The ACT is missing out on up to $480 million in GST revenue, if the calculation is based on economic activity rather than population.
NSW has agreed with Reserve Bank Governor Ian Macfarlane that it is illogical that it should subsidise other states and territories, particularly high-performing Western Australia and Queensland.
The present split is worked out by the Commonwealth Grants Commission based on the principle of federation that all Australians are entitled to reasonable equal access to government services.
NSW argues that if the GST were split according population it would get $12.3 of the $37 billion on offer, not the $10.4 billion it actually gets. The ACT would get about $130 million less.
But if you base the split on economic activity – and the GST is based on economic activity – you get a much different result.
The ACT has only 1.5 per cent of the Australian population but it generates 3.2 per cent of Australian economic activity. On that basis the ACT should be getting $1180 million from the $37 billion in GST money, not the $700 million we currently get. We are being ripped off by $480 million.
Tasmania, on the other hand, has just over 2 per cent of the population, generates just under 2 per cent of the economy but gets about 3 per cent of GST revenue – better off by about $350 million on any measure.