States funding.
Vertical imbalance,
fixed.
The Australian Budget Growth Fund (ABGF) replaces the GST transfer system, the Specific Purpose Payments framework, and the various ad-hoc grants that previously made up the federal-state fiscal relationship. States receive a single transfer payment, calculated on a transparent formula based on population, demographic factors, and a regional-need adjustment.
Payments grow from $164 billion in 2026 to $395 billion by 2050, totalling $7.9 trillion across the period. The vertical fiscal imbalance — the long-running mismatch between Commonwealth revenue-raising power and state service-delivery responsibility — is corrected.
States can plan multi-decade infrastructure and service investments without the year-to-year uncertainty that the GST system produced. The ABGF formula is published. The growth rate is locked. The discretionary "specific-purpose" mechanism that allowed Commonwealth ministers to direct state spending is retired; in its place, states receive their share and decide their own priorities, accountable to their own electorates.
The ABGF is the mechanism by which the GST removal at the cash register does not defund the people who run hospitals and schools. The same dollar that previously moved through the GST flows now moves through a more transparent, more growth-linked mechanism. States are not compensated; they are properly funded for the first time in decades.