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Thursday, 9 December 1971
Page: 4622

Mr Whitlam asked theTreasurer, upon notice:

(1)   What additional revenue over and above previously anticipated revenue will (a) each State and (b) all States receive' this year, and in each of the next 3 years as a result of arrangements at the Premiers' Conference in June 1971.

(2)   What will be the additional amount available for education in each case if the Slates allocate for education the same proportion of their new revenue as of their previous revenue. '

(3)   What will be the impact of these additional funds upon the deficit revealed by the Nationwide Survey of Educational Needs, taking into account arrears accumulated in that part of the 5-year survey period which has already elapsed.

Mr Snedden - The answer to the honourable member's question is as follows:

(1)   The State Governments will receive additional, revenue in 3. ways as a result of the decisions made at the Premiers' Conference on 16th June 1971.

First, the transfer from the Commonwealth to the Slates of the. right to impose pay-roll tax in the States as from 1st September 1971 is on the basis that there will be offsetting deductions from the Commonwealth's financial assistance grants to the Slates in 1971-72, but. that these deductions : will be less than the loss to Commonwealth revenue (and the gains to the States' budgets at the previously existing rate of tax of 2.5 per cent) resulting from the transfer by amounts estimated at the time of the Conference at $22.7m and now estimated at $22.4m.

The distribution between the States of this esti mated gain of $22.4m to the States' budgets in 1971-72 is shown in the Budget paper 'Commonwealth Paymentstoor for the States 1971-72 (see the penultimate line in Table 3), in which document full details are given of the arrangements under which pay-roll tax in the States was transferred to the States.

The reduction of an estimated $22.4m in the amounts to be deducted from the Commonwealth's financial assistance grants to the States will also apply to the 'base' used to determine the financial assistance grants for 1972-73 and the 3 subsequent years; and the States will therefore continue to benefit, to an increasing degree, from that reduction in those years. The amount of the benefit in years subsequent to 1971-72 cannot be estimated precisely, as it will depend on the annual increase in each State's population and on the annual increase in average wages in Australia as a whole, these being two of the elements in the formula under which the financial assistance grants increase each year. As an indication of the approximate effect of the abovementioned reduced deduction, however, it is estimated that the total benefit to the States over the 4 years 1971-72 to 1974-75 could be of the order of$100m.

It should be explained that the figures mentioned above do not include the coststo the Commonwealth, and the gains, to local government authorities, arising from the Commonwealth's offerto meet the cost of exempting the non-business activities of local government authorities . from payment of pay-roll tax at the 2.5 per cent rate as from the date of transfer of the tax. The cost to the Commonwealth of that offer is estimated to amount toabout $6m in 1971-72 something over $8m in 1972-73,and willincrease further in subsequent years.

Secondly, the Commonwealth will pay the States additional, non-recurring . special 'revenue assistance of$40m in 1971-72, to be distributed between the States in proportion to their financial assistance grants.The approximate amounts estimated to be payable to each State are shown' in Table 39 in the Budget paperCommonwealth Paymentsto or for the States 1971-72'.

Thirdly, following the pay-roll tax transfer decision, all the States acted to increase the rate of the tax by1 per cent from 2½ per cent to 3½ per cent, as from the transfer date (1st September 1971). Onlyabout three-quarters ofthe full-year effect of that increase will accrue to the benefit of State Budgets in 1971-72. It is estimated that the benefitto the 1971-72 budgets of the 6 States taken as a whole will be approximately $90m in net terms (that is excluding collections which in some States will be made in respectof wages and salaries met direct from their budgets).

The benefitsto State budgets in subsequent years from this third factor will depend, obviously, on whether individual States decide to vary the rate of the tax (and if so, by how much and in what direction), as well as on movements in taxable wages and salaries in each State, and cannot, therefore, be predicted.

(2)   This is a hypothetical questionand, if only becacse of the considerations referred to in the answerto (1), I am in no position to answer it. However, I can inform the honourablemember that, on the basis of figures published inthe December 1970 Supplement tothe Treasury Information Bulletin on National Accounting Estimates of Public Authority Receipts and Expenditures, it has been calculated that recurrent expenditures by the State Governments in 1969-70 on education (comprising net current expenditure on goods and services and transfer payments) represented about 36 per cent of total State budgetary expenditures of a current nature in that year.

(3)   See answer to (2). I add that on 5th October last, in the course of a statement on the Commonwealth Education Programme for 1971- 72, the Minister for Education and Science expressed strong reservations about accepting the figures presented by State Ministers on the needs of government schools. Even if a more precise response were capable of being given to the earlier parts of the question, I would be reluctant to compound the shortcomings to which the Minister referred in that statement by attempting the arithmetical exercises which the honourable member invites me to undertake.

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