The results of this paper add to the existing body of evidence estimating the potential fiscal impacts of the new system of HFE and its impacts on the distribution of GST. We contribute to the literature by examining individual factors that impact on the GST pool and relativity values and using a novel methodology to analyse the GST. The novel multivariate scenario approach strengthens the argument that Victoria is likely to be worse off under the new system of GST. We have mitigated the limitations of the study through our intentional selection of variables, analysis of relationships between the variables and use of plausible growth rates by reviewing historical situations.
This paper highlights the significant impacts that the new system of GST may have on Victoria’s fiscal position. It demonstrates the real risk to Victoria’s revenue if the new system remains as is and the no-worse-off guarantee is not extended beyond 2026–27. Our results show that across a range of potential scenarios, including conservative scenarios where Victoria experiences strong economic conditions and WA poorer conditions, Victoria could be worse off by between $3.5 billion to $6.5 billion from 2021–22 to 2026–27 without supplementary Commonwealth payments to compensate for the impact of the new GST system.
The work in this paper demonstrates the importance of considering the breadth of interrelated factors that go into the distribution of GST when making projections and estimating the impacts of the new system. The scenarios in this paper only represent a simplified set of possible circumstances. In reality, many more factors will change in future to impact the GST assessment. While we have relied on one set of inputs, replicating historical scenarios may lead to inaccurate results, as demonstrated by the differences between the simple and more complex scenarios in this paper.
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