Garnaut Fitzgerald Review of Commonwealth-State Funding

CHAPTER 12: Overall Assessment
and the Need for Reform
Tasmania
Tasmania has almost completed a difficult structural change due to the decline of some
traditional energy and capital-intensive industries that were once dominant in the
economy. At the same time, Tasmania’s high-value agricultural industries, and the
footloose services industries servicing national and international markets, have now
been growing strongly for long enough to significantly affect the State’s economic
aggregates. Tasmanian Chamber of Commerce and Industry Chief Executive Tim Abey
commented recently: ‘after a decade of being belted up unmercifully in the economic
stakes, Tasmanians now have much to look forward to’ (Tasmanian Chamber of
Commerce and Industry 2000). The Tasmanian Chamber of Commerce and Industry
(2001) has estimated that the Basslink project alone will inject over a billion dollars into
the Tasmanian economy over the next decade and sustain almost 1 000 new jobs.
Tasmanian Treasurer Dr David Crean reinforced this positive outlook recently, stating in
the 2002–03 Budget Speech that the jobless rate has declined from ‘10.5 per cent to
8.6 per cent over the past three and a half years substantially due to jobs growth…the
unemployment queue has reduced by more than 4 000 people’ (2002).
The Territories
The Territories also have good growth prospects.
The Northern Territory’s economy and population have grown far more strongly than the
rest of Australia through the past two decades, and official projections by the ABS
anticipate it will continue to do so. The gradual improvement in Darwin and State
infrastructure – soon to be joined by completion of the Alice Springs to Darwin railway –
have allowed the Territory to make increasing use of the advantages of proximity to
Asia. After the interruption of the Asian financial crisis 1997–98, neighbouring Asia is
again growing much more strongly than the rest of the world. Natural resource
discoveries, most importantly offshore petroleum, provide exceptional prospects for a
small economy.
The Australian Capital Territory has been expanding as a centre for private sector
service industries, serving national and international markets. It has advantages from
the strongest per capita education, research and skilled labour base of any State. Its
competitiveness as a location for high-value service industries is enhanced by rising real
estate and other costs in Sydney.
12.7 The need for reform
The Review of Commonwealth–State Funding has revealed large weaknesses in
established arrangements. Around these weaknesses are intensely politicised
differences among the States on the way untied grants are distributed, and between the
Commonwealth and States on the levels and character of SPPs.
Identifying weaknesses – even major flaws – in the existing system, and recognising
deep differences within the Australian community about them, does not in itself make a
case for change. The case for reform also requires demonstration of an alternative that
would work better in practice. It must be capable of being implemented with transitional
arrangements that avoid costly dislocation, and generate overall benefits that exceed
the costs of transition. It must be feasible within the Australian political framework.
FINAL REPORT [182]