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2011-03-17

An unintended effect of fiscal equalisation

Comments on Gary Johns “Tasmanian worker is a threatened species”, http://www.theaustralian.com.au/news/opinion/tasmanian-worker-is-a-threatened-species/story-e6frg6zo-1226022768108

It appears that the horizontal fiscal equalisation in Australia by the Commonwealth Grants Commission may have inadvertent effects on artificially increasing the Greens support base in Tasmania.

Tasmania receives GST distribution significantly above its population shares due to fiscal equalisation, so it has the same fiscal capacity to provide government services.

Imagine that it only received its population share, or only got back the GST revenue from Tasmania, would those Greens supporters in Tasmania, faced with poor government services than other States, still support the Greens as they have?

Fiscal equalisation through the distribution of the GST by the Commonwealth Grants Commission has far reaching implications than most people have realised so far, even though very few people in Australia understand it. It affects so many things around us.

That is perhaps another reason to have a fundamental review of federal financial relations and fiscal equalisation in Australia.

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