ACT set to share GST tax revenue windfall with other states and territories

Finance Department figures show GST revenue topped $48.4 billion in the seven months to January to be $773 million higher than projected in the October budget.

Greater than anticipated GST revenue reflects strong household spending late last year and early this year.

Retail transaction data released by the Reserve Bank of Australia shows shoppers made almost $80 billion worth of credit and debit card purchases in January, a 5.7 per cent increase from December and up 17.6 per cent from a year earlier.

More recent figures show households cut back on spending on goods later in January and through February, but continued to splash out on travel and entertainment.

Card and merchant transaction data collected by ANZ for the first week of March showed purchases of non-food retail goods fell at an annualised rate of 4 per cent while spending on travel was up 10 per cent from a year earlier and on entertainment it surged 17 per cent.

Westpac's card tracker index fell almost five points in the last two weeks of February but remained at a relatively high 138.3 points.

Overall, though, ANZ economists expect consumer spending to "slow appreciably in 2023 as households juggle the impact of rising rates and inflation, and many roll off their very low fixed rate mortgages".

Reserve Bank governor Philip Lowe said on Wednesday moderating consumption was important because it would "help establish a better balance between supply and demand ... and support the return of inflation to target".

The expected slowdown in household spending will crimp GST revenues, though this will be at least partially offset by the return of overseas tourists and international students and the increased migrant intake.

The update on GST revenues comes as the Commonwealth Grants Commission prepares to make recommendations on how to carve up the tax take among the states and territories for 2023-24.

Last year the commission recommended the ACT receive a 1.8 per cent share of the 2022-23 GST take, which amounted to $1.42 billion.

If that formula was applied to the current GST revenue gain, ACT would claim just an extra $14 million from the windfall.

Population is an important factor in determining GST revenue shares and the accuracy of official estimates has become politically sensitive.

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According to the latest estimates from the Australian Bureau of Statistics, a net 3100 people moved to the ACT in the 12 months to June last year, a 0.7 per cent increase, below the national average of a 1.1 per cent gain.

But ACT Chief Minister Andrew Barr said early this year that the territory was being regularly deprived of its rightful share of GST revenue because of persistent underestimates of its population and incorrect assumptions about interstate migration flows.

"This is the factor that has led to the past two significant undercounts of the territory's population," Mr Barr said.

"There remains a risk of another undercount at the next census if the ABS cannot provide more accurate data on the interstate migration measure."

Australian Statistician David Gruen said the ABS was well aware of the significance of population data in helping determine the allocation of GST revenue and admitted that the agency underestimated the ACT population before the 2021 Census.

"Obviously, jurisdictions are very sensitive to that because, in the interim, they were getting less GST revenue than they would otherwise have got," Dr Gruen said.

The statistician said he had held discussions with the ACT government to assure them that "we're doing everything we can to make these numbers accurate".