Commonwealth Grants Commission

The Commonwealth Grants Commission (CGC) is an independent statutory authority that advises the Australian Government on the distribution of GST revenue among the states and territories. Its primary role is to ensure horizontal fiscal equity, meaning that each state and territory has the fiscal capacity to provide a comparable level of services to its population, assuming comparable revenue-raising efforts. The CGC has recently become newsworthy due to ongoing debates and criticism surrounding the GST carve-up, particularly a 2018 deal that significantly benefited Western Australia. Reports indicate that this deal has led to substantial financial gains for WA, while other states, like New South Wales, are experiencing a reduction in their share of GST revenue relative to their population. Experts and state premiers have voiced concerns that the current distribution model is unfair and outdated, with potential for increased costs to taxpayers in non-benefiting states if commodity prices rise. The Productivity Commission has also weighed in, suggesting the Morrison-era GST deal with WA was a mistake that should be reversed, highlighting the current relevance and significance of the CGC's recommendations and the distribution methodology it employs.