their own finances at its lowest point in recent memory. Commentators are urging optimism — “Cheer up, Australia, we will turn the corner and get to better days” — but the structural cracks in the tax system suggest that better days will require more than positive thinking.
