O'Farrell flags GST shakeup

NSW Premier Barry O'Farrell says it's time to re-examine the GST and consider whether it should be raised or some state taxes traded off in exchange for an increased GST share.

Mr O'Farrell said on Sunday his state's revenue had dropped $2.5 billion a year in the last two years.

He pointed the finger at federal Treasurer Wayne Swan, who he said was unable to articulate an economic strategy that filled the community with confidence.

"It's a lack of confidence at a national economic level that's caused the reduction in GST receipts, that's caused the flow-on consequences for the states," Mr O'Farrell told Sky News.

Current national economic circumstances had never been worse and the premier said he could not see when they were going to pick up.

If there was no prospect of improvement in the medium term, everything should be on the table, including changes to the GST, Mr O'Farrell said.

"If that includes relooking at the GST to see whether or not a trade-off of getting rid of state taxes in exchange for GST should be on the table, because frankly I think all states, as you are seeing are struggling with the sort of revenues that are coming in," he said.

Mr O'Farrell said he had not had any conversation with his Liberal counterparts across the country or other state premiers.

"Given the prospects that are clear, given the economic conditions that are relevant, we'd be mugs if there looks to be no change, to not again consider the issue of whether we can trade state taxes that affect businesses and families and do so through what is an effective and efficient tax in what is the GST."

Mr O'Farrell said he would not rule out raising royalties to increase state revenues but said the mining sector was facing lower commodity prices which had already resulted in job losses.

"There's only so much juice you can squeeze from a lemon that's already under pressure," he said.

The premier said he was happy to discuss education funding with the federal government.

Mr O'Farrell said he supported the formula recommended by the Gonski review but at this stage he did not have any extra money to fund the model.

"If you don't have the money you can't spend it," he said.

Prime Minister Julia Gillard later ruled out lifting the GST.

"Federal Labor will not raise the GST," she told reporters in Brisbane.

"I understand that Premier O'Farrell has called for this today, so it should be maybe something you raise with Tony Abbott, but federal Labor will not be raising the GST."

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