Fiscal Redistribution Across States by the Commonwealth
The Horizontal Fiscal Equalisation process results in a fiscal redistribution between States, as GST grants are not allocated between States according to the State of origin of GST paid to the Commonwealth.
More broadly, all Commonwealth fiscal policies tend to result in fiscal redistribution between States, as the distribution of benefits from Commonwealth expenditures across States (including grants to State and local governments, benefits paid to individuals and direct provision of services) does not match the distribution of taxes and other revenues raised from production and consumption activities in each State to support these expenditures.
The latest analysis of this redistribution, by the Western Australian Department of Treasury, is shown in the table below.
As indicated, Western Australia is a major contributor to national welfare through the revenues it contributes to the Commonwealth Budget that are used to support expenditures in other States.
In 2010–11, it is estimated that the Commonwealth derived $41.9 billion from Western Australia, while expenditure for the benefit of the State (less the State's share of the deficit) totalled only $27.0 billion, a difference of $14.9 billion.
Western Australia’s net contribution to the Commonwealth far exceeds that of any other State, in both per capita and absolute terms. This partly reflects the high level of company tax and other Commonwealth revenues generated from its resource sector, as well as the low level of social security and health benefits received by Western Australians.
Net Redistribution of Resources(a)
2010-11
|
| |
GST only(b)
|
Total
|
| |
$m
|
$ per capita |
$m |
$ per capita
|
New South Wales
|
1,043
|
144
|
2,190
|
301
|
Victoria
|
1,085
|
194
|
1,314
|
235
|
Queensland
|
99
|
22
|
-6,019
|
-1,325
|
Western Australia
|
1,692
|
730
|
14,939
|
6,447
|
South Australia
|
-1,244
|
-754
|
-5,095
|
-3,087
|
Tasmania
|
-776
|
-1,524
|
-3,414
|
-6,706
|
Northern Territory
|
-1,898
|
-8,272
|
-3,915
|
-17,058
|
Total
|
0
|
0
|
0
|
0
|
| (a) All Commonwealth outlays and revenue relating to the Australian Capital Territory (ACT) are allocated to the other States according to population shares. This recognises that the ACT would be unlikely to exist as a separate entity if the federation dissolved. |
| (b) Difference between estimated GST revenue raised from economic activity in each State and GST grants paid to the State. |
| Source: Department of Treasury estimates, using a range of data sources including the Commonwealth Final Budget Outcome publications and Australian Bureau of Statistics publication 5220.0. Results are based on the latest available data. Some data has been proxied by escalating earlier data using relevant economic indicators. |
The discussion paper on Fiscal Subsidies in the Australian Federation provides a full explanation of the net fiscal subsidy analysis.