This monograph analyses two specific issues relating to natural disaster relief. First, the assignment of responsibility for natural disaster relief in a federal system is discussed and applied in an Australian context to determine how natural disaster payments affect vertical and horizontal balance. Secondly, attention is focused on the payments to Queensland following the widespread flooding that occurred in 1973-74. This second issue is concerned with evaluating the criteria that were attached as conditions of the specific purpose grant and were used to distribute natural disaster relief to individuals. These criteria are evaluated by reference to the twin notions of horizontal and vertical equity in the public finance literature on taxation. It is found that the criteria were inequitable in that persons in equal economic positions were treated unequally and that persons in unequal economic positions were treated equally. The monograph concludes with an outline of a scheme for natural disaster relief which incorpor ates the notions of horizontal and vertical equity.