Intergovernmental Agreement (IGA) on Federal Financial Relations

COAG has reaffirmed its commitment to cooperative working arrangements through an historic new IGA that provides an overarching framework for the Commonwealth’s financial relations with the States and Territories (the States).

The IGA represents the most significant reform of Australia’s federal financial relations in decades. It is aimed at improving the quality and effectiveness of government services by reducing Commonwealth prescriptions on service delivery by the States, providing them with increased flexibility in the way they deliver services to the Australian people. In addition, it provides a clearer specification of roles and responsibilities of each level of government and an improved focus on accountability for better outcomes and better service delivery. This is accompanied by a major rationalisation of the number of payments to the States for Specific Purpose Payments (SPPs), reducing the number of such payments from over 90 to five.

Central to these reforms is a substantial financial package that provides an additional $7.1 billion in SPP funding to the States over five years to improve services for all Australians. Commonwealth-State financial relations will be placed on a secure footing with the creation of five new national SPPs, including total funding of:

$60.5 billion in a National Healthcare SPP;
$18 billion in a National Schools SPP;
$6.7 billion in a National Skills and Workforce Development SPP;
$5.3 billion in a National Disability Services SPP; and
$6.2 billion in a National Affordable Housing SPP.

Each SPP is associated with a National Agreement that contains the objectives, outcomes, outputs and performance indicators, and clarifies the roles and responsibilities that will guide the Commonwealth and States in the delivery of services across the relevant sectors. COAG agreed to six new National Agreements – National Healthcare Agreement, National Education Agreement, National Agreement for Skills and Workforce Development, National Disability Agreement, National Affordable Housing Agreement, and the National Indigenous Reform Agreement.

The performance of all governments in achieving mutually-agreed outcomes and performance benchmarks specified in each National Agreement will be monitored and assessed by the independent COAG Reform Council and reported publicly on an annual basis. COAG agreed that the new National Agreements are central to achieving service delivery improvements and reforms.

The new federal financial framework is the culmination of extensive joint work by all levels of government. It began on 1 January 2009 and provides a solid foundation for COAG to pursue economic and social reforms to underpin growth, prosperity and social cohesion into the future.

Intergovernmental Agreement (IGA) on Federal Financial Relations

National Partnerships

COAG has previously agreed to a new form of payment - National Partnership (NP) payments - to fund specific projects and to facilitate and/or reward States that deliver on nationally-significant reforms. The financial arrangements will include incentive payments to reward performance, funding for which will be decided at a later date.

The first wave of NPs has been agreed, including:

Last Updated: 25 February, 2010