Garnaut Fitzgerald Review of Commonwealth-State Funding

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CHAPTER 8: Federal Policy Effects on Interstate Distribution of Incomes and Economic Activity 8.4 Trends Transfers of income across States, and differential encouragement of economic activity between States, have grown markedly over the last ten years (Tables 8.10 and 8.11). The pattern of donors and recipients is unchanged in nearly all instances over this time. TABLE 8.10: Welfare transfers from Commonwealth expenditures and revenues ($m) NSW VIC QLD WA SA TAS ACT NT 1985–86 -1 167 -792 831 11 845 449 -741 564 1990–91 -2 440 -503 1 083 -261 1 338 690 -481 573 1995–96 -2 658 108 845 -1 213 1 981 1 008 -637 566 2000–01 -4 409 -415 1 611 -1 007 2 283 1 526 -614 1 025 TABLE 8.11: Production effects from Commonwealth expenditures and revenues ($m) NSW VIC QLD WA SA TAS ACT NT 1985–86 -649 -2 779 313 -477 772 288 1 932 600 1990–91 -2 971 -1 339 33 -1 631 1 368 423 3 615 502 1995–96 -4 356 -1 157 11 -2 681 1 648 690 5 042 804 2000–01 -6 292 -3 091 1 262 -4 069 1 742 1 171 7 599 1 679 Positive and negative factors driving these trends vary across the States. Major factors influencing the direction of the overall impacts include: • Defence expenditures are the main reason behind the increase in the Northern Territory’s production impact. They also noticeably increase the Australian Capital Territory’s production effect, and reduce Victoria’s production effect. • Commonwealth final consumption expenditures, excluding Defence, are the main reason behind the increase in the Australian Capital Territory’s production effect and increase the Northern Territory’s welfare transfer. They significantly reduce Western Australia’s welfare and production effects, and increase these effects in Queensland and South Australia. • Taxes and royalties on petroleum production have caused net movements in production impacts in Victoria and Western Australia. • Personal income tax is the main reason for the decline in the Australian Capital Territory’s welfare transfer and also contributes significantly to net movements in other States. • Company tax has caused net movements in New South Wales, Queensland, Western Australia, South Australia and Tasmania. • Commonwealth grants (including the GST) are the main reason behind the increase in the Northern Territory’s welfare transfer, and contribute substantially to the increase in its production impact. They have also caused net movements in South Australia and Tasmania, but have worked against net movements in Victoria and the Australian Capital Territory’s welfare transfer. FINAL REPORT [118]
CHAPTER 8: Federal Policy Effects on Interstate Distribution of Incomes and Economic Activity • Personal benefit payments, including grants to non-profit institutions, have caused net movements in transfers for Western Australia, South Australia and Tasmania, and increased Victoria’s production effect. They have worked against the net movements in Queensland and the Northern Territory, and decreased the Australian Capital Territory’s production effect. • Customs duties have caused net movements in production effects for Queensland, Tasmania and the Northern Territory, but have blocked net movements in Victoria and Western Australia. (Unless otherwise noted, these factors have contributed in the same direction as the net movement in transfers or effects for each State.) Other indirect taxes (e.g. sales tax, the GST) have had a mixed impact on net movements, with the effect often being quite different on the individual welfare and production sides. 8.5 Comparisons with State incomes and growth It is reasonable to ask whether the pattern of welfare and production transfers between States induced by Commonwealth policies can be broadly rationalised in terms of income redistribution or economic assistance objectives. Welfare Table 8.12 compares the individual welfare transfers (including the redistribution of the GST) to State product, the broadest measure of State income. A broad tendency for income to be redistributed from higher-income to lower-income States is evident, with the Northern Territory, a high-income State with a high positive welfare transfer, a conspicuous exception. A detailed comparison of welfare transfers to the per capita gross state product variations suggests significant variance in the degree of income equalisation across States. Some of this can be interpreted as progressive (e.g. the progressively greater relative subsidies to Queensland, South Australia and Tasmania), but no pattern is discernible among States with above-average per capita gross state product. FINAL REPORT [119]
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Review of Commonwealth-State Fundin
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Review of Commonwealth-State Fundin
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TABLE OF CONTENTS CHAPTER 9: Equity
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THE REVIEW COMMITTEE FINAL REPORT [
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EXECUTIVE SUMMARY Overall assessmen
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EXECUTIVE SUMMARY Each State would
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CHAPTER 1: Overview and Summary of
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CHAPTER 2: How the System Grew: A H
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CHAPTER 3: The Current System TABLE
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CHAPTER 3: The Current System 3.3 G
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CHAPTER 3: The Current System Natio
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CHAPTER 3: The Current System FINAL
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CHAPTER 4: Allocation of General Pu
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Chapter 5: Specific Purpose Payment
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Page 118 and 119: CHAPTER 7: Other Federations FINAL
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CHAPTER 11: Simplicity, Transparenc
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CHAPTER 12: Overall Assessment and
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CHAPTER 13: Commonwealth-State Fina
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APPENDIX A: National Health and Age
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APPENDIX A: National Health and Age
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APPENDIX B: National Education and
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APPENDIX C: National Indigenous Com
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APPENDIX C: National Indigenous Com
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APPENDIX D: Minimum Cost of Governm
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APPENDIX E: Consultation • Local
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APPENDIX E: Consultation • VICRoa
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GLOSSARY Efficiency: allocative eff
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GLOSSARY merit goods (health, educa
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FINAL REPORT [234] GLOSSARY
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BIBLIOGRAPHY Buchanan, JM 2001, Fis
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BIBLIOGRAPHY Government of Victoria
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BIBLIOGRAPHY Watts, RL 1999, Compar
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INDEX E economic activity / growth
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INDEX O other Federations Canada ·
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Garnaut Fitzgerald Review of Commonwealth-State Funding

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