Fiscal Equalisation and Australian Federalism, 1971–1981

Australian federalism in the 1970s was characterised by marked vertical and horizontal financial imbalance, a trend towards ‘big government’, and increasing government involvement in social policy. These characteristics presented a challenge to a system in which the federal government dominated revenue and the states dominated expenditure. The challenge was met by altering the method of transfer payments within the federal system. Attempts to adopt a clear principle of fiscal equalisation in such transfer payments were thwarted however by political expediency.