Queensland's LNP government is calling for a reform in the GST allocation as the state grapples with an $8.6 billion deficit for the upcoming financial year, primarily due to a $2.3 billion cut to its GST share from the Commonwealth.

Premier David Crisafulli has criticized the current GST distribution system, arguing that it unfairly penalizes Queensland based on the performance of other states and fails to address the state's financial needs.

The Premier described the $2.3 billion reduction in Queensland's GST allocation as a significant blow to the state's finances.

Federal Treasurer Jim Chalmers acknowledged the ongoing tensions between the Commonwealth and the states regarding funding and expressed a willingness to discuss GST reform at an economic reform roundtable scheduled for August.

Treasurer David Janetzki emphasized that Queensland will advocate strongly for a fairer GST distribution during the upcoming federal Productivity Commission review.

The budget papers reveal a projected $2.29 billion revenue loss in 2025-26 due to the redistribution of GST revenue, with an overall negative impact estimated to exceed $5 billion through 2027-28.

Janetzki also highlighted a dramatic decline in coal royalties, forecasting that revenue will plummet from $15 billion in 2022-23 to under $6 billion in 2024-25.

Despite the financial challenges, the Queensland budget proposes a 3.5% pay increase for public servants, including teachers, who are currently negotiating for higher wages.

Teachers are contemplating industrial action if the government does not enhance its wage offer, as they face a severe shortage and increasing workplace challenges.

Deputy Opposition Leader Ted O’Brien stated that the Coalition intends to engage constructively in discussions while holding the government accountable for actionable reforms.

Chalmers stressed the need to consider national interests in any proposed reforms, ensuring that changes do not jeopardize the sustainability of the budget.

The reduction in GST revenue has been linked to Queensland's coal royalties, which were introduced by the previous Labor government in 2022, thereby decreasing the state's reliance on the GST pool.