COAG

The Council of Australian Governments (COAG) is an organisation consisting of the federal government, the governments of the six states and two mainland territories and the Australian Local Government Association.

COAG was established in May 1992 after agreement by the then Prime Minister (Paul Keating), premiers and chief ministers, and it first met in December 1992. It is chaired by the Prime Minister. It meets to debate and co-ordinate government activities between the federal and state or territorial governments and between the state and territorial governments themselves as well as issues affecting local government.

COAG grew out of the Premiers' Conferences, which had been held for many decades. These were limited to the premiers of the six states and the Prime Minister.

A related organisation is the Loan Council, which coordinates borrowing by the federal and state and territorial governments of Australia.

COAG differs from the U.S.'s National Governors Association or Canada's Council of the Federation, because these bodies only include state/provincial representatives, whereas COAG also includes federal and local representatives.

Australia is believed to be the first federation to have introduced a formal system of horizontal fiscal equalisation (HFE) which was introduced in 1933 to compensate States which have a lower capacity to raise revenue. Many federations use fiscal equalisation to reduce the inequalities in the fiscal capacities of sub-national governments arising from the differences in their geography, demography, natural endowments and economies. However the level of equalisation sought varies. In Australia, the objective is full equalisation.

Full equalisation means that, after HFE, each of the six states, the Australian Capital Territory and the Northern Territory would have the capacity to provide services and the associated infrastructure at the same standard, if each state or territory made the same effort to raise revenue from its own sources and operated at the same level of efficiency.

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