Treasurer says reason for funds top-up is fall in GST share, not hydraulic fracturing decision

The federal government has given the Northern Territory an extra $260m to compensate for its low GST share, a decision both governments have denied is linked to the territory’s decision to lift a moratorium on fracking.

At a press conference on Monday the treasurer, Scott Morrison, said the Northern Territory would receive the extra funding from the commonwealth’s consolidated revenue, as well as an extra $550m over five years for remote Indigenous housing.

Northern Territory lifts fracking ban, opening up 700,000 sq km to gas exploration Read more

The Northern Territory’s GST share is set to fall from 4.66% of Australia’s total in 2017-18 to 4.26% in 2018-19 as a result of the recommendation of the Commonwealth Grant Commission – the independent body that carves up the GST pie.

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“This was clearly an outcome I was not comfortable with,” Morrison said.

On Tuesday the Northern Territory government lifted a ban on hydraulic fracturing of onshore gas, opening up more than half the territory’s land mass to fracking exploration.

In October the finance minister, Mathias Cormann, said GST revenue was a “potential lever” to encourage New South Wales, Victoria and the Northern Territory to reach their full potential, including by exploiting their resources.

The law lecturer and former NT Labor MP Ken Parish told Guardian Australia it was impossible to be sure if the extra funding and gas announcement were linked but “if it’s got feathers, a bill and webbed feet – it’s probably a duck”.

Parish said the NT was “extremely justified” in arguing it needed a higher GST share to fund its services after the post-mining-boom slump, but it was “naive” to discount the possibility the gas decision was also a factor.

“It might well not be a coincidence that Morrison has announced this funding only a few days after the NT government decided to lift the moratorium.”

He said there had been “quite a bit of pressure federally” to lift fracking bans.

Asked if the gas decision was linked to the extra funding, Morrison told reporters the Northern Territory government had made the call on fracking on its own merits.

“I think you should pay the Northern Territory government a bit more respect,” he said. “You’re suggesting they’ve been so weak-kneed they’ve just rolled over – I don’t think they’ve done that at all.”

The Northern Territory treasurer, Nicole Manison, said her government “made its decision with regards to fracking 100% based on the inquiry and what we thought was in the best interests of Territorians”.

The Commonwealth Grants Commission has indicated it will consider coal seam gas development as part of its 2018 update and 2020 review of the formula to split the tax take between jurisdictions.

The Turnbull government has also given $550m over five years to address the housing needs of Aboriginal and Torres Strait Islander people, to be matched by the Northern Territory government.

Room to breathe: remote Indigenous communities and the battle to improve housing and jobs Read more

The Indigenous affairs minister, Nigel Scullion, said the new investment would help address severe overcrowding in remote communities.

The Greens senator Andrew Bartlett questioned why the federal government was not also extending remote Indigenous housing funding for Queensland.

“Queensland has achieved the best results out of the federal funding for remote Indigenous housing,” he said.

“However, the national partnership on remote housing is due to expire on 30 June 2018 and the Turnbull government has so far refused to agree to extend it for Queensland.”