Transcript Document

Presentation to
the Panel reviewing
the GST Distribution
6 May 2011
1
1.
Some history and the definition of HFE
2.
Main reasons why GST shares differ
3.
Developments in the last decade
4.
Methodology changes in 2010 Review
5.
CGC and the Committee to review HFE
2
CGC established 1933
 1933-70s: claimant States assessed against a
2 State average (NSW and Victoria)
Full equalisation
 Fraser legislates1978, CGC reports 1980 and
phased-in 1980s,Territories also by 1993-94

Each State assessed against an 8 State average

Reaffirmed Howard 1999, Rudd 2008
3


Reviews of methodology
Annual updates
◦ Latest data are fed into the methods
from the last review
4
800
700
600
$m
500
400
300
200
100
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Update
Update
Review
Update
Update
Update
Update
Update
Review
Update
Revisions (a)
Changes in State circumstances
(a) Impact of revisions and changes in assessment methods combined
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
The GST is distributed so that:
◦ After allowing for the major factors affecting
revenues and expenditures;
◦ Each State has the fiscal capacity to provide services
and the associated infrastructure at the same
standard;
◦ If each makes the same effort to raise revenue from
its own sources; and
Each operates at the same level of efficiency.
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35.0
-$92 pc
GST Share
30.0
Population Share
-$213 pc
25.0
-$160 pc
per cent %
20.0
15.0
-$644 pc
10.0
$606 pc
$9 927 pc
$1 333 pc
5.0
$265 pc
0.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
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8
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Note: 3 yr average
Source: CGC assessment system.
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50
Share of Population
Share of Mining Revenue
45
40
per cent (%)
35
30
25
20
15
10
5
0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Note: 3 yr average
Source: ABS estimated resident population and revenue data sourced from CGC assessment system.
10
250.0
Cost of service ratio
200.0
150.0
100.0
50.0
0.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Note: 3 yr average
Source: CGC assessment system.
11
35.0
30.0
Per cent (%)
25.0
20.0
15.0
10.0
5.0
0.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Average
Source: ABS indigenous population estimates, 2008-09
12
80
Low
Middle
High
70
60
Per cent
50
40
30
20
10
0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Australia
Source: ABS SEIFA index, 2009-10 (Census District data).
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8.0
6.0
Per cent
4.0
2.0
0.0
-2.0
-4.0
-6.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Source: CGC interstate wage disability factor, Update 2011
Note: 3 year average using data for the years 2007-08 to 2009-10.
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2011 Update
Mining production
(7% of OSR)*
Indigenous influences
Where people live
Wage Levels
Socio-economic status
Payrolls
(18% of OSR)*
Property Sales
(13% of OSR)*
Amount
redistributed
$m
3 802
2 562
1 642
1 187
1 131
881
767
Source: Table 7, 2011 Update Report, Commonwealth Grants Commission.
* OSR = Own source revenue
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16
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Redist
$m
$m
$m
$m
$m
$m
$m
$m
$m
Equal per capita
16 104.2
12 429.7
10 193.9
5 192.3
3 640.4
1 121.3
800.0
518.2
Illustrative
15 439.9
11 257.4
9 475.8
3 728.2
4 630.6
1 795.2
894.1
2 778.9
-664.4
-1 172.3
-718.1
-1 464.1
990.2
673.9
94.1
2 260.7
2008-09
2009-10
Redistribution
4 018.9
10.0
8.0
7.0
2011-12
2010-11
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
6.0
2000-01
Per cent
9.0
17
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
Relativity
1.10
1.05
1.00
0.95
0.90
0.85
NSW
Vic
0.80
Qld
0.75
WA
0.70
0.65
0.60
Source: CGC calculation.
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Share of own source revenue (%)
9.00
9.00
8.00
8.00
7.00
7.00
6.00
6.00
5.00
5.00
4.00
4.00
3.00
3.00
2.00
2.00
1.00
1.00
0.00
0.00
Per cent
Dollars billion
Mining revenue ($b)
19
4 000.0
3 500.0
Dollars million
3 000.0
2 500.0
2 000.0
1 500.0
1 000.0
500.0
0.0
20
Share of own source revenue (%)
18.00
18.00
16.00
16.00
14.00
14.00
12.00
12.00
10.00
10.00
8.00
8.00
6.00
6.00
4.00
4.00
2.00
2.00
0.00
0.00
Percent
Dollars billion
Conveyencing revenue ($b)
21
1 400.0
1 200.0
Dollars million
1 000.0
800.0
600.0
400.0
200.0
0.0
22
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

Simplification and materiality
- Required by terms of reference
Averaging of data: 5 years reduced to 3 years
- Contemporaneity versus stability
- Lags reduced by 2 years
- Implications of lags for booms and busts

Investment and population growth
- Needs assessed upfront
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250.0
Cost of Capital Ratio
200.0
150.0
100.0
50.0
0.0
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Note: 3 year average
Source: CGC calculation.
25
3.0%
Population growth (%)
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
NSW
Vic
Qld
WA
SA
Tas
ACT
NT
Note: 3 year average. Based on data for 2007-08 to 2009-10.
Source: ABS Estimated resident population.
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27

Welcomes the Review

Will fully cooperate with the Review

Need for transparency
◦ We will adopt our usual practice for reviews and updates
◦ Any submissions we make will be placed on our website

Need to remain neutral
◦ CGC has continuing responsibility ‘to make
recommendations on the distribution of the GST’

Some CGC staff will be seconded to Secretariat
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