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Wednesday, 3 November 1976
Page: 2277

Mr LYNCH (Flinders) (Treasurer) - I move:

That the Bill be now read a second time.

The main purpose of this Bill is to authorise the payment to Queensland of $2 7m in 1976-77 in the form of special grants. The payment of this amount is in accordance with the recommendations of the Grants Commission contained in its forty-third report on special assistance for the States which was tabled, initially in the Senate, by the Minister for Administrative Services (Senator Withers). The Bill also seeks authority for payment of advances to Queensland in the early months of 1977-78, pending receipt of the Commission's recommendations for that year and enactment of any necessary legislation to provide for special grants that may be paid to the State in that year.

The Commonwealth Government makes special grants to certain of the States to compensate them for such factors as lower capacity to raise revenue from their own resources and higher costs in providing government services of a standard similar to those in the financially stronger States. When special grants were first paid they constituted the only regular form of general revenue assistance paid to the fiancially weaker States for this purpose. However, for many years now, the mam way in which special compensatory assistance has been provided has been through the higher per capita shares of other general revenue funds paid to the 4 less populous States. This meant principally that, prior to the current financial year, the financial assistance grants, or formula grants, paid to Queensland, South Australia, Western Australia and Tasmania were higher, in per capita terms, than the financial assistance grants paid to New South Wales and Victoria. From the beginning of 1976-77, those formula grants are, of course, being replaced with the personal income tax sharing arrangements between the Commonwealth and the States.

I emphasise, however, that under the personal income tax sharing arrangements the less populous States will continue to be free to apply for special financial assistance on the recommendation of the Grants Commission. As honourable members will be aware, this is one of the explicit understandings between governments in relation to the tax sharing arrangements. Any such special grants would be regarded as supplementing a State's entitlement under the tax sharing arrangements in the same way as they formerly supplemented the financial assistance grants.

The Grants Commission, in arriving at its recommendations in relation to claims for special assistance, makes an assessment of the financial needs of a claimant State. To quantify these needs, the Commission compares in detail the finances of the claimant State with those of New South Wales and Victoria, taking into account differences in revenue-raising capacity and differences in the cost of providing comparable services.

The payments of special grants recommended by the Grants Commission consist of 2 parts. One part is based on a preliminary estimate of the claimant State's financial need in the current financial year, and is treated as an advance payment subject to adjustment 2 years later when the Commission has compared in detail the finances of the claimant and standard States for that year. The other part represents the final adjustment to the advance payment made 2 years earlier and is known as the completion payment. This adjustment may be positive or negative and therefore may result in the final grant in respect of a year being higher or lower than the advance payment for that year.

Currently Queensland is the only State applying for special revenue assistance under the Grants Commission arrangements. The payment to Queensland in 1976-77 of $27m provided for by this Bill comprises an advance payment of $l8m in respect of 1976-77 and a completion payment of $9m in respect of 1 974-75. The completion payment in respect of 1974-75, when added to the $15m advance grant paid to Queensland in that year, brings the final grant in respect of 1 974-75 to $24m, which is $2.7m more than the corresponding figure for 1973-74. The advance grant for 1976-77 will, in accordance with normal practice, be subject to adjustment in 2 years time.

The Commission's recommendations in relation to the special grants arrangements have been adopted by the Parliament each year since the Commission's inception and the Government considers that they should be accepted on this occasion. I commend the Bill to the House.

Debate (on motion by Dr Cass) adjourned.

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