Garnaut Fitzgerald Review of Commonwealth-State Funding

CHAPTER 11: Simplicity, Transparency and Accountability –
Anomalies and Unintended Consequences
CHAPTER 11: Simplicity,
Transparency and
Accountability – Anomalies
and Unintended
Consequences
• Australia’s system of Commonwealth–State financial arrangements is a ‘black box’
which is a barrier to rigorous, open analysis and debate on ways to improve it.
• There are substantial and unnecessary costs involved in administering the system,
and it has a number of inherent irregularities and anomalies.
• The concepts used by the Commonwealth Grants Commission to determine States’
expenditure needs and revenue capacities – policy neutrality and average State
policy benchmarks – are flawed.
• Commonwealth–State funding arrangements need to be simple and transparent.
• Australian electorates cannot properly evaluate Commonwealth and State
Government performance in service delivery, because responsibilities are blurred
and general purpose grants are used for purposes other than the ones they are
allocated for.
11.1 Introduction
The commitment to fiscal equalisation across States, and the complexity of the process
designed to achieve it, have become much greater in the late 20th century (Chapter 2).
The evolutionary development of general purpose grants and specific purpose payments
(SPPs) has led to a complex, opaque set of arrangements. One obvious consequence is
significant problems of accountability to the electorate and other stakeholders at
Commonwealth and State levels. The problem is manifested in numerous
methodological approaches that make sense within the internal logic of the allocation
process, but which appear anomalous to those who are not specialists within the
system.
FINAL REPORT [155]