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Tuesday, 19 September 1972
Page: 1559

Mr GARLAND (Curtin) (Minister for Supply and Minister Assisting the Treasurer) - in reply - In replying on behalf of the Treasurer (Mr Snedden) might I say that the points made by honourable members in their speeches will certainly be noted. In summing up I would like to refer to the provisions of the Bill since the debate, particularly the contributions by the last few speakers, has ranged somewhat widely. The first Bill, the States Grants Bill (No. 2), amends the States Grants Act 1971-72 to revise the financial assistance grants arrangements agreed between the Commonwealth and the States at the Premiers Conference held 3 months ago. Firstly, it was agreed that an additional $112m would be paid to the States in their grants for the current year; and built into the formula grants to escalate in future years as part of the for mula laid down and provided in the present Act. The SI 12m is to be distributed between the States in proportion to the 1971-72 formula grants as escalated in 1972-73 under the formula, and this method was decided on to exclude the effects of the adjustments to the financial assistance grants which are accompanying the transfer of payroll tax to the States.

Secondly, the additional grants of $2 per head paid to New South Wales and Victoria annually are increased to $3.50 per head this year, and these amounts also are added to the formula to escalate in future years. This increases the grants to New South Wales and Victoria this year by approximately $ 12.5m. Under the procedures of the Commonwealth Grants Commission, the 3 States which receive special grants, on its recommendation - namely Queensland, South Australia and Tasmania - will benefit proportionately from these increased grants. Thirdly, it was agreed that a special temporary addition of $3.5m would be made to the financial assistance grants payable to Western Australia in 1972-73. Perhaps the honourable member for Swan (Mr Bennett) would care to reflect on that in the light of the rather rash remarks he made a little while ago. The total cost will be to add $128m to the financial assistance grants that would be produced in 1972-73 by the arrangements in the existing legislation. The addition to the grants in subsequent years will, of course, be greater as a result of building the major part of this amount into the formula grants. Taking into account all' the changes in the revenue assistance arrangements that were decided at and since the 1970 Premiers Conference, it is estimated that in the current year the States will receive in Commonwealth general revenue assistance over $420m more than they would have received had the arrangement which existed before 1970-71 continued unchanged. The second Bill - we are debating both Bills together - is the States Grants (Capital Assistance) Bill (No. 3) 1972. Its main purpose is to authorise capital grants to the States in this current year totalling over $261m. It is made up of $248m as the grants component of the States works and housing programme for the current year and $13m as 'grants for expenditure on State government primary and secondary schools. It will be recalled that the capital grants for the works and housing programme are being provided under arrangements agreed with the States in June 1970 whereby the Commonwealth is providing part, now equal to about 25 per cent, of that programme as a grant in lieu of borrowings, The savings on debt charges to the States for the works and housing programmes for the 5 years to 1974-75, as a result of the introduction of these capital grants, will be of the order of $200m. The grants for capital expenditure on government schools are being provided under arrangements announced by the Prime Minister (Mr McMahon) in December last year for providing capital grants to the States totalling $20m over the 18 months ending June 1973. Last year's allocation of the capital' grants for schools was authorised by previous legislation.

A number of honourable members referred to the financing of local government authorities in Australia. For the record, I want to make some comments on the Commonwealth's attitude. Local government authorities are created and function under State laws. The Commonwealth does not wish to disturb the constitutional structure whereby the responsibility is placed on State governments and parliaments to determine the revenue raising powers that local authorities should have and to assess the extent to which the financial resources available to them should be supplemented and by what means. In accordance with this attitude, the Commonwealth does not normally provide direct grants to local authorities. What it does is provide to the State governments large amounts of general, that is untied, assistance which they are free to disburse as they themselves decide. It is, accordingly, for each State government to allocate the volume of funds which should be passed on to local government authorities from the total funds available, including those from the Commonwealth. I have referred to that in speaking on these Bills.

The most important way in which Commonwealth assistance is provided to the States is through the general revenue grants. The arrangements under which these grants will be paid over the 5 years ending 1974-75 were determined initially at the Premiers Conference in June 1970 to which I referred earlier and were substantially revised again as a result of discus sions at the June 1971 and June 1972 Premiers Conferences. Under these arrangements the level and rate of growth of Commonwealth general revenue assistance to the States have been significantly increased as compared with the previous arrangements. It is estimated, for example, that the States will receive in 1972-73- the current year - over $420m more in Commonwealth general revenue assistance than they would have received had the arrangements which existed before 1970-71 continued unchanged.

At the June 1971 Premiers Conference, besides agreeing to provide additional revenue grants, the Commonwealth offered to transfer payroll tax to the States so as to provide them with a new and significant source of revenue. The States accepted this offer and have been levying payroll tax since September last year. At the same conference the Commonwealth agreed as a special measure of assistance to local government authorities, to meet the full cost, estimated at about $6m last year and $8m in a full year, that would otherwise be incurred by State governments in exempting the non-business activities of local government authorities from the payment of payroll tax at the former rate. The relief that the States are thus providing to local government authorities has been welcomed by local government authorities throughout Australia and implemented in effect by the Commonwealth.

The Government believes that having substantially improved the general revenue grants arrangements, having facilitated access by the States to a new area of growth taxation which they have already acted upon, and having continued to increase the levels of numerous other forms of assistance to the States which are not detailed now, it has done all it reasonably can do at this time, given the other demands on the resources available to it, towards putting the States in a position adequately to meet their financial responsibilities including their responsibilities in respect of the affairs of local government authorities given the competing priorities which they, like the Commonwealth Government, encounter.

Question resolved in the affirmative.

Bill read a second time.

Message from Governor-General recommending appropriation announced.

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