The Australian Government will establish the COAG Reform Fund to help deliver on a new era of Commonwealth-State relations.
Many of the significant challenges facing the Australian economy can only be addressed through more effective Commonwealth-State arrangements. Through COAG, the Government is working closely with the States to deliver better services for all Australians.
The COAG Reform Fund will enable the Commonwealth to work with the States to deliver better services, through investment in transport and communication, education and skills, and health and aging.
The new COAG Reform Fund will receive contributions directly from the Commonwealth Budget as well as from the three other Funds being set up by the Government for capital investment - the Building Australia Fund to focus on transport and communication infrastructure; the Education Investment Fund; and the Health and Hospitals Fund.
The Government intends to make an initial contribution of around $40 billion to the funds, largely from the 2007-08 and 2008-09 surpluses.
- The Building Australia Fund will receive around $20 billion.
- The Education and Investment Fund will receive around $11 billion.
- The Health and Hospitals Fund will receive around $10 billion.
Where investments in transport and communication, health and hospitals and education are to be undertaken by the Sates, and the Commonwealth agrees to finance these through any of the funds, the funding will be channelled to the States through the COAG Reform Fund.
A more cooperative federalism will deliver better services through reducing administration and compliance costs, freeing up resources to be spent where they are most needed, and ending the blame game and cost shifting behaviours of the past.
States will have increased freedom to design and implement innovative methods of services delivery, within the context of the mutually-agreed national objectives. This will lead to service delivery which are more cost-effective and better meet communities needs.
To ensure that total capital spending from the fund is consistent with the Government's macroeconomic goals, the Australian Loan Council will provide advice on whether the combined spending envelope of both Commonwealth and the States can be delivered in prevailing economic conditions without putting at risk the Government's inflation targets.