THE SHIFTING BOUNDARIES OF SOCIAL WELFARE IN THE AUSTRALIAN FEDERATION'

Since the fall of the Whitlam government in 1975, budgetary policy of the Commonwealth has been framed generally in the context of fiscal restraint. The need to fight inflation by reducing budget outlays and deficits remained a constant theme with the Commonwealth governments under Prime Ministers Fraser, Hawke and Keating. Commonwealth payments to the States, having reached high levels during the Whitlam years, were targeted for restraint throughout the subsequent period. A distinctive feature of the measures adopted for this purpose by the Fraser governments was the sharp reduction in the specific purpose payments to the States, while several guarantee provisions protected the growth of general-purpose payments. In contrast, as the Hawke-Keating governments applied cuts mainly to general-purpose payments, the share of specific purpose grants increased to more than half of total payments by 1994-95. At the same time, the States' share of public sector outlays on social welfare has increased relative to that of the Commonwealth, especially in the past decade. This shift in the fiscal boundaries of the Commonwealth and the States is examined in this paper. The long-term sustainability of the emerging boundaries is questioned, particularly in the absence of a corresponding extension of their revenue resources. Questions are also raised regarding the possible impact of interstate differences in welfare expenditure on interstate migration.