GST carve-up may condemn NSW to a new vicious cycle

29 September 2009

The proposed new national carve up of GST revenue would penalise NSW, according to the Urban Taskforce.

The Taskforces chief executive, Aaron Gadiel, said that the new formula rewarded states that benefited from strong population growth in the recent past.


The Urban Taskforce has signed a joint letter with the NSW Government and other groups asking the Commonwealth Grants Commission to review the formula.


In the three years to December 2008, NSWs population only grew by 4.3 per cent, while Queenslands population grew by 9.5 per cent and Victorias grew by 6.5 per cent, Mr Gadiel said.


NSWs modest population growth is depriving the state of economic vitality.


Mr Gadiel said NSWs population will stagnate without massive new public investment in transport and social infrastructure in the metropolitan area.


If we want people to stay in NSW, we need to offer them affordable housing, well serviced by infrastructure, he said.


This new GST carve-up threatens NSWs ability to turn itself around and make the necessary public investment.


The new funding formula would cost NSW $400 million in GST formula in 2010/11, rising to $900 million 2012/13. The new formula is, in part, based on changes in population over the past three years.


Ironically, the new formula penalises NSW for its growth performance, but in doing so, locks the state into a new vicious cycle.


For every 10,000 NSW residents, work starts on 8 new private sector homes each quarter. While in Victoria work starts on 19 private sector homes, for every 10,000 of its residents and in Queensland work starts on 14 homes.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


The construction activity made possible by property developers contributes $69 billion to the national economy each year and creates 709,000 direct jobs. The construction industry is Australias third largest source of employment.


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