COMPETITION BETWEEN REGIONAL GOVERNMENTS AND THE FEDERAL CULTURE OF FISCAL EQUALIZATION

Since federation, regional economic development in Australia has been shaped by fiscal competition among state and Commonwealth governments. Variations in the fiscal capacity of the different governments to provide goods and services, together with the Commonwealth's increased revenue collection powers since 1942, has led to vigorous political competition between the states over their share of the general purpose funds through a process known as fiscal equalisation. The state premiers themselves have been at the forefront of the debates over fiscal equalisation and, as events surrounding the 1992 June Premiers' Conference have indicated, competition over an equitable share of the fiscal resources highlights the strong federal orientation of economic development. The aim of this paper is first, to explain the significance of the Commonwealth Grants Commission's equalisation process in the wider economic and political context of competitive state federalism and, second, to explain the historical importance of regional political values that contribute to the shape of state economic developments.