RAJ REPORT

What determines the State distributions of GST?

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What determines the State distributions of GST?

The States receive different per capita amounts from the GST primarily because of a few key drivers. Western Australia and Queensland have a very strong capacity to raise revenue from mining, and so need less GST, while the other States need more to compensate for their lower revenue raising capacity.

As well as having a strong mining sector, Western Australia also has other strong revenue bases, while in South Australia and Tasmania in particular, other revenue bases are relatively weak.

The expense of providing services also varies significantly. States, on average, spend more per capita on Indigenous than non-Indigenous people, and because of their relatively large Indigenous populations, Queensland, Western Australian and the Northern Territory have higher expense requirements. These States also have more dispersed populations, increasing their expense requirements.

Because wage levels for comparable employees are higher in New South Wales, Western Australia, ACT and the Northern Territory, these States face higher wage pressures than other States, and hence a greater requirement for GST.

In addition to these influences, there are many other smaller influences, some of which may have relatively large effects for some States. More detailed information is provided below:

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