GST distribution review: final report

Abstract

The Panel conducting the Review was asked to consider whether the current approach to distributing the GST (according to the principle of horizontal fiscal equalisation, hereafter referred to as HFE) would ensure that Australia is best placed to respond to the expected significant structural changes in the economy and would maintain public confidence in financial relationships within the Federation. However, the commission was not given without restrictions. The Terms of Reference also state that the Review will be guided by a number of factors, including that: the long-standing practice of equalisation between States has served Australia well the GST will continue to be distributed to the States on the basis that they should have equal capacity to provide services and infrastructure to their citizens GST will be distributed as ‘untied’ payments the Commonwealth Grants Commission (CGC) will continue to make recommendations on the distribution of the GST.2 In addition, there is no extra Commonwealth revenue available with which to ‘buy’ reform, or smooth any transition. The Panel has therefore proceeded on the basis that States that are fiscally weaker at any given time must continue to have the capacity to provide substantially similar levels of services and infrastructure to their citizens from within the current revenue envelope