Australian Government, 2011‑12 Budget
Budget

Attachment D

Australia's Federal Relations

This attachment provides information on payments for specific purposes and general revenue assistance provided to the States and Territories (the States).

The current framework for federal financial relations under the Intergovernmental Agreement on Federal Financial Relations (Intergovernmental Agreement) was introduced on 1 January 2009.

The Commonwealth is working in partnership with the States in a number of key reform areas. Significant progress has been made in implementing the reform agenda through the federal financial relations framework. The framework has proved to be flexible and dynamic including through facilitating national health reform, and responding to the global recession, and more recently, natural disasters.

More detailed information on the Intergovernmental Agreement and Australia's federal financial relations is provided in Budget Paper No. 3, Australia's Federal Relations 2011‑12 and on the federal financial relations website at www.federalfinancialrelations.gov.au.

Overview of payments to the States

The States receive significant financial support from the Commonwealth. In 2011‑12, total payments to the States are estimated to be $96.3 billion, or 25.9 per cent of total Commonwealth expenditure. The Commonwealth will provide the States with payments for specific purposes of $47.6 billion and general revenue assistance of $48.7 billion.

Table 3.21 shows payments for specific purposes and general revenue assistance to the States.

Table 3.21: Commonwealth payments to the States, 2011-12 to 2014-15*

Table 3.21: Commonwealth payments to the States, 2011-12 to 2014-15

Note: The data in this table have been amended from the published MYEFO document. Total expenses remain unchanged. A minor adjustment has been made to the State shares of some National Specific Purpose Payments.

  1. State allocations are not yet finalised for a number of National Partnership payments; unallocated payments are not included in State totals.

Payments for specific purposes

The Commonwealth provides payments to the States for specific purposes to pursue important national policy objectives in areas that may be administered by the States. Payments to the States for specific purposes will total $47.6 billion in 2011‑12, a decrease of 7.7 per cent compared with the $51.6 billion the States received in 2010‑11. This decrease largely reflects the change in accounting treatment of payments made to the States under the Natural Disaster Relief and Recovery Arrangements (NDRRA) as reported in the 2010‑11 Final Budget Outcome. Payments to the States for specific purposes are estimated to represent 12.8 per cent of total Commonwealth expenditure in 2011‑12.

The Commonwealth provides the following types of Specific Purpose Payments (SPPs) to the States:

  • National Specific Purpose Payments (National SPPs) in respect of key service delivery sectors;
  • National Health Reform funding (from 1 July 2012); and
  • National Partnership payments — project payments, facilitation payments and reward payments.

Table 3.22 shows total payments for specific purposes by category (National SPPs, National Health Reform funding, and National Partnership payments).

Table 3.22: Total payments for specific purposes by category, 2011-12 to
2014-15*

Table 3.22: Total payments for specific purposes by category, 2011-12 to 2014-15

Note: The data in this table have been amended from the published MYEFO document. Total expenses remain unchanged. A minor adjustment has been made to the State shares of some National Specific Purpose Payments.

  1. State allocations are not yet finalised for several payments; unallocated payments are not included in State totals.
  2. Includes financial assistance grants for local government.

Since the 2011‑12 Budget, payments to the States for specific purposes are estimated to be higher by $2.1 billion in 2011‑12, but $7.2 billion lower across the forward estimates. Major changes include:

  • the bringing forward of $1.1 billion into 2011‑12 from across the forward estimates to accelerate various road infrastructure projects under the Nation Building Fund — Investment — Road program;
  • a decrease of $6.8 billion across the forward estimates reflecting changes in the accounting treatment of the NDRRA (further details on this change are detailed below);
  • the rephasing of $250 million into 2011‑12 from 2012‑13 to accelerate various projects under the Building Australia Fund — Road and Rail;
  • the bringing forward of around $230 million into 2011‑12 from across the forward estimates to reflect higher than expected completion rates by the States and payment for the early delivery of milestones under the National Partnership Agreement on Remote Indigenous Housing;
  • a reprofiling of approximately $160 million related to projects funded under the Health and Hospitals Fund including amounts related to the Victorian Comprehensive Cancer Centre and Midland Health Campus;
  • a rephasing of around $150 million from the Reward Payments for School Improvement Program to allow for greater stakeholder consultation, with funding provided to develop and implement the National Schools Improvement Framework, including testing pilot projects;
  • a movement of reward funding under the National Partnership Agreement on Improving Public Hospital Services expected to be paid in 2012‑13 (and later years) into 2013‑14 (and subsequent years) to better reflect expected reporting and payment timeframes. Earlier payments may be possible if reporting processes can be facilitated earlier; and
  • an additional $50 million over three years from 2011‑12 in reward funding under a new National Partnership agreement to support the assessment of impacts of coal seam gas and large coal developments.

Payments for specific purposes cover most functional areas of state and local government activity — including health, education, skills and workforce development, community services, affordable housing, infrastructure and environment. Table 3.23 shows total payments for specific purposes by function.

Table 3.23: Payments for specific purposes by function, 2011-12 to 2014-15*

Table 3.23: Payments for specific purposes by function, 2011-12 to 2014-15

Note: The data in this table have been amended from the published MYEFO document. Total expenses remain unchanged. A minor adjustment has been made to the State shares of some National Specific Purpose Payments.

  1. State allocations are not yet finalised for several National Partnership payments; unallocated payments are not included in State totals.
  2. Includes financial assistance grants for local government.

Total payments for specific purposes by function, and category (National SPPs, National Health Reform funding, and National Partnership payments) are shown in Table 3.24.

Table 3.24: Payments for specific purposes by function and category,
2011-12 to 2014-15

Table 3.24: Payments for specific purposes by function and category, 2011-12 to 2014-15

  1. Includes adjustment to the National Disability SPP to achieve budget neutrality under National Health Reform (see footnote to Table A.4 in Annex A for details).
  2. Includes financial assistance grants for local government.

Detailed tables of payments for specific purposes are provided in Annex A. This Annex provides accrual estimates of Commonwealth payments to the States.

In 2010‑11, the Commonwealth reviewed the accounting treatment of payments made to the States under the NDRRA. The accounting treatment previously applied by the Commonwealth was to recognise grant liabilities under the NDRRA to the extent that (i) the services required to be performed by the State had been performed or (ii) the grant eligibility criteria had been satisfied, but payments due had not been made. The change in accounting treatment has resulted in the Commonwealth recognising a liability equal to the discounted value of estimated future payments to the State under the NDRRA. This is regardless of whether or not a State has completed eligible disaster reconstruction work or submitted an eligible claim under the NDRRA. The estimated NDRRA cash payments are shown in Table 3.25 below (see Table A.8 in Annex A for accrual estimates).

Table 3.25: Estimated NDRRA cash payments, 2011-12 to 2014-15

Table 3.25: Estimated NDRRA cash payments, 2011-12 to 2014-15

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