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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2020-03-24 Daily Xml
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Bushfire Recovery Support

In reply to the Hon. T.T. NGO (6 February 2020).

The Hon. R.I. LUCAS (Treasurer): I have been provided the following advice:

All states and territories are covered by the 2018 Disaster Recovery Funding Arrangements (DRFA). Under these arrangements the commonwealth provides financial assistance to the states in respect of eligible expenditure on relief and recovery assistance.

Payments from the commonwealth to states and territories made under the DRFA do not have a direct impact on the distribution of GST revenue under the assessment approach currently used by the Commonwealth Grants Commission (CGC).

However, disaster recovery expenses incurred by states and territories (states) net of any commonwealth DRFA funding (i.e. out-of-pocket expenses), do have an impact of the distribution of GST revenue.

As part of its assessment approach, the CGC considers a states' relative share of net disaster recovery expenditure. If a states' share of net disaster recovery expenses is greater than its population share, that state will receive additional GST revenue and vice versa. This is consistent with the underlying principle of horizontal fiscal equalisation that all states should have a similar capacity to provide a comparable level of services to their citizens.

The CGC's natural disaster assessment is based on the expenditure criteria outlined in the DRFA agreement (net of any relevant commonwealth assistance received). From a process perspective, each year the CGC requests natural disaster relief expenditure data through a data request process. States are required to provide data on eligible expenditure net of DRFA funding provided by the commonwealth and re-insurance receipts.

Data is provided for the most recent financial year and data can be updated for prior years (if there were subsequent changes). The CGC has measures in place to check the reasonableness of the state provided data. The CGC collects data from Emergency Management Australia (EMA) to review state data.

As CGC assessments are based on the average of data for three years, there is a natural lag in the assessment and redistribution process. For example, increased net disaster recovery expenditure incurred by states in 2019-20 will only be reflected in the 2021 update, which determines relativities and the distribution of GST in 2021-22. In addition, the impact will only be fully reflected over a three year period due to averaging (eg 2021-22, 2022-23 and 2023-24 for expenditure incurred in 2019-20).

Although there is a lag in the assessment of the disaster recovery expenses by the CGC, states benefit from the immediate provision of commonwealth DRFA funding.

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