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Monday, 25 March 1985
Page: 694

Senator Dame MARGARET GUILFOYLE — I direct a question to the Minister for Finance. I understand that the national inquiry into local government finance is expected to report in September. Will the Government await the recommendations of the inquiry before making any changes to existing tax sharing arrangements with local government at either the Premiers Conference in May or the tax summit in July?

Senator WALSH —I believe the first part of the question correctly assumes that the inquiry is to report by September of this year. As to the second part of the question, payments to local governments, of course, will have to be considered in the context of government outlays. It ought to be noted that, on present estimates, if the existing arrangement for local government is continued into next year it will get a nominal increase in funds of around 20 per cent and a real increase in funds of about 15 per cent. I do not believe that an increase of that magnitude, 15 per cent in real terms-a far higher increase in funds than local government has ever before received-can be justified in the present tight budgetary situation. Local government authorities have not increased their revenue raising effort in the last decade or so in spite of rising property values, and the States have responded to Commonwealth assistance to local government associations by reducing State contributions to local government. I cite, for example, Dr Edwards, a former Treasurer of Queensland, who, in a letter to the President of the Local Government Association of Queensland advising of a big cut back in Queensland Government payments to local government authorities, said:

. . . the financial position of local authorities has improved significantly over recent years. In this regard, Commonwealth grants to local authorities have increased from $9m in 1974-75 to $50.7m in 1980-81 and . . . $59m in 1982-83.

The Queensland Government subsequently reconsidered its position, but that statement is indicative of its attitude. I do not believe that a real increase of 15 per cent, in the difficult budgetary situation that the Government is facing, can be justified even in isolation, less so when the effect of that is to discourage local government and State governments from providing their own funds. It was always a foolish decision to tie any Commonwealth funding to local government to the most unstable of all Commonwealth revenues, that is, to personal income tax, which is highly unstable. What ought to be considered is a review of local government funding arrangements to put them on a more stable basis than any continuing arrangement tied to personal income tax. Finally, if, as some people would argue there should be, there were a major shift from personal income tax to broadly based consumption taxes in the raising of Commonwealth revenue, obviously the 2 per cent formula which some people would like to regard as sacrosanct would heavily disadvantage local government. That is another thing which must be taken into consideration.