Mr McGAURAN (Minister for the Arts and the Centenary of Federation) (9:50 AM) —I move:

The Local Government (Financial Assistance) Act 1995 is the basis upon which Commonwealth financial assistance is provided to local government through the states and territories. This financial assistance has two components:

general purpose funding (section 9 payments); and

local roads funding (section 12 payments).

Under this act local government is estimated to be entitled to around $1.32 billion in financial assistance grants for 2000-01. Each year, the Treasurer determines the escalation of local government assistance by having regard to movements in the level of the financial assistance grants and special revenue assistance paid to the states.

Under the government's revised tax reform package, the Commonwealth retains responsibility for providing financial assistance grants to local government. It is necessary to amend the Local Government (Financial Assistance) Act 1995 to remove the nexus with states' financial assistance grants, as these will be abolished from 1 July 2000 as a result of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations(the agreement). A key feature of the agreement is the payment of all GST revenue to the states.

The amendment allows local government financial assistance grants to be maintained on a real per capita basis.

The matters to which the Treasurer must currently have regard in making an adjustment to the escalation factor will be nullified by the reforms to Commonwealth-state financial relations and are therefore deleted. This will leave a general discretion as in the present act. However, under the amendments, the discretion can be used only if the Treasurer considers there are special circumstance to make the adjustment. In making a decision to adjust the factor, the matters the Treasurer is to have regard to are the objects of the act, set out in section 3, and any other matters he thinks relevant.

Under clause 17 of the agreement, the states and territories agreed, inter alia, that local government would operate as if it were subject to the GST legislation.

As undertaken in clause 18 of the agreement, the Commonwealth is legislating to require the states and the Northern Territory to withhold from the financial assistance grants, for any local government authority in breach of clause 17 of the agreement, a sum representing the amount of any unpaid voluntary or notional GST payments. Amounts withheld by the states and the Northern Territory are to be paid to the Commonwealth.

The amendment bill will also clarify the roles of the minister and Statistician relating to calculation of projected population figures used in estimating state entitlements. The Statistician will prepare the estimates on the basis of assumptions specified by the minister, after consulting the Statistician. The Statistician requested this amendment.

I commend the bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Melham) adjourned.