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Transcripts from the Prime Ministers of Australia

Transcript 6324


Photo of Hawke, Robert

Hawke, Robert

Period of Service: 11/03/1983 to 20/12/1991

More information about Hawke, Robert on The National Archive website.

Release Date: 14/02/1984

Release Type: Media Release

Transcript ID: 6324

FOR MEDIA 14 February 1984
Terms of reference for an enquiry by the Commonwualth Grants
Commission into State tax sharing relativities have been
transmitted to the Chairman of the Grants Commission, the
Hon. Mr. Justice Else-Mitchell, CMG. The current arrangements
for the distribution of the tax sharing and identified health
grants expire at the end of June 1985.
I have written to all the Premiers and the Chief Minister of
the Norther: n Territory, in terms of the attached letter,
advising them of the terms of reference.

My dear Premier
Thank you for your letter to the Prime Ministei. setting
out your Government's views regarding the proposed
review of State tax sharing relativities and the report
on this matter prepared by Commonwealth, State and
Territory Treasury officers.
I note that there was a considerable measure of
agreeme' between officials on the structure and basic
content of the terms of reference for the review,
although some significant differences regarding coverage
and emphasis did emerg&:. I note also that in providing
comments, you, the other Premiers and the Chief
Minister, naturally enough, sought to convey views in
relation to those differences rather than the areas of
agreement. Nonetheless, there was a considerable amount
of common ground in the alternative terms of reference
prepared by the Commonwealth and State officials.
I now wish to advise you of the Commonwealth's decision
to proceed with a review and attach for your
information, terms of reference which have been
transmitted to the Commonwealth Grants Commission by the
Special Minister of State. In reaching its decision,
the Commonwealth has carefully weighed up the arguments
put forward by you, the other Premiers and the Chief
Minister. * In palticular, I refer to the view put by
several of the Premiers that there are higher priority
tasks to be undertaken and that the review of
relativities should therefore be deferred. While some
of the issues referred to in that context are important
in their own right, the Commonwealth does not consider
that they give rise to a need to defer the review. it
is important that Governments have available to them an
independent and up to date assessment of relative State
needs as a basis for negotiations on the general revenue
sharing arrangements to apply beyond June 1985. / 2

A major area in which all the Premiers and the Chief
Minister expressed reservations related to the proposal
to ask-the Grants Commission to present its assessment
both inclusive and exclusive of the Northern Territory.
The Commonwealth has noted the concerns of the States
regarding the size of the pool of funds to be divided up
if it is decided to bring the Territory into the tax
sharing arrangements applying to the States after June
1985. However, as th-size of the pool to be
distributed will be a matter for determination at the
appropriate time, the Commonwealth does not see such
concerns as in themselves constituting grounds for not
seeking the Commission's assessment on the two bases
proposed. In that context, I need hardly emphasise that
any decision on how the Territory will be treated after
1984-. 85 will only be taken closer to the time and after
full negotiations with all the parties involved. I have
also noted the ChieZ Minister's concern that the
Territory should be free to present arguments to the
Commission that the Territory has needs which are not
apparent in the States or which differ from those of the
States. For this reason, I have inserted an additional
clause in the terms of reference.
The officials' report contained an agreed reference to
the treatment of payments for South West Tasmania.
Although the Commonwealth appreciates the concerns
raised subsequently regarding this inclusion, it
believes that the arrangements between the Commonwealth
and Tasmania in relation to our undertakings regarding
the cessation of work on the Gord3on-below-Franklin Dam
have a quite special status. As a result, it does not
see their proposed treatment in the review as having any
wider implication~ s.
Premiers expres-sed differing views on whether a
paragraph dealing with business undertakings should be
included in the terms of reference. I consider that the
assessment of business undertakings by the Commission
does raise a number of special questions of both
practice and principle and I am concerned to establish
as firm as possible a foundation on which judgements on
the matter can be based. I have therefore decided to
include a paragraph on business undertakings in the
transmittal letter along the lines proposed by
Commonwealth officers. I would stress, however, that
this inclusion does not prejudice any decision on the
appropriate basis for the assessment of tax sharing
relativities. / 3

rhe othet areas of differences of view that arose
centred around the extent to which it is considered
desirable to focus the work of the Commission.
Particularly in view of the short time available to the
Commission to conduct the review, Commonwealth officials
took the view that it was desirable to provide some
focus on issues, while State officials generally
preferred an approach that would leave the Commission's
approach in those areas as a matter for debate before
the Commission. In general, the Commonwealth believes
th. at the Commission will be able to make better use of
its time if greater focus is provided in the terms of
reference on these matters. Accordingly, the terms of
reference have been based principally on the draft
provided by Commonwealth officials. The Commonwealth
believes that this will not unduly restrict the Stat1es'
ability to argue their case before the Commission.
You will be aware that in discussions between the
Commonwealth and Queensland Governments in relation to
the Medicare Agreement with that State, it has been
suggested that an additional clause be included in the
Terms of Reference on that issue. If it is decided in
that context that an additional clause should be
included, I will provide you with a copy of the revised
Terms of Reference as soon as possible.
1 would now ask for your full co-operation with the
Commission in undertaking the review and look forward to
productive negotiations with you in the first half of
1985. 1 have written in similar terms to the other Premiers
and the Chief Minister.
Yours sincerely
Lionel Bowen

" Pursuant to sections 16 and 16A of the Commonwealth
Grants Commission Act 1973, I hereby refer to the
Commission for inquiry and report, by 31 March, 1985 at
the latest, on the question of the per capita
relativities for distributing tax sharing grants which
the Commission would regard as appropriate to apply
after 1984-85 to:
a distribution of tax sharing grants among the
States only; and.
a distribution of tax sharing grants among the
States and the Northern Territory with the Northern
Territory being treated on the same basis as the
2. The Commission's assessment should
be based on the application f the principle that
the respective tax sharing grants to which the
States are entitled should enable each State to
provide, without having to impose taxes and charges
at levels appreciably different from the levels
imposed by the other States, government services at
standards not appreciably different from the
standards provided, by the other States; and
take account of
differences in the capacities of the States to
raise revenues; and
( ii) differences in the amounts required to be
expended by the States in providing government
services of a comparable standard.
The word State( s) in this paragraph is to be taken as
also covering the Northern Territory.
3. The Commission' s assessment of relative fiscal
needs should be based on the years 1981-82 to 1983-84
inclusive but the Commission should report on
developments in relative fiscal positions over a longer
period and, to the extent practicable, should indicate
what allowance ( if any) might be made to State factors
assessed for the period 1981-82 to 1983-84 if account
were to be taken of trends over a longer period or, with
respect to the 1981-82 to 1983-84 period, factors judged
to be of temporary nature.

4. The Commission' s assessments should cover areas of
revenue and government services broadly similar to those
covered in its Report on States Tax Sharing and Heaalth
Grants 1982.
The Commission should also present its assessments
in such a way as to show:
factors applicable to the tax sharing grants on the
basis that relative health needs are to continue to
be reflected in the distribution of tax sharing
grants; and
factors applicable to the tax sharing grants
separate from factors applicable to health grants
on the basis that health grants ( that is
" identified" health grants and Medicare
compensation and other specific health payments)
are distributed in accordance with relative health
needs and that relative health needs are not
reflected in the distribution of tax sharing
6. The Commission sh ' uld exclude from its assessments
payments of financial assistance in 1983-84 that are
received by Tasmania from the Commonwealth as a
consequence of cessation of the Gordon-below-Franklin
dam. The Commonwealth will advise the Commission when
the final scope of the financial payment~ s for 1983-84
has been settled. The treatment of payments for future
years will be determined when the terms and scope of the
financial assistance for those years have been
determined." In forwarding these terms of reference the Government
notes that the provisions for the payment to the States
of tax sharing crants, and to the States and the
Northern Territory of " identified" health grants, in the
States ( Tax Sharing and Health Grants) Act 1981 ( as
amended by the States ( Tax Sharing and Health Grants)
Amendment Act ( No 2) 1983) do not have any legislative
authority beyond 1984-85. It is therefore ex~ pected that
these arrangements will be reviewed in 1984-85. The
Government also notes that the arrangements for the
payment to the States and the Nort~ hern Territory of
grants to compensate for losses of revenue and
additional costs under Medicare, details of which will
be provided separately to the Commission, are scheduled
to commence on 1 February 1984. They are also expected
to be reviewed in 1984-85.
The Government recognises that if there were to be major
changes to either or both of these health funding
arrangements after 1984-85, there could be implications
for the appropriate distribution of tax sharing grants.

As regards the Northern Territory, the Government would
expect the Commission to report on arguments put to it
that needs exist in the Territory which are not apparent
in the States or which differ from those of the States,
and to report, if any such needs exist, on whether they
would be best addressed in the context of the tax
sharing arrangements or separately from those
arrangements. In relation to business undertakings, having in mind the
desirability of encouraging improved efficiency in the
provision of services provided by such undertakings, the
Covernment would like the Commission specifically to
report on:
the continued appropriateness of applying the
principle of fiscal equalisation in respect of
services in the nature of business undertakings;
any data deficiencies or other di. fficulties in
making quantitative allowances for policy and
efficiency differences between the States with
respect to business undertakings;
whether measures might be available to improve the
measurement of such differences; and
the effect of a decision not to have relative needs
in these areas, if quantifiable, reflected in the
distribution of the grants.
In asking the Commission to include 1983-84 in its
assessment, the Government recognises that the
availability of data may be more comprehensive for the
earlier years of the assessment period. The Government
has sought the assistance of the States in the timely
provision ofl dat-a in respect of 1.983-84 and it has asked
the Australian Statistician to do all that he can to
assist the Commission with data for its inquiry.
In addi-tion, the Commission is asked to indicate the
extent to which Commonwealth tax sharing payments to
each State in recent years ( including 1983-84) have
fallen short or exceeded ( as the case may be) the amount
that would have been paid had tax sharing P7. ayments been
distributed among the States on the basis of the State
factors recommended by the Commission.
Finally, the Government asks that the Commission assist
interested parties to the extent possible by again
undertaking supplementary calculations to show the
effects on the Commission's assessments of using
different methodologies in those cases where one or more
of the parties request alternative approaches to be

Transcript 6324