NSW has dismissed the GST distribution system as broken as the state readies for a deficit in its first budget under a new regime that will feature "wellbeing" indicators.
Premier Chris Minns has continued his campaign for an overhaul of the annual carve-up, likening Western Australia to wealthy petro-states such as Saudi Arabia and Qatar.
NSW took the largest share of new migrants and was home to a growing and diversifying economy, including a leading role in providing financial services, he said on Monday.
"That is a hedge against Australia's reliance on natural resources for export earnings," he said.
NSW receives a lower per-capita share of GST than most other states because it is cheaper to provide services to its highly urbanised population, the Commonwealth Grants Commission says.
The state has an above-average capacity to raise revenue of its own through measures such as property taxes and coal royalties.
Those factors led to the commission recommending the state receive $310 million less in GST distributions in 2024/25 compared to the previous financial year.
After the addition of so-called "no-worse-off payments", introduced in 2018 to counteract the effects of a minimum GST-share guarantee for WA, NSW will receive $188 million less.
The commission noted government services were cheaper to provide in NSW because only 5.1 per cent of the population lived in outer regional and remote areas, compared to a national average of 10 per cent.
But some parts of NSW that were formerly "outer regional" are now "inner regional" due to population growth, while others have been upgraded to "major cities".
Mr Minns, who has been pushing for a per-capita-based distribution of GST, said those changes were clear examples of a broken system.
"The idea that Kiama would be treated as a major city is obviously laughable to the people of NSW," he said.
The state's budget is moving to weigh up residents' wellbeing alongside standard measures of performance, such as economic growth.
The budget to be handed down in June will shift to a new "performance and wellbeing" framework which will help improve transparency and accountability, while driving better social outcomes, the state government says.
It will replace the former coalition government's outcomes statement, which Finance Minister Courtney Houssos described as a "polite fiction".
"(That was) a gesture towards accountability on government spend without actually achieving it," she said.
The replacement system would measure how well the government met its priorities with an emphasis on key services like health, education, transport and housing.
"Being up-front and honest about the challenges means providing genuine data that's transparent, reliable and accessible to the people of NSW," Ms Houssos said.
The first set of indicators published in the budget will be expanded in future editions following a parliamentary inquiry.
The shift in NSW follows a similar federal move, which included the release of the first "national wellbeing framework" in July in line with similar schemes introduced in Canada and New Zealand.
