This paper is concerned with public finance and social welfare in Australia. Its purpose first of all, is to explore the background of public finance issues, giving the overall context of social welfare finance in our federal system. Second it examines the methods used by the Commonwealth Grants Commission and the implications of these methods in determining relativities among the States in the distribution process of federal funds. Third it examines methods of assessing social welfare need and social welfare expenditures in the States. Fourth it shows how the structure and pattern of federal grants has changed over the past decade. (1973 – 1983) The data reported here allow comparison between the States on a reasonably standard basis, and show some interesting results in the levels of distribution of social service and social welfare expenditures. Social services (broadly defined) involve a major cash flow in Australian society. Annual social welfare expenditure, (a small part only of the States' social services expenditures, but a large proportion of Commonwealth expenditures) for 1982-83 alone, would buy BHP, CRA, MIM, Westpac, CSR, Comalco and the ANZ Banking Group, and there would still be some change. In this paper we are certainly not dealing with trifling matters. We have attempted to look at broad issues of public finance, and relate these to social welfare. Chapter 1 outlines the roles and responsibilities of the Commonwealth and State governments in providing and funding social welfare. Chapter 2 deals with the role and methods of the Commonwealth Grants Commission review of tax sharing and its analysis of relative needs and costs in social welfare. Chapter 3 uses the standard budgets worked out by the Commonwealth Grants Commission to shed light on the relative levels and structures of social welfare expenditure in the States. Chapter 4 examines how financial arrangements have changed in the past decade, and how the taxation structure has had an impact on State finances and services.