Sustainable revenue

2021-22 NSW Intergenerational Report

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Revenue is projected to grow by 4.0 per cent a year on average to 2060-61. This is slower than projected growth in government spending of 4.5 per cent. Slower growth in state based revenues is being driven by a range of factors, such as the ageing of the population and the declining global demand for coal. As state revenue growth slows, we will become more reliant on Commonwealth funding sources to meet the services and infrastructure needs of the population.

GST revenues are expected to grow more slowly as consumption that is subject to GST declines and as changes to GST distribution see New South Wales worse off in the long-run. As GST growth slows, an increasing share of revenues from the Commonwealth will be tied to specific purposes, reducing New South Wales’ autonomy to respond to the needs of citizens.

Revenue shares and contribution to total revenue base

By 2060-61, state raised revenues are projected to fall as a share of our total revenue base, while revenues received from the Commonwealth will form a larger share of our revenue base.

Source: NSW Treasury.

Average annual growth in state revenues 2018-19 to 2060-61

State raised revenues are projected to grow by an annual average of 3.7 per cent to 2060-61. This is slower than broader economic growth and growth in spending.

Source: NSW Treasury.

Over the period to 2060-61

 

Illustration of a column graph trending up along the x axis

Revenue will grow by an average of

4.0 PER CENT

a year to 2060-61

 

 

Illustration of a column graph trending down along the x axis

Revenue as a share of GSP will decline from 12.9 per cent to

11.5 PER CENT

by 2060-61

 

 

Illustration of a pie chart

NSW's share of the national GST pool will decline from 27 per cent to

24 PER CENT

by 2060-61

 

Insights and opportunities

 

  • To ensure a sustainable revenue base into the future, the way government raises revenue will have to adapt and modernise. 
  • Under current policy settings revenue is projected to grow more slowly than spending, meaning that - without reform New South Wales will need to borrow to meet its future spending needs.
  • There are a range of reform opportunities that could help to ensure a fair and sustainable revenue base for the future, including modernising the state tax system, working with the Commonwealth to reform the GST and improving Commonwealth funding arrangements to support a fairer federation. 
  • Measures that lift productivity and participation rates will also grow our economy and government revenues.  

 

Last updated: 07/06/2021