Garnaut Fitzgerald Review of Commonwealth-State Funding

CHAPTER 7: Other Federations
Economic output
Gross state product variance between States across the four Federations during the
1990s is shown in Figure 7.4. Dispersion of State economic growth is measured by the
coefficient of variation. This statistic provides insights into whether gross state product
per capita distribution among States is high or low, and whether it is narrowing or
widening. The coefficient of variation is used to measure this convergence. For example,
a decreasing coefficient of variation over time indicates converging gross state product
per capita among States (i.e. average output in the poorer States growing more quickly
than in the richer States).
Per capita gross state product has been far more equal across Australian States than in
the other Federations. The convergence of the German Länder is unsurprising given the
unequal starting point at the time of unification. States in the United States are the most
divergent and have remained that way for most the decade. Canada’s statistics are
slightly skewed after 1999 by the separating out of Nunavut from the Northwest
Territories in that year.
FIGURE 7.4: Gross state product per capita – divergence between States in Australia,
the United States, Canada and Germany,1990–2000
0.4
0.3
0.2
0.1
1990
1991
Coefficient of variation
1992
1993
1994
1995
1996
1997
1998
1999
2000
Canada Australia US Germany
Source: Statistics Canada 2002; Bureau of Economic Analysis 2002; Bavarian Government 2002; ABS cat. no. 5220.0
With the overall distribution of population and economic growth across States being
more equal and generally more convergent in Australia than in other Federations, it is
curious – at first sight – that Australia has a much more comprehensive approach to
equalisation, and has moved further in this direction over recent decades.
FINAL REPORT [97]