Sustainable revenue - chapter 5

Sustainable revenue in NSW

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2021-22 NSW Intergenerational Report, chapter 5 - sustainable revenue

[Speaker]

To ensure a sustainable revenue base into the future the way the government raises revenue will have to adapt. Currently revenue is projected to grow more slowly than spending, meaning that without reform our state will need to borrow more to meet its future spending needs. Options to reform our revenue base include modernising the NSW state tax system, working with commonwealth to reform the gst and improving commonwealth funding arrangements to support the fairer federation.

[music]

Revenue is projected to grow by 4.0% a year on average to 2060-61. This is slower than projected growth in government spending of 4.5%. 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 NSW 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.

Over the period to 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 NSW 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.