Victoria’s Economic Bulletin: The fiscal impacts of the new GST system on Victoria

Carlos Jimenez, Amanda Gailiss and Arshiya Merchant^1,2

¹ _{Intergovernmental Relations Team, Economic Division, DTF}
² _{Author contact details: veb@dtf.vic.gov.au.}

_{Acknowledgements: The authors would like to thank Matthew Yeung, Edward Jin, Rebecca Valenzuela, Helen Ratcliffe and Sheryl Bartlett for their assistance on this paper.
Disclaimer: The views expressed in this paper are those of the authors and do not necessarily reflect the views of DTF.
Suggested Citation: Carlos Jimenez, Amanda Gailiss and Arshiya Merchant (2022) The fiscal impacts of the new GST system on Victoria. Victoria’s Economic Bulletin, October, vol 6, no 3. DTF.}

Abstract

In 2018, the Commonwealth Government legislated a new system for distributing GST revenue to the states and territories. This paper focuses on the potential fiscal impacts of the new GST system on Victoria and aims to determine the circumstances under which Victoria would be better or worse off under the new system. Our empirical approach systematically identifies key variables that drive the GST distribution, including states’ mining royalty revenues, land transfer duty collections and population growth.

These variables are analysed to determine their underlying relationship to our primary variable, mining royalty revenue, as well as understanding the role of any intra-state dependencies. Historical information is distilled into growth rates applied to past base values to inform hypothetical future scenarios. Our results show that across a range of potential scenarios, Victoria could require supplementary payments of between $3.5 billion to $6.5 billion to ensure it is not disadvantaged under the new GST system from 2021–22 to 2026–27.