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OECD's 2014 Economic Survey of Australia examines recent economic developments, policies and prospects.  Special chapters cover taxes and transfers, and federal-state relations.

Australia’s material living standards and well-being compare well internationally, reflecting a well-managed and successful economy. The economy is slowing as the prolonged mining boom recedes. Output growth of about 3% is expected for 2014 and 2.5% in 2015. Macroeconomic policies are appropriate for the current conjuncture while long-term prosperity depends on ensuring that structural settings help all forms of economic activity and promote broad-based productivity growth.

Australia’s inter-governmental fiscal relations have gradually moved towards greater centralisation. State governments receive sizeable transfers from the federal government and own revenues only partially cover their expenses. Finding the right balance between federal control and state autonomy in public service provision and its financing has not been easy. Over time various compromises have somewhat blurred responsibilities in various functional areas or reduced incentives to raise sub-national revenues potentially affecting public sector efficiency and service quality. A better balance, one in which central government has less steerage over state activities and states have more financing autonomy but also bear increased responsibility is likely to improve outcomes. Federal-state shared responsibilities continue to affect the efficiency of healthcare service delivery in particular. A clearer delineation of roles in shared functions and possibly a reallocation of responsibilities in some cases, are important. There is also scope to reduce federal grant conditionality further to contain red tape and enhance transparency and give the states a more flexible allocation of funds. Strengthening states’ revenue-raising by broadening existing tax bases would promote efficiency. Consideration could be given to the introduction of a state-level income tax. The government’s current review of the federal system, focusing on both spending and tax responsibilities, is welcome, as is the whole-of-government approach to the process.

This annex reviews action taken on recommendations from previous Surveys. They cover macroeconomic and structural policy priorities. Each recommendation is followed by a note of actions taken since the December 2012 Survey. Recommendations that are new in this Survey are listed in the relevant chapter.

Australia’s material living standards and well-being compare well internationally. However, continued progress will require adjusting towards broad-based growth in the wake of the peak in the mining boom, coping with population aging and dealing with socio-economic and environmental challenges. The current government, elected in September 2013, is focussing on addressing the structural budget deficit through reducing the pace of spending increases and aims to improve productivity performance through deregulation, infrastructure investment and structural reform (see ). Prominent initial items on the government’s agenda have been the scrapping of a supernormal profit tax on mining companies and the repeal of a carbon tax with proposals to replace this with subsidies to firms for reducing greenhouse gas emissions.