By Jacob Shteyman in Canberra

Lower spending on natural disaster relief and strong growth in land values mean NSW will get a smaller share of the GST pool, while the cost to federal taxpayers of filling up Western Australia’s coffers rose again.

The Commonwealth Grants Commission, an independent body that advises the federal government on the share of GST each state and territory should receive, on Friday revealed the federal budget will take a $6.6 billion hit from the WA GST deal in next year’s carve-up.

When it was first announced, changes to the distribution of GST revenue among the states, struck after years of persistent protestations from WA that it was getting less than its fair share, were forecast to set the federal budget back $9 billion over eight years.

But independent economist Saul Eslake now expects the cost to the federal budget will exceed $60 billion over 11 years, making it the biggest blowout in the cost of any single policy decision ever, with the exception of the NDIS.

The Tasmanian calls it “Australia’s worst public policy decision of the 21st century thus far”.

The distribution of GST has historically been decided based on need, which from about year 2000 to 2018 meant resource-rich WA received a lower per capita share than poorer states like Tasmania.

But the 2018 legislation meant that in the past two financial years, WA could receive no less than 75c to the dollar of what it would get based on a per capita distribution.

WA’s floor increased to the equivalent of NSW’s relativity in the 2026/27 carve-up, which came in at just under 82c.

That means the cost to federal taxpayers of topping up the pool of GST revenue to make sure no state or territory is worse off will rise from $6.1 billion to $6.6 billion in 2026/27.

“Which I think is scandalous,” Mr Eslake told AAP.

NSW’s GST relativity fell from 86c, driven by lower spend on natural disaster relief than it had previously estimated, and large COVID-19 expenses in 2021/22 dropping out of the assessment period.

Higher stamp duty take from strong growth in land values meant a higher bounty than other states.

Queensland, the biggest loser of the 2025/26 carve-up, had its relative share increase from 85c to 87c, or $1.7 billion, as falling coal prices reduced the state’s royalty revenue, leading the grants commission to assess that the Sunshine State needed a bigger leg-up.

Commission chair Mike Callaghan said the distribution arrangements aim to make sure all states have the funds to provide their residents with a broadly comparable standard of government services.

Key drivers of the change in GST shares since 2025/26 included the value of mining production declining, large COVID-19-related health and business support expenses no longer being assessed, and the strength of property markets changing across Australia, he said.

WA Treasurer Rita Saffioti said other states and the federal budget had been significantly better off since 2018 due to the higher than expected company tax collections from WA, outweighing the cost of the deal.

“Without the 2018 GST reforms, we risk $6 billion being ripped from the WA economy every year, reducing our ability to invest in the critical economic enabling infrastructure that powers our state and the national economy,” she said.

The federal government tends to accept the recommendations of the grants commission without amendment.