We argue that Australian equalisation should be driven by efficiency concerns. To this end, we propose an efficiency-based equalisation model and argue that, if implemented, this model would yield welfare gains in all States, relative to the status quo. Our model is also shown to yield superior welfare outcomes to an equal per capita allocation model (as proposed by some researchers to replace the existing model). The conclusion notes that given the magnitude of the resources ...
<1 the State has a negative expenditure need which tends to reduce its grant below the equal per capita amount. Similarly, T/N(1- [[rho].sub.i]) is the State's 'revenue need'. If [[rho].sub.i]>