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Government interim response to Productivity Commission inquiry into horizontal fiscal equalisation

On 5 July 2018, the Government released its interim response to the Productivity Commission’s final report on horizontal fiscal equalisation (HFE). The Government is proposing a plan to update the way the GST is distributed to reflect changes to the economy since the GST was introduced almost 20 years ago. This plan would improve the resilience of the HFE system against economic shocks and reduce volatility in GST relativities amongst the States and Territories (States). The Government’s plan involves transitioning to a new HFE system over eight years from 2019-20 in a way that is fair, reasonable and sustainable and that would ensure all States are better off. The Government will commence discussions with the States on its plan and place it on the agenda of a special Council of Federal Financial Relations meeting in September 2018, at the latest, with a view to coming to a final agreement on transition arrangements by the end of 2018.

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