Commonwealth Fiscal Impacts
The Horizontal Fiscal Equalisation process results in a redistribution of resources 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 redistribute resources 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 and Finance, 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 2007–08, it is estimated that the Commonwealth derived $37 billion from Western Australia, while expenditure for the benefit of the State (including future benefits from the Commonwealth surplus) totalled only $29 billion, a difference of $8 billion.
Western Australia’s per capita net contribution to the Commonwealth far exceeds that of any other State. 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.
| Each State’s net fiscal subsidy to the federation |
|
2007-08
|
|
$m
|
$ per capita
|
New South Wales
|
4,637
|
668
|
Victoria
|
607
|
115
|
Queensland
|
-2,137
|
-504
|
Western Australia
|
8,204
|
3,832
|
South Australia
|
-5,221
|
-3,275
|
Tasmania
|
-3,001
|
-6,056
|
Northern Territory
|
-3,089
|
-14,214
|
All States
|
0 |
|
The discussion paper on Fiscal Subsidies in the Australian Federation provides a full explanation of the net fiscal subsidy analysis.