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Presentation to the Panel reviewing the GST Distribution 6 May 2011

Presentation to the Panel reviewing the GST Distribution 6 May 2011. Topics. Some history and the definition of HFE Main reasons why GST shares differ Developments in the last decade Methodology changes in 2010 Review CGC and the Committee to review HFE. Some history.

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Presentation to the Panel reviewing the GST Distribution 6 May 2011

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  1. Presentation to the Panel reviewing the GST Distribution 6 May 2011

  2. Topics • Some history and the definition of HFE • Main reasons why GST shares differ • Developments in the last decade • Methodology changes in 2010 Review • CGC and the Committee to review HFE

  3. Some history CGC established 1933 • 1933-70s: claimant States assessed against a 2 State average (NSW and Victoria) Full equalisation • Fraser legislates1978, CGC reports 1980 and phased-in 1980s,Territories also by 1993-94 • Each State assessed against an 8 State average • Reaffirmed Howard 1999, Rudd 2008

  4. CGC tasks • Reviews of methodology • Annual updates • Latest data are fed into the methods from the last review

  5. Revisions v Changes in State circumstances (a) Impact of revisions and changes in assessment methods combined

  6. Definition of HFE • The GST is distributed so that: • After allowing for the major factors affecting revenues and expenditures; • Each State has the fiscal capacity to provide services and the associated infrastructure at the same standard; • If each makes the same effort to raise revenue from its own sources; andEach operates at the same level of efficiency.

  7. GST and population shares 2010-11

  8. Why shares differ

  9. Relative revenue raising capacities 2007-08 to 2009-10 Note: 3 yr average Source: CGC assessment system.

  10. Share of mining revenue and population 2007-08 to 2009-10 Note: 3 yr average Source: ABS estimated resident population and revenue data sourced from CGC assessment system.

  11. Relative costs of services 2007-08 to 2009-10 Note: 3 yr average Source: CGC assessment system.

  12. Indigenous population: share of total population Source: ABS indigenous population estimates, 2008-09

  13. Socio-economic profile of States Source: ABS SEIFA index, 2009-10 (Census District data).

  14. Difference from average wage levels Source: CGC interstate wage disability factor, Update 2011 Note: 3 year average using data for the years 2007-08 to 2009-10.

  15. The main causes Source: Table 7, 2011 Update Report, Commonwealth Grants Commission. *OSR = Own source revenue

  16. Developmentsin the last decade

  17. Difference from population share

  18. Qld and WA become donors Source: CGC calculation.

  19. Mining revenue growth

  20. Source of volatility:Mining revenue redistribution

  21. Source of volatility:Conveyance duty Percent

  22. Contribution of conveyance duties to total redistribution

  23. Methodology changes

  24. 2010 Review • Simplification and materiality - Required by terms of reference • Averaging of data: 5 years reduced to 3 years - Contemporaneity versus stability - Lags reduced by 2 years - Implications of lags for booms and busts • Investment and population growth - Needs assessed upfront

  25. Relative investment 2007-08 to 2009-10 Note: 3 year average Source: CGC calculation.

  26. Population growth pa 2007-08 to 2009-10 Note: 3 year average. Based on data for 2007-08 to 2009-10. Source: ABS Estimated resident population.

  27. The Review of theGST Distribution

  28. CGC and the Review of GST Distribution • Welcomes the Review • Will fully cooperate with the Review • Need for transparency • We will adopt our usual practice for reviews and updates • Any submissions we make will be placed on our website • Need to remain neutral • CGC has continuing responsibility ‘to make recommendations on the distribution of the GST’ • Some CGC staff will be seconded to Secretariat

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