on which the States provide feedback to the CGC. Many participants to the inquiry expressed concern with the complexity of the system (box 3.3), suggesting it leads to inconsistencies, unpredictable budget outcomes and barriers to accountability (for example, WA Government, sub. 15; the Association of Mining and Exploration Companies, sub. 23; Business Council of Australia, sub. 47). It also conveys a false sense of precision an issue that was picked up in the 2012 GST — Distribution Review (Brumby, Carter and Greiner 2012a, p. 43). Despite the recommendations of that Review, State relativities are still reported to five decimal places, even though the relativities are in many cases dependent upon the judgment and assumptions made by the CGC. Complexity is discussed further in chapter 3. 2.4 A revised objective The focus remains on equity In the Productivity view, horizontal fiscal equity should remain the core Commission’s objective of HFE. This is a view shared by most participants in the inquiry (box 2.2). What this means in practice is more contested, and inquiry participants expressed a range of views around equity and fairness (box 2.3). In particular, several participants to the inquiry have expressed the view that Western allocation is not Western Australia’s ‘fair’ (Put Australia First, sub. 12; WA Government, sub. 15; Parliamentary Liberal Party of WA, sub. 22). These concerns are not invalid, as the concepts of fairness and equity can have several interpretations. For example, participants have interpreted to mean that: ‘fairness’ every State should be treated the entailing funding being distributed equally per same — person, regardless of their personal circumstances every State should receive the funding it based on the amount of GST that is deserves — in that State ‘raised’ every State should be treated on the basis of those States that are fiscally stronger need — should assist those that are less able.
on which the States provide feedback to the CGC. Many participants to the inquiry expressed concern with the complexity of the system (box 3.3), suggesting it leads to inconsistencies, unpredictable budget outcomes and barriers to accountability (for example, WA Government, sub. 15; the Association of Mining and Exploration Companies, sub. 23; Business Council of Australia, sub. 47). It also conveys a false sense of precision — an issue that was picked up in the 2012 GST Distribution Review (Brumby, Carter and Greiner 2012a, p. 43). Despite the recommendations of that Review, State relativities are still reported to five decimal places, even though the relativities are in many cases dependent upon the judgment and assumptions made by the CGC. Complexity is discussed further in chapter 3. 2.4 A revised objective The focus remains on equity In the Productivity Commission’s view, horizontal fiscal equity should remain the core objective of HFE. This is a view shared by most participants in the inquiry (box 2.2). What this means in practice is more contested, and inquiry participants expressed a range of views around equity and fairness (box 2.3). In particular, several participants to the inquiry have expressed the view that Western Australia’s allocation is not ‘fair’ (Put Western Australia First, sub. 12; WA Government, sub. 15; Parliamentary Liberal Party of WA, sub. 22). These concerns are not invalid, as the concepts of fairness and equity can have several interpretations. For example, participants have interpreted ‘fairness’ to mean that: every State should be treated the same — entailing funding being distributed equally per person, regardless of their personal circumstances every State should receive the funding it deserves — based on the amount of GST that is ‘raised’ in that State every State should be treated on the basis of need — those States that are fiscally stronger should assist those that are less able.
horizontal-fiscal-equalisation-draft.docx