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THE Greater North Queensland is estimated to have contributed $2 billion per year more to State and Commonwealth revenue than it has received in spending, according to an AEC Group study.

The study, entitled Taxation and Expenditure Balance in Greater North Queensland, released in September 2008, found there was no sound argument for why the GNQ region should be under-funded.

When examined by level of government the expenditure, the imbalance was found to be almost entirely at the Commonwealth level.

However the Queensland Government's expenditure in GNQ was estimated to be $664 million short of its revenues gained over the study period - the six years between 2001-02 and 2006-07.

The study said it was also not clear that the Queensland Government was investing in GNQ to the level that would be justified by its economic contribution and growth trajectory.

It said that if State spending in GNQ were to be determined by economic contribution, the State would have spent an additional $5.7 billion over the study period.

"There exists on-going suspicion in GNQ that the region is subsidising others and this study supports that theory," the study said.

"There is a recent and clear precedent for such issues having major political implications with the change of the West Australian Government being led by disgruntled regions seeing their revenues generated in their environs primarily used to develop the capital city. The (WA) new government has committed to spending 25 per cent of mining resource revenue in the regions."

The study said that an assessment of government taxation and expenditure accounting at the regional level was very difficult with a lack of regional level reporting and double-counting of expenditure and consolidation of revenues.

The key difference of this study had been to model business taxation flows based on the structure of the regional economy.

This resulted in taxation earned in the region but otherwise accounted for through head offices to be rightfully allocated to GNQ. In the six years studied, GNQ was estimated to have made an average net contribution to the Commonwealth and State government sector of just over $2 billion per year.

This equated to an average $3550 per person per year or $10,800 per household per year ($208 per household per week).

The majority of the net loss was with the Commonwealth Government which is estimated to have spent 29 per cent less in GNQ than it earned from the region.

The Commonwealth's taxation burden on GNQ was estimated at 21.5 per cent of Gross Regional Product, marginally higher than the national average of 21 per cent of Gross Domestic Product.

For the Queensland Government, expenditure quite closely matched revenues from the region with revenue derived from GNQ estimated to be about 2.9 per cent higher than expenditure in the region.

The Queensland Government's tax burden (including GST) on GNQ, at 11.9 per cent of GRP, was estimated to be lower than the Queensland average, which was 14.8 per cent of GSP.

At the State level, the study said the concern remained that forward infrastructure spending (driven by debt) would favour the south east of the state.

It was estimated that government expenditure in GNQ would have been about $5.7 billion greater over the six years if it had been tied to GRP.

The study said a number of potential explanations for the estimated imbalance were examined but that none were found to be adequate to explain the difference in government revenues collected and expenditure undertaken in GNQ. The potential explanations examined included: Current high revenues from GNQ were temporary Revenues were only (or substantially) due to the resources boom Revenue from GNQ was required to subsidise disadvantaged groups elsewhere and/or government investment in GNQ was not as efficient as elsewhere Government expenditure was more urgently required elsewhere to address high population growth The difference was due to necessary centralised function That defence expenditure explained the difference

The study found no reason on the grounds of social equity, economic efficiency or productive investment to favour expenditure in other regions.

In its recommendations, the study suggested a summit of all three levels of government and other relevant stakeholders be convened to start a dialogue on the facilitation of northern development.

Solutions proposed were: Demystify the government revenue and expenditure process Economic efficiency to drive regional infrastructure development Recognition of regional dynamics in funding distribution Develop system for regional budgets for GNQ based on appropriate funding drivers Develop appropriate forms of regional governance structures and processes Develop future-oriented holistic regional plans for each of the regions In the short term, address the funding imbalance

The study said these recommendations were valid for rural and regional areas across Australia which often harbored feelings of inequity in sending revenue to metropolitan areas.

At the time of its release, State Treasurer Andrew Fraser rubbished the study's findings as fundamentally flawed because the authors had acknowledged they did not have data on Queensland Government revenue or expenditure activity and had used "proxy assumptions".

Federal Treasurer Wayne Swan had said the reason the Federal Government established independent authority Infrastructure Australia to advise on infrastructure spending and end the previous government's politically motivated allocations which had "dudded" regions like the North.

Unfortunately for North Queensland, proposals such as the Bruce Highway Corridor Upgrades - on which Labor promised more than $1 billion in spending between 2009-2013 - still languishes as an "early stage" initiative in Infrastructure Australia's latest annual report, based on information provided to it by the State Government.

The Mount Isa Townsville Rail Corridor Upgrade is also listed as "early stage" - proposals which are considered "significant" but where development of the "right solution" is at an early stage.

Source: Townsville Bulletin - July 14th, 2010