Earlier this week the Productivity Commission held a public hearing in Brisbane as part of its inquiry into Horizontal Fiscal Equalisation (HFE). QCOSS made a submission to the inquiry and was also represented at the hearing. Our interest in HFE is to ensure social investment and fairness. Adequate funding for essential services, (like health, education, transport and housing), is the foundation for social and economic wellbeing in strong, thriving communities.
HFE is the formula the Commonwealth Grants Commission uses to calculate the distribution of GST revenue among the states and territories. The current formula provides for full equalisation between the states. This provides the capacity for state and territory government services of the same standard. However, the Productivity Commission’s draft report considers alternative approaches, all of which reduce equalisation, and therefore reduce the capacity to deliver services for most states and territories.
The HFE formula allows for adjustments based on revenue and spending differences between the states that are out of the control of government policymaking. It considers regionalisation, age of population, natural resources, and numbers of properties and businesses. HFE ensures that GST revenue collected by the federal government is fairly redistributed to provide services equitably to all people and communities.
Arguments by the Productivity Commission that HFE distorts policymaking are not supported by evidence presented in previous reviews, or in submissions to this inquiry.
QCOSS presentation and submission to the Productivity Commission advocated that:
- Equalisation is critical for social investment.
- Full equalisation is the fairest way to redistribute GST revenue.
- Recent HFE reviews resolved the issues of this inquiry.
- The Productivity Commission has not made the case for a need to change HFE.
- The Productivity Commission alternative approaches to HFE lack evidence.
QCOSS also recommends a wider review of Federalism in general.
See our full submission to the inquiry here.