Investment in public infrastructure is a significant expense for states and territories (states). In 2020–21 infrastructure spending accounted for 15% of total state expenditure.

The Commission considers states’ different investment needs as part of determining a state’s capacity to meet its spending needs (fiscal capacity), which underpins the GST distribution.

The Commission’s assessment of a state’s need to invest in a particular type of infrastructure is largely based on the proportion of its population expected to use that infrastructure and how that population changes. It considers this to be the best way to remove the influence of state policy choices on investment spending.

A state may have a share of users of a particular infrastructure type that is different from its share of the national population. This influences how the Commission determines investment needs. If the number of people who use a type of infrastructure grows at a rate faster in one state than in other states, the Commission will assess this state to have a greater need for investment. In turn, states with higher investment needs will have higher GST requirements.

The Commission’s assessment of investment needs can also be influenced by the amount states collectively invest in a type of infrastructure for a particular year.