Intergovernmental relations

Intergovernmental relations are an essential part of the Australian system of federation, particularly given the level of Vertical Fiscal Imbalance between the States and the Commonwealth. As the Commonwealth has a broader range of revenue raising powers than the States, it is required to provide funding to the States so that States can meet their extensive expenditure requirements. These funds are provided either as general revenue grants or tied grants.

The method of distributing general revenue grants from the Commonwealth to the States underwent considerable change with the introduction of the Commonwealth's Goods and Service Tax (GST) in July 2000. The framework for distributing general revenue grants is outlined in the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, but the actual process of determining the level of untied funding that each State receives is based on fiscal equalisation principles. This process is managed by the Commonwealth Grants Commission, on behalf of the Commonwealth.

The level of tied grants or Specific Purpose Payments (SPPs) from the Commonwealth not only has a direct impact on the level of departmental funding but also on the level of untied grants or the amount of GST received from the Commonwealth. The processes and current risks associated with SPP funding to Queensland is summarised under Specific Purpose Payments and Fiscal Risks.

A number of forums exist to oversee this system of Intergovernmental financial relations. These forums include Ministerial Council, Heads of Treasury, and GSTAS meetings.

Links

• Commonwealth Grants Commission
• Fiscal risks
• Commonwealth Funding Agreements
• Ministerial Council, Heads of Treasury, and GSTAS meetings
• Specific Purpose Payments
• Vertical fiscal imbalance

Last reviewed 23 January 2012