The Commonwealth Grants Commission has released its advice to the Australian, State, and Territory Governments on how GST revenue should be distributed among the States and Territories in 2011-12.

 

The recommended shares of GST to apply in 2011-12 are based on the average fiscal capacities of the States and Territories over the three years 2007-08 to 2009-10.

The assessment is based on the same methodology applied in the previous year, but using updated and more recent data.

 

The main changes for 2011-12 compared with 2010-11 involve increased shares for the Northern Territory, Western Australia and Queensland and a reduced share for Victoria. The changes in shares for other jurisdictions are modest.

 

The Chairman of the Commission, Alan Henderson, said, “Volatile mining and property revenues, varying population and more recent data on private sector wages, are driving adjustments in GST shares.”

 

“Mining revenues continue to boost the fiscal capacity of Queensland and especially Western Australia. However, their impact on the GST shares in this update has been offset by slower property markets in these States and revised data on relative wage levels, which have increased their costs of service delivery.”

 

“In contrast, Victoria’s GST share has declined because property markets have been more buoyant and relative wages growth has been slower in Victoria.”

 

In preparing its recommendations the Commission assessed the relative costs of providing State hospital, school and other services, including the associated infrastructure; and their relative capacity to raise revenue from payrolls, mining production and other State tax bases.

 

The recommended allocation of GST revenue is designed to equalise the fiscal capacities of the States; that is, to enable the States to provide a similar standard of services provided they make a similar effort to raise revenue. Because each State retains the discretion to decide its own spending and taxing policies, the Commission bases its assessment on the average of State policies.

 

This update report also explains how the Commission assesses mining royalties and shows how, over time, through adjustments in the shares of GST revenue, the proceeds from mining royalty capacity are shared among all States.

 

The report can be found here.