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Budget Paper No.2 Fiscal and Economic Outlook 2008-2009



Budget Paper No.2 Fiscal and Economic Outlook 2008-2009

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Tabled paper 1293


Tabled papers for 10th Assembly 2005 - 2008; Tabled papers; ParliamentNT




Tabled By Delia Lawrie


Made available by the Legislative Assembly of the Northern Territory under Standing Order 240. Where copyright subsists with a third party it remains with the original owner and permission may be required to reuse the material.




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53 Commonwealth Grants Commission The role of the Commission is to recommend to the Commonwealth an annual set of relativities that determine the distribution of GST revenue among the states. The Commission is required under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations to base its recommendations on the principle of horizontal fiscal equalisation, defined as: State governments should receive funding from the pool of Goods and Services Tax revenue and health care grants such that, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency, each would have the capacity to provide services at the same standard. (Commonwealth Grants Commission 2008 Update) Each states relativity reflects unavoidable differences in revenue raising capacity (revenue needs) and costs of providing general government services (expenditure needs), and states shares of SPP funding. Needs reflect differences in states economic, demographic and physical circumstances and can be positive or negative. Because the Commission assesses needs within a defined level of available funds, a necessary consequence is that a positive need of one jurisdiction means it will be offset by a negative need in at least one other jurisdiction. The Territory is assessed as having the highest level of needs of all jurisdictions. This is primarily due to the high costs of providing virtually all government services in the Territory and, to a lesser extent, the Territorys below average capacity to raise own-source revenue. This is partly offset by the Territorys relatively high share of SPP funding. Table 5.2 shows the relative revenue, expenditure and SPP needs of each jurisdiction. The costs of providing services in the Territory are high because of: the very large proportion of the Indigenous population residing in the Territory, which increases the use and costs of many services; the small but widely dispersed population over a large and remote land mass; large diseconomies of scale in central administration and the need to provide a high proportion of services in small and dispersed communities; small private sector relative to demand, particularly in the area of health services; and the Territorys isolation from major supply centres. Chart 5.1 shows the main factors that contribute to the difference between the Territorys equalised share and equal per capita share of GST revenue. Indigenous influences account for about 45 per cent of the total expenditure needs of the Territory. Table 5.2: GST Relative Needs 200607 ($ per capita) NSW Vic Qld WA SA Tas ACT NT $ $ $ $ $ $ $ $ Revenue raising capacity - 19.82 348.67 - 227.54 - 1 104.85 597.31 886.36 428.24 252.88 Expenditure requirements - 62.65 - 491.98 14.30 492.32 - 85.29 388.87 - 123.21 8 798.76 SPP needs - 2.63 44.23 - 11.23 - 24.95 - 14.57 - 28.85 99.03 - 509.17 Total needs difference from equal per capita - 85.10 - 99.08 - 224.47 - 637.48 497.45 1 246.38 404.06 8 542.48 Source: Commonwealth Grants Commission 2008 Update