Financial Relations Between the Australian Commonwealth and the Australian States

Extract

The maintenance of a satisfactory relationship between the financial resources and the responsibilities of a government is one of the most fundamental problems of all states. The difficulties are greatly complicated in those states in which a central government shares its tax resources and its responsibilities with local administrations. The complexities reach their peak in federations where central, provincial, and municipal governments all have strong traditions of independence, all draw their revenue from sources which overlap to a greater or lesser degree, and all compete for the support of the same voting public. As there develops a recognition of the nation-wide and not merely the local significance of such services as schools, roads, welfare services, etc., it becomes increasingly necessary for each local government to keep its services up to a level not too far below the accepted national standard. As the cost of these government services increases, an ever increasing proportion of the wealth of the community must be diverted to these uses and the point is eventually reached where the less wealthy communities are unable to raise the tax revenue necessary to maintain an acceptable standard.

Two conflicting courses of action offer themselves as possible solutions to such a situation. On the one hand there has been a movement toward larger administrative areas and toward centralization of services under the control of the authority operating over the larger area.