2002-03 BUDGET PAPER No. 3

FEDERAL
FINANCIAL RELATIONS
2002-03

CIRCULATED BY
THE HONOURABLE PETER COSTELLO, M.P.,
TREASURER OF THE COMMONWEALTH OF AUSTRALIA, AND
SENATOR THE HONOURABLE NICK MINCHIN, 
MINISTER FOR FINANCE AND ADMINISTRATION,
FOR THE INFORMATION OF HONOURABLE MEMBERS
ON THE OCCASION OF THE BUDGET 2002-03
14 MAY 2002

  Commonwealth of Australia 2002
ISBN 0642 74107 7
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Foreword
This Budget Paper presents information on the Commonwealth Government’s financial relations with State, Territory and local governments.
Relationship with other Budget Papers and terminology
Budget Paper No. 3 is one of a series of Budget Papers, the purpose of which is to provide information supplementary to that in the Budget Speech. A full list of the series is printed on the inside cover of this Paper.
Chapter 4 of this Paper examines budget trends in the States and Territories. This is intended to provide an overview of fiscal developments in the States and Territories and supplement information provided in Statement 8 of Budget Paper No. 1.
Notes
The following style conventions are employed in this Paper.
•	The Australian Capital Territory and the Northern Territory are referred to as ‘the Territories’. References to the ‘States’ or ‘each State’ include the Territories.
•	The State and local government sector is denoted as the ‘State/local sector’. References to the ‘State/local sector’ include the Territories unless otherwise stated.
•	Figures in tables, and generally in the text, have been rounded. Discrepancies in tables between totals and sums of components reflect rounding. Percentage changes in tables are based on the underlying unrounded amounts.
•	The following notations are used in the tables.
na	not applicable
0	zero
-	nil
$m	  $ million

Contents
Foreword	iii
Chapter 1:  Overview and Recent Developments	1
Overview of Commonwealth-State Financial Relations	1
GST Revenue Provision and Commonwealth Payments to the State/Local Sector	2
Key Developments since the 2001‑02 Budget	6
Chapter 2:  GST Revenue Provision and Commonwealth Payments of General Revenue Assistance to the States and Territories	9
Provision of GST Revenue to the States and Territories in 2001‑02 and 2002‑03	9
General Revenue Assistance	12
Mirror Tax Arrangements	17
Horizontal Fiscal Equalisation	17
Chapter 3:  Specific Purpose Payments, and Financial Assistance Grants to Local Government	23
Specific Purpose Payments	23
Financial Assistance Grants to Local Government	25
Chapter 4:  Fiscal Developments in the States and Territories and Loan Council Arrangements	29
Fiscal Developments in the States and Territories	29
Loan Council Arrangements	32
Appendix A:  GST Revenue	37
GST Revenue	37
GST Revenue Measures	38
Appendix B:  Commonwealth Specific Purpose Payments to Other Levels of Government, Repayments of Advances, Advances and Interest Payments	41
Appendix C:  Parameter Estimates and Further Information	89
Parameter Estimates used in this Paper	89
Further Information	90

List of tables
Table 1:	GST revenue provision and total Commonwealth payments to the State/local sector, 2001‑02 	4
Table 2:	GST revenue provision and total Commonwealth payments to the State/local sector, 2002‑03 	5
Table 3:	Distribution of GST revenue, 2001‑02 	10
Table 4:	Distribution of GST revenue, 2002‑03 	11
Table 5:	Additional Budget Balancing Assistance in 2001‑02	13
Table 6:	Guaranteed Minimum Amount components, GST revenue provision and Budget Balancing Assistance, 2001‑02 	14
Table 7:	Guaranteed Minimum Amount components, GST revenue provision and Budget Balancing Assistance, 2002‑03	15
Table 8:	National Competition Policy Payments, 2001‑02 to 2005‑06 	16
Table 9:	Special Revenue Assistance to the Australian Capital Territory, 2001‑02 to 2005‑06 	17
Table 10:	Accrued mirror taxes on behalf of the States, 2001‑02 to 2005‑06	17
Table 11:	GST relativities and Financial Assistance Grants forgone relativities, 2001‑02 and 2002‑03	21
Table 12:	Effect of Horizontal Fiscal Equalisation, 2002‑03	22
Table 13:	Financial Assistance Grants to local government, 2001‑02 and 2002‑03 	27
Table 14:	State general government cash balance	31
Table 15:	State general government fiscal balance	32
Table 16:	State non‑financial public sector net debt	32
Table 17:	Loan Council Allocation Nominations for 2002‑03	35
Table 18:	Commonwealth Loan Council Allocation Budget update for 2002‑03	36
Table A1:	Reconciliation of GST revenue	37
Table A2:	GST revenue measures since the 2001‑02 Budget	38
Table B1:	Estimated Specific Purpose Payments to the States, repayments of advances, advances and interest payments, 2001‑02 to 2005‑06	42
Table B2:	Estimated Specific Purpose Payments to the States, repayments of advances, advances and interest payments, 2001‑02	66
Table B3:	Estimated Specific Purpose Payments to the States, repayments of advances, advances and interest payments, 2002‑03	75
Table B4:	Estimated Specific Purpose Payments direct to local government authorities, 2001‑02 to 2005‑06	85
Table B5:	Estimated Specific Purpose Payments direct to local government authorities, 2001‑02	86
Table C1:	Population by State	89
Table C2:	Parameters	89

List of charts
Chart 1:	GST revenue provision to the States, 2002‑03	2
Chart 2:	Commonwealth payments to the State/local sector, 2002‑03	3
Chart 3:	Specific Purpose Payments 1982‑83 to 2002‑03	24
Chart 4:	Composition of estimated Specific Purpose Payments ‘to’ and ‘through’ the States, 2002‑03	25
Chart 5:	State cash surplus by sector	30
Chart 6: 	State non‑financial public sector net debt by sector	31