Garnaut Fitzgerald Review of Commonwealth-State Funding

CHAPTER 13: Commonwealth–State Financial Relations
for the 21 st Century
CHAPTER 13: Commonwealth–
State Financial Relations for
the 21st Century
• The new model for Australia’s Commonwealth–State financial relations is based on
efficient, simplified delivery of services that are most important for equality of
opportunity among Australians.
• National programs would be established in Health and Aged Care, Education and
Training and Indigenous Community Development.
• Commonwealth and State Governments would have joint responsibility for setting
broad national objectives in each area.
• Administrative responsibility would be unambiguous – States would administer the
Health and Aged Care and Education and Training programs, and the
Commonwealth would administer the Indigenous Community Development
Program.
• Most specific purpose payments would have their funds transferred to the three
National Programs.
• Untied grants funded by the GST would be allocated on a simple basis of equal per
capita, with an element of horizontal fiscal equalisation. The element of horizontal
fiscal equalisation – favouring the smaller States – would be much closer to that
originally applied by the Commonwealth Grants Commission. There would be
guarantees on minimum untied payments to all States, which would ease
adjustment in the main recipient States.
• The new model would provide Australia with a more efficient and equitable system
of Commonwealth–State financial relations to match its modern, dynamic economy
in the 21st century.
13.1 Outline of the new model
The model introduced in Chapter 1 recognises that there are certain areas of
government service provision that are centrally important to both the Commonwealth
and the States. It also recognises the importance of removing administrative
inefficiencies associated with shared and overlapping administration in these core areas
to eliminate duplication, cost shifting and a lack of coordination between closely related
areas.
FINAL REPORT [191]