NEW South Wales is a "victim of its own success" and will receive a dramatically reduced share in GST revenue over the coming years, according to Treasurer Gladys Berejiklian.
The NSW Budget predicts a $3.7 billion surplus in 2016-17 - up $1.2 billion on the half-yearly forecast in January - but the surplus is forecast to drop to just $1.3 billion for the following two years.
Ms Berejiklian said the slowing property boom was partially to blame.
But she said the formula used to divide GST revenue among the states and territories meant NSW would receive a diminishing cut in the impending years.
"Ironically we are the victims of our success when it comes to GST," she said.
The system is designed so richer states receive a smaller portion of GST revenue than those which are struggling.
Ms Berejiklian said the NSW Government had long lobbied for a population-based funding system, but had failed to convince the Federal Government.
She said the state would receive $10.8 billion less in GST revenue from 2014-15 to 2018-19.
However, she noted the $3.7 billion surplus predicted next financial year was likely to be an underestimate because it did not take into account the $2 billion the state hoped to receive for the sale of power distribution companies Ausgrid and Endeavour Energy.
A $990 million incentive from the Federal Government to sell Transgrid was also not taken into account.
Its sale raised $10 billion last year - the big contributor to the state's current debt level sitting at almost zero.
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