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May 31, 2012
The effects of the so-called patchwork economy can be seen in the recent budgets of the Tasmanian and South Australian budgets---the rising public debt highlights the fiscal stress in these two states. South Australia is increasingly becoming stranded between its past – particularly manufacturing – and its future embodied in the BHP's $US20 billion expansion of the Olympic Dam mine project that keeps on being postponed because of falling commodity prices.
Even though Australia is a federation the wealthy mining states--ie., WA and Queensland---want to let the less wealthy states which have a lower capacity to raise revenue to swim on their own or siink. WA in particular is very hostile to horizontal fiscal equalization---its revenue being used to help Tasmania and South Australia through difficult times; even though historically WA has been the recipient of intergovernmental fiscal adjustment from NSW and Victoria in the industrial past.
Australian federalism is characterized by both the high imbalance between state expenditure responsibilities and taxation powers and the states’ own-source revenues account for only 40 per cent of their own-purpose outlays. Hence the poorer states are very dependent on fiscal transfers from the Commonwealth.
Just like the Big Miners who are deeply opposed to 'spreading the benefits of the boom', WA wants to keep its mining wealth for itself in opposition to fiscal equalization. WA has a history of antagonism to federalism.
Update
WA's current antagonism to horizontal fiscal equalization takes the current form of requiring the poorer and more depressed states like Tasmania cutting back on the public services in order to deal with reduced revenue from Canberra. Behind this proposal sits the neo-liberal small state rhetoric that means rolling back the welfare state.
Presumably as the welfare state shrinks the welfare responsibilities of the public sector are shifted to the underfunded community sector. Many of the core functions of government are outsourced to volunteers, community-based groups and not-for-profit organisations.
This logic is applied to the widest conceivable range of services including parks, libraries, post offices, hospitals, welfare-to-work employment programs, prisons, court and tribunal administration, payment processing, fraud, debt and identity-related services, police information and communication technology and training, ‘infrastructure and back-office functions’, health services, housing, planning and schools.
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No one else has commented. Very well, I will.
From the read, you will discern my appreciation of understatement and restrained treatment of the issue from GST and be not surprised to find that I applaud him on the above piece.
Partly because it represents the unpacking of a new political Pandora's box from trouble making mega business and partly because it reminds me never to overestimate the character of people in general, which is a relief in a way.