Australia’s system of federal-state financial relations should in principle ensure that all state governments can provide a minimum level of public and essential services. In practice, so-called “horizontal fiscal equalisation” – taking money from richer states and giving it to poorer states – raises tricky challenges and can be problematic.

Think how at the peak of the mining boom a decade ago Western Australia’s share of GST revenue raised in the West and allocated back to it fell to just 30 cent in the dollar, compared to if the tax had been divvied up based on population instead. Or think how the nation’s biggest spending and debt-laden state government in Victoria was allocated an additional $4 billion under the latest distribution of the GST in March this year.