Executive Summary

• The States will receive goods and services tax (GST) revenue totalling an estimated $31.7 billion in 2003-04. This amount is distributed between the States in accordance with recommendations of the Commonwealth Grants Commission (Chart 1).

• The States are realising the benefits of a broad, growing GST revenue base. Current estimates show that Queensland, Western Australia, Tasmania, the Australian Capital Territory and the Northern Territory will not require Budget Balancing Assistance in 2003-04. Their GST revenue will exceed their Guaranteed Minimum Amounts by a combined estimated total of $269.6 million in 2003-04.

• In addition, the Government will provide the States with payments including National Competition Policy Payments, Specific Purpose Payments and Budget Balancing Assistance totalling an estimated $24.5 billion in 2003-04. Specific Purpose Payments comprise a significant proportion of these funds (Chart 2).

• The Government is seeking improved accountability in Specific Purpose Payment agreements with the States. This reflects the importance of these payments, which the Commonwealth Government provides to the States as a contribution to areas of state responsibility, such as hospitals and schools.

• Fiscal developments in the States indicate a trend towards both cash and fiscal balance surpluses in almost all States by 2005-06. Over the past decade, most States have also reduced their levels of net debt.

Chart 1: GST revenue provision to the States, 2003-04
(estimated)

Chart 2: Commonwealth payments to the state/local sector, 2003-04
(estimated)

Note: Specific Purpose Payments through the States are payments to state governments to be passed on to local governments and others.