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Abstract

Australia has a well established system of financial assistance grants to State, Territory and Local Governments based on the principle of horizontal fiscal equalisation. From a regional development point of view, the current system for State/Territory level funding is not favourable for regions. Differences between the levels of State services to regions and to capital cities are entrenched in the Commonwealth system for GST revenue allocation to the States. The local government funding arrangements however provide considerable assistance to regional areas, but only in terms of local government functions. The paper examines the role of financial assistance grants in supporting regional development in Australia.

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