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FOR MEDIA SUNDAY, 7 JUNE, 1981
ELECTORATE TALK
Nearly three years ago, the Commonwealth and all State
Governments decided -to face up to the difficult problem of
relativities in financial assistance grants to the States,
and for the first time in Australia's history, to have a
comprehensive, independent review of the distribution of
those grants. We expect the recommendations of that so-called
review of relativities to be released within a few days.
In all Federations, there is a significant problem that
arises from differences betwecn member States; differences
in population, in size, in incomes, in economic development
and so on. In Australia, before the Second World War, each
State raised its own -tax requirements, including income taxes.
There were very obvious differences in the abilities of the
States to raise revenue and to provide services to their
residents. It was in recognition of this fact that the
Commonwealth Grants Commission was created in 1933). It is
a unique institution among Federal systems. Its task is tQ
assess claims by some States for special grants to compensate
them for their lower tax raising capacity, or their higher
costs, which prevent them from providing public services at
a standard equivalent to those available in the richer, more
popular States of New South Wales and Victoria.
At various stages, all of the less popular States have been
claimant States and have received special grants. Since the
Second World War, the personal income tax has been collected
exclusively by -the Commonwealth, and the Commonwealth has give-n.
back a large part of the revenue its gets in the formn of
grants to the States. Initially, these grants simply
reimbursed each StLate a given proportion of the income tax
revenue collected from its residents. Over time, the dist~ ribution
of the grants to the States has been adjusted with the agreement
of all States, to recognise the differences in their capaci-ties
and costs, largely removing the need for the poorer States to
apply for special grants.
it has always been difficult to decide how the total moniLes
available for the States should be divided between them. Over
the years, the decisions on this have reflected recommendations
of the independent Grants Commission, and investigations
undertaken co-operatively by Commonwealth and State officials.
There have however, been significant changes, particularly in
recent times in the distribution of population and in the
economic: structure of Australia and of the various States.
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So, at the Premiers' Conference in July, 1977, the States agreed
that a major independent review of the distribution of grants
should be undertaken. That is being done by the Grants
Commission, with the assistance of two additional associate
Commissioners appointed for just this task.
At the next Premiers' Conference and Loan Council Meeting
on the 19th of June, the recommendations for new relativities
between the States will be a major agenda item. But by then,
neither the Commonwealth nor the States will have had time to
consider the report in detail. A detailed examination is
essentiai, for the subject of this report is vital to the
future of all the States.
In the circumstances, I have willingly agreed to Lindsay Thompson's
request that an additional Premier's Conference be held later
in the year to discuss this matter more fully and in a more
considered way. We are currently looking at possible dates
during the Parliamentary recess for this additional Conference.
Nobody other than the Grants Commission itself yet knows what
the recommendations will be, but there is widespread belief that
it will recommend changes, possibly substantial changes, in
the shares going to the various States. of course, it cannot
recommend a greater share for one State, without recommending
a smaller share for others. How to implement the report' s
recommendations will be a difficult question, requiring an
exceptionally high degree of consultation between the States
and-between them an& the Commonwcalth. The Comrmonwealth is
willing to assist the States in their discussion and
decision-mak Kc, but itt is at least as much a matter for
co-operation between the States themselves, for ultimately,
it is their shares, not the total of Commonwealth grants
available to them that is-at issue.
The statesmanship of the leaders ' of all Governments in
Australia will be put to the test in the coming weeks. Decisions
important to the very structure of our Federation will be at
stake. Co-operation and consultation will be required in
abundance. 000---