When introduced in 2000–01, revenue from Australia’s Goods and Services Tax (GST) was expected to grow in line with the overall Australian economy, providing a secure revenue source for state governments to fund services. This has not occurred. This paper shows that short-changing of the states is likely to get worse. 

The paper details the factors driving the decline in GST revenue as a proportion of gross domestic product (GDP). Short-changing the states and territories has real consequences for their ability to supply services like health, education and public housing. New revenue could be provided by adding new federal taxes to the pool of revenue going to the states and territories.

Key findings

• Since 2000-01, GST revenue has grown at 5% while economic growth has averaged 6%.
• The slower growth in GST revenue means that states and territories have $26 billion less to spend in 2025-26 than was intended.
• The difference over the forward estimates for all states and territories is $122 billion.