GST Rate History: Australia & New Zealand 1986-2026

Understanding GST Rate Evolution in Australia and New Zealand

For businesses and consumers operating across the Tasman, understanding the divergent paths of Australian and New Zealand GST rates is essential. While both countries started with a 10% GST, their trajectories have differed dramatically: New Zealand has increased rates twice (now at 15%), while Australia has maintained the same 10% rate for 26 years.

This comprehensive guide traces the complete history of GST rates in both countries from New Zealand's pioneering 1986 introduction through 2026, analyzing the political, economic, and social factors driving rate decisions—and what the future might hold.

Complete GST Rate Timeline

Chronological Rate History (1986-2026)

New Zealand: Three-Stage Rate History

Stage 1: 10% GST (October 1, 1986 - June 30, 1989)

Introduction Context

• Government: Labour (David Lange PM, Roger Douglas Finance Minister)
• Economic Crisis: Stagflation, 15% inflation, budget deficits
• Reform Package: "Rogernomics" - GST introduced alongside income tax cuts
• Base: Broad (included food, education, most services)
• Exemptions: Minimal (financial services, residential rent, exports only)

Revenue Performance

Year          GST Revenue (NZ$)    % of Total Tax Revenue 1986-87       $2.8 billion         23% 1987-88       $3.2 billion         24% 1988-89       $3.5 billion         25%

Economic Impact

• Inflation: Initial 5% price increase (less than feared 10%)
• Compliance: 96% on-time filing (exceptional for new tax)
• Public Acceptance: Initial opposition faded within 12 months

Stage 2: 12.5% GST (July 1, 1989 - September 30, 2010)

Rate Increase Details

• Effective Date: July 1, 1989
• Rate Change: 10% → 12.5% (+2.5 percentage points)
• Percentage Increase: +25%
• Government: Labour (Geoffrey Palmer PM)
• Rationale: Budget deficit reduction, fund welfare expansion

21-Year Stability Period

The 12.5% rate lasted 21 years (1989-2010), through:

• 1990-1999: National Government (Jim Bolger, Jenny Shipley)
• 1999-2008: Labour Government (Helen Clark PM) - explicitly pledged no GST increase
• 2008-2010: National Government (John Key PM) - inherited GFC deficit

Revenue Growth (Economic Growth, Not Rate Increases)

Year          GST Revenue (NZ$)    Real GDP Growth 1989-90       $4.3 billion         2.1% 1999-2000     $7.2 billion         4.2% 2009-10       $14.5 billion        -1.6% (GFC)

Stage 3: 15% GST (October 1, 2010 - Present)

2010 Rate Increase Details

• Effective Date: October 1, 2010
• Rate Change: 12.5% → 15% (+2.5 percentage points)
• Percentage Increase: +20%
• Government: National (John Key PM, Bill English Finance Minister)
• Rationale: GFC deficit recovery, fund income tax cuts

Coupled Tax Cuts (2010 Budget)

Income Tax Changes (October 1, 2010): - Top marginal rate: 38% → 33% (-5%) - Company tax rate: 30% → 28% (-2%) - Bottom rate: 10.5% (unchanged) Net Effect: Higher earners benefited from income tax cuts, lower earners received welfare benefit increases

Revenue Impact

Year          GST Revenue (NZ$) 2009-10       $14.5 billion (12.5% rate) 2010-11       $17.8 billion (15% rate) +22.8% increase 2015-16       $20.4 billion 2020-21       $23.1 billion 2024-25       $25.0 billion (est.)

16 Years at 15% (2010-2026)

The 15% rate has remained stable through:

• 2010-2017: National Government (Key/English)
• 2017-2023: Labour-led Governments (Ardern/Hipkins) - pledged no GST increase
• 2023-Present: National-ACT-NZ First Coalition (Luxon) - no increase proposed

Australia: Single-Rate History

10% GST (July 1, 2000 - Present)

Introduction Context

• Government: Liberal-National Coalition (John Howard PM, Peter Costello Treasurer)
• Election Mandate: 1998 election (won seats but lost popular vote)
• Senate Compromise: Australian Democrats negotiated GST-free fresh food
• Base: Narrower than NZ (fresh food exempt, plus health, education, etc.)
• Exemptions: 10+ categories (food, health, education, charities, etc.)

26 Years of Stability (2000-2026)

Australia's 10% rate has never changed, through:

• 2000-2007: Liberal-National Coalition (Howard/Costello)
• 2007-2013: Labor Government (Rudd/Gillard/Rudd) - opposed GST increase
• 2013-2022: Liberal-National Coalition (Abbott/Turnbull/Morrison)
  • 2015: Abbott floated 15% GST (abandoned due to backlash)
  • 2016: Turnbull considered GST expansion (rejected)
• 2022-Present: Labor Government (Albanese) - opposes GST increases

Revenue Growth (Economic Growth Only)

Year          GST Revenue (AUD)    Real GDP Growth 2000-01       $23.5 billion        3.1% 2005-06       $37.8 billion        2.8% 2010-11       $47.0 billion        2.4% 2015-16       $60.6 billion        2.7% 2020-21       $64.3 billion        -0.9% (COVID) 2024-25       $80.0 billion (est.) 2.1%

Why Has Australia's Rate Never Changed?

• Political Toxicity: 1993 election loss (Hewson's 15% GST) haunts politicians
• Unanimous State Approval Required: All 8 states/territories must agree to any change
• Public Opposition: Polls consistently show 60-70% oppose GST increases
• Electoral Risk: No party wants to risk electoral loss over GST
• Revenue Adequacy: Economic growth generates sufficient GST revenue increases

Side-by-Side Rate Comparison

Rate History Chart

Year    New Zealand    Australia      Difference 1986    10%            —              — 1987    10%            —              — 1988    10%            —              — 1989    12.5% ↑        —              — 1990    12.5%          —              — ... 1999    12.5%          —              — 2000    12.5%          10%            +2.5% (NZ higher) 2001    12.5%          10%            +2.5% (NZ higher) ... 2009    12.5%          10%            +2.5% (NZ higher) 2010    15% ↑          10%            +5.0% (NZ higher) 2011    15%            10%            +5.0% (NZ higher) ... 2026    15%            10%            +5.0% (NZ higher)

Current 5% Rate Gap (2026)

New Zealand's 15% vs Australia's 10% creates significant implications:

Consumer Impact

Example: $100 Product (GST-exclusive) New Zealand: Base Price: $100.00 GST (15%): $15.00 Total: $115.00 Australia: Base Price: $100.00 GST (10%): $10.00 Total: $110.00 Difference: $5.00 (4.3% more expensive in NZ)

Business Impact

• Cross-Tasman Businesses: Must configure systems for dual rates (15% NZ, 10% AUS)
• Invoice Complexity: Clear labeling essential (NZ GST vs AUS GST)
• Competitive Pressure: NZ businesses face higher tax burden than Australian counterparts

Government Revenue

Per Capita GST Revenue (2024-25, approximate): New Zealand: Population: 5.2 million GST Revenue: NZ$25 billion Per Capita: NZ$4,808/person Australia: Population: 26.6 million GST Revenue: AU$80 billion Per Capita: AU$3,008/person Note: NZ collects 60% more GST per capita despite broader base

Future Predictions: Will Rates Change?

New Zealand: Likelihood of 16%+ (Next 10 Years)

Probability: Low-Moderate (25-35%)

Factors FOR Increase:

• Aging Population: NZ Superannuation costs rising (65+ population growing 3.5%/year)
• Infrastructure Needs: Climate adaptation, transport, housing require funding
• Fiscal Deficit: Post-COVID debt servicing costs
• Precedent: NZ has increased GST twice before without electoral disaster
• Economist Support: Treasury and economists argue GST least distortionary tax to raise

Factors AGAINST Increase:

• Public Opposition: Polls show 55-65% oppose further GST increases
• Regressive Impact: Low-income earners disproportionately burdened
• Political Risk: Potential electoral backlash
• Alternative Revenue: Capital gains tax, wealth tax alternatives debated

Most Likely Scenario (2026-2035):

If NZ increases GST, expect:

• Rate: 15% → 16% or 16.5% (small incremental increase)
• Timing: 2028-2032 (post-next-election)
• Coupled With: Income tax cuts (top rate 39% → 35%) and welfare benefit increases
• Probability: 30% chance of increase by 2035

Australia: Likelihood of 12.5%+ (Next 10 Years)

Probability: Very Low (5-10%)

Factors FOR Increase:

• Budget Pressure: NDIS, aged care, healthcare costs ballooning
• State Demands: States push for higher GST to fund services
• Tax Reform Advocates: Economists argue for broader GST base or higher rate
• OECD Comparison: Australia's 10% is among lowest in developed world

Factors AGAINST Increase (Overwhelming):

• Political Suicide: 1993 Hewson loss, 2015 Abbott backlash make GST untouchable
• Unanimous State Approval: Constitutional barrier - all 8 states/territories must agree
• Public Fury: 70%+ oppose GST increases in polls
• Electoral Certainty: Proposing GST increase guarantees electoral loss
• Alternative Revenue: Stage 3 tax cuts, negative gearing reform, mining taxes considered instead

Most Likely Scenario (2026-2035):

Australia's GST will almost certainly remain at 10% indefinitely:

• No Major Party Proposal: Labor and Coalition both oppose increases
• State Gridlock: Impossible to get 8 states to unanimously agree
• Public Backlash: Any mention triggers voter anger
• Probability: 95% chance of remaining at 10% through 2035

Global Context: How AUS/NZ Compare

OECD VAT/GST Rates (2026)

Key Observations

• Australia's 10% is joint-lowest among major OECD economies
• New Zealand's 15% is moderate (mid-range globally)
• European average: 21% (significantly higher than AUS/NZ)
• Trend: Most countries increased VAT/GST rates during/after 2008-2012 financial crisis
• Australia uniqueness: Only major economy never to increase rate since introduction

Lessons from 40 Years of GST Rate History

What New Zealand's Experience Teaches

• Rate increases are politically survivable if coupled with income tax cuts or welfare compensation
• Incremental increases (2.5%) are more palatable than large jumps
• Long gaps between increases (21 years, 16+ years) reduce voter anger
• Broad base enables higher rates - efficiency offsets higher burden
• Economic growth matters more than rate - revenue tripled despite only 50% rate increase

What Australia's Experience Teaches

• Political trauma lasts decades - 1993 Hewson loss still haunts GST debate
• Constitutional complexity is a barrier - unanimous state approval requirement creates gridlock
• Public opinion is sticky - 70% opposition to GST increases has persisted 20+ years
• Exemptions create rigidity - narrow base makes rate increases more painful for affected sectors
• Revenue grows without rate increases - economic growth drove 3.4x revenue increase (2000-2025)

The Tasman Divergence

Australia and New Zealand started at the same 10% rate, but diverged due to:

• Political Culture: NZ more accepting of tax increases when coupled with cuts elsewhere
• Constitutional Flexibility: NZ's unicameral parliament vs Australia's federal-state gridlock
• GST Base: NZ's broad base (includes food) makes higher rates more efficient
• Historical Precedent: NZ's successful 1989 increase emboldened 2010 increase; Australia's 1993 failure paralyzed future attempts