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New South Wales, Victoria and WA say current funding arrangements encourage smaller and poorer states to exaggerate their financial hardship to maximise funding.\n

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Friday 30 August 2002


New South Wales, Victoria and WA say current funding arrangements encourage smaller and poorer states to exaggerate their financial hardship to maxi mise funding.


MARK COLVIN: It was Paul Keating who said you should never get between a premier and a bucket of money. The New South Wales, Victorian, and West Australian State Governments have demonstrated it yet again.


They've commissioned a report by leading economists, Ross Garnaut and Vince Fitzgerald, on Commonwealth State funding arrangements. The three states say the present system encourages the smaller and poorer states to exagerate their financial hardship to maximise funding.


Louise Yaxley reports.


LOUISE YAXLEY: NSW Treasurer, Michael Egan, John Brumby from Victoria, and Western Australia's Treasurer, Eric Ripper, argue their states are getting a rough deal from the current system of redistributing funding between the states.


MICHAEL EGAN: It is an impediment to a better Australia. In no way does it make Australia better off.


JOHN BRUMBY: It doesn't stack up, on the grounds of efficiency, simplicity, equity, or transparency.


ERIC RIPPER: Our growth, not only in the donor states, but also in the beneficiary states, is inhibited by the Grants Commission process, and that, I think, is something that we all should be concerned about.


LOUISE YAXLEY: They've been campaigning for two years, and today released their trump-card: a report by economists, Ross Garnaut and Vince Fitzgerald, which backs the claim that the system doesn't work. That's exactly the message the gang of three treasurers wanted to hear.


MICHAEL EGAN: What the report confirms is that the current system is holding all of Australia back. It's not just holding back, New South Wales, Western Australia and Victoria, it's holding back growth across all of the Australian states and territories, and across the federation as a whole.


LOUISE YAXLEY: The economists recommend a new system providing funding on the basis of population, arguing that would get around the problem identified by Professor Garnaut.


ROSS GARNAUT: The formal equalisation processes require states to demonstrate that their revenue-raising capacity is not as good as other states, and that its costs of delivering services are higher than other states.


We think that the necessity for State Governments to constantly prove that they're bigger basket-cases than other states over time, affects the way in which states look at the cost of delivering services.


LOUISE YAXLEY: The three states want a new system with funding on a per capita basis. Hey acknowledge it would have to be introduced slowly, to wean the states like Tasmania and South Australia away from their dependence on the present system. Victoria's John Brumby, tries to put the best spin on it.


JOHN BRUMBY: No state will be worse off than what we're getting today, in real per capita terms.


LOUISE YAXLEY: But the states like Tasmania, South Australia, and the Nort hern territory would lose the growth in their grant allocations under this plan, and so, they don't like it and are unlikely to come to the party. The Prime Minister doesn't expect the self-proclaimed 'donor states' to convince their state colleagues.


JOHN HOWARD: If one state is unhappy with its allocation, it's got to get the other five states onside, and then they come along to us in a united way, and say, "Will you please re-arrange it, in accordance with this new formula". I wish them luck.


LOUISE YAXLEY: The Northern Territory Chief Minister, Claire Martin's reaction, indicates that Prime Minister's right to be sceptical.


CLAIRE MARTIN: Any change in horizontal fiscal equalisation, which is the principle adopted by the Commonwealth Grants Commission, has to have the full support of all states and territories, and it does not have the support of the Northern Territory, nor South Australia, nor the ACT, nor Tasmania, nor Queensland.