Submission to the Productivity Commission Inquiry into Horizontal Fiscal Equalisation
11 July 2017
The Business Council supports the principle of horizontal fiscal equalisation (HFE), which is broadly that states and territories should have the fiscal capacity to ensure Australian citizens are able to access comparable standards of services regardless of the jurisdiction in which they reside.
However, the Business Council is making a submission to the inquiry because we are concerned that the way HFE is implemented in Australia has become a barrier to national reform, inter-state cooperation and broad-based tax reform.
The system of HFE as it is currently applied by the Commonwealth Grant’s Commission (CGC) is too complex, and is not well suited to dealing with very large disparities between jurisdictions – as occurred during the recent resources boom – or when economic fortunes of states rapidly change.