Australia

Abstract

AbstractThis chapter discusses Australia’s unique brand of fiscal federalism, which has evolved under a Constitution that is more than 120 years old. While Australia’s fiscal federation is stable, Australia has high vertical fiscal imbalance with strong centralisation of taxing power and revenues at the national level, while many expenditure and governance responsibilities remain with subnational States and Territories. Vertical equalisation is delivered through unconditional and conditional grants from the federal government to subnational governments, and horizontal equalisation by a formula based on taxing capacity and spending needs, combined with conditional grants, politicised in various ways. The Chapter recommends reform to establish a new fiscal bargain supporting sharing of income tax and GST by both levels of government and to update fiscal arrangements to recognise and support Indigenous sovereignty self-government in the federation.