Intergovernmental Financial Relations
Australian Government payments
Australian Government payments contribute to Queensland’s ability to meet its service delivery and infrastructure responsibilities. The 2 main forms of payment are ‘Payments for specific purposes’ and ‘General revenue assistance’. Together, Australian Government payments make up around 48 per cent of Queensland’s total revenue.
Payments for specific purpose are arranged through Commonwealth-State agreements and cover a wide range of policy purposes. Major agreements include the National Health Reform Agreement, National Disability Insurance Scheme, National Housing and Homelessness Agreement, National School Reform Agreement and the National Skills Agreement. The main source of general revenue assistance is the distribution of goods and services tax (GST) revenue.
In the 2023–24 Federal Budget delivered in May 2023, the Australian Government estimated the Queensland Government would receive $39.3 billion in 2023–24 comprising: $18.6 billion in payments for specific purposes; $1.2 billion in other Australian Government grants (including payments to Queensland Government agencies for Australian Government own-purpose expenditure); and $19.5 billion in payments for general purposes.
Changes to the Infrastructure Investment Program
On 16 November 2023, the Australian Government released the outcomes of its Independent Strategic Review of the Infrastructure Investment Program (the Review), including a summary of changes to funding for projects.
Initial analysis on the outcomes of the Review suggests a negative financial impact for Queensland due to various factors, such as, the Australian Government moving away from funding 80 per cent of projects in regional areas, introducing caps on road corridors, categorising a number of existing project commitments to be subject to further planning, and proposing to cancel federal funding for some projects entirely.
While the Australian Government has released the Review outcomes, release of the Federal Mid-Year Economic and Fiscal Outlook (MYEFO) is yet to occur. Release of the Australian Government’s MYEFO will allow for further dialogue with the Australian Government. The Queensland Government will then be better positioned to more fully consider and respond to the ongoing financial implications for Queensland’s transport capital program.
Box 5: Australian Government changes to Horizontal Fiscal Equalisation (HFE) and extension of the No Worse off Guarantee
Each year, the Commonwealth Grants Commission recommends to the Australian Government how GST should be distributed to states and territories for horizontal fiscal equalisation (HFE). The HFE methodology allocates a varying amount of GST to each state and territory depending on its fiscal capacity to deliver a similar standard of services and infrastructure to its population, no matter where they live.
In 2018, the previous Australian Government legislated changes to HFE, including: that states will equalise to the stronger of New South Wales or Victoria, rather than the state with the greatest fiscal capacity; that a relativity floor would be introduced; and that the Australian Government would provide a permanent boost to the GST pool. These changes are being gradually introduced over a 6-year transition period from 2021–22 to
2026–27.
Given the potentially significant implications of these changes for the GST received by individual states in any given year, the Australian Government also introduced a “No Worse Off Guarantee” (NWOG) over the transition period, which provides supplementary payments to any state that receives less GST under the new system than it would have received under the previous system.
The 2023–24 Federal Budget estimated Queensland’s NWOG payment for 2023–24 will be $1.121 billion.
Under the new arrangements, the NWOG was scheduled to end in 2026-27, which would have resulted in most states and territories, including Queensland, facing significant revenue reductions from 2027–28 onwards.
However, on 6 December 2023, National Cabinet agreed to extend the NWOG payments by a further 3 years, to 2029–2030.
The agreement by the Australian Government to a temporary extension of the NWOG was welcomed and is beneficial in providing greater GST revenue certainty to states and territories for an extended period.
The extension of the NWOG was also critical to provide ongoing funding certainty to states and territories in order to allow time for the scheduled Australian Productivity Commission review of GST arrangements to be completed.
Queensland will continue to engage with the Australian Government and other jurisdictions in an effort to establish the NWOG as a permanent arrangement, to ensure that the changes introduced by the previous Australian Government do not result in any significant decrease in ongoing revenue over the longer term.
