Federal Financial Relations

Cover of the Intergovernmental Agreement on Federal Financial RelationsThe COAG Council on Federal Financial Relations (CFFR) is responsible for overseeing the financial relationship between the Commonwealth and the states and territories, including the Intergovernmental Agreement on Federal Financial Relations (IGA FFR). The council is made up of Commonwealth and state and territory treasurers. The CFFR website has information on the federal financial relations framework, including all funding agreements under the IGA FFR.

On average, the Commonwealth funds just under half of state and territory general government spending through financial grants. These grants include:

  • general revenue assistance (primarily through GST distribution) which has no conditions on how states use the funding
  • a range of specific-purpose payments, to be spent on particular sectors or projects, such as education and health services; infrastructure projects; and national reforms such as improving outcomes for Indigenous Australians.

The IGA FFR sets the framework for the Commonwealth’s financial relations with the states.  It recognises that the states have primary responsibility for many areas of service delivery but that coordinated action is necessary to respond to Australia’s economic and social challenges.

The aim of the IGA FFR is to improve the quality and effectiveness of government services, and improve the wellbeing of all Australians, by:

  • allowing states increased flexibility in the way they deliver services to the Australian people
  • increasing accountability by clearly defining the roles of each level of government, focussing on outcomes and providing better performance reporting.

All payments to the states under the IGA FFR are processed by the Commonwealth Treasury and paid directly to each state treasury. State treasuries are then responsible for distributing the funding within their jurisdiction.

For detailed information on Commonwealth payments to the states see the Commonwealth’s Budget Paper number 3.