By Katie Lahey
Business Council of Australia
The debate over the parlous state of federal–state relations, sparked by Treasurer Peter Costello's suggestion that Canberra should take over all economic powers of state governments, may have left people wondering what all the fuss is about. After all, difficulties and dysfunctionality between federal and state governments have long been part of the political landscape.
Certainly, when it comes to issues such as hospital waiting lists, doctor shortages or shortfalls in school funding, the community is more than used to buck-passing and finger-pointing between Canberra and the states. But there is growing evidence that on a broad level, Australia's "contract" between the Commonwealth and the states has broken down.
Growing weaknesses in the federal–state system are putting our economic growth and future prosperity at risk. Education and health services suffer through a lack of clear lines of responsibility and inconsistent policies and directions from different government levels.
Lack of co-ordination means forward planning and targeted investment in infrastructure such as electricity and water are lacking. The burden of red tape on the community and business grows as governments add to the stockpile of overlapping, duplicated, inconsistent laws.
From a business perspective, weaknesses in our federal system add unnecessarily to business costs, dampen innovation and sap our economic strength.
Australia will face many challenges in the 21st century, from an ageing population to intensifying global competition. The reality is no Government can respond successfully to these challenges alone.
The federal system means shared responsibility across three tiers of government for vital parts of the Australian economy, for critical policy development and for efficient service delivery. But the real problem is that over time, the line between Commonwealth and state responsibilities has become blurred and confused.
Identifying the problems is easy. Finding workable solutions to fixing federalism has proved more difficult.
The usual response is to abolish one tier of government, but this is neither realistic nor sensible. In reality, the solutions do not need to be radical.
Much more could be done to make Australia's existing federal structure operate more efficiently and effectively.
Workable reforms should be the starting point for improving the federation, even if more significant changes are ultimately needed. Later this year, the BCA will convene a forum of past and present political leaders, constitutional experts and opinion leaders to discuss options that might make the federal-state system work better and meet the challenges of this century.
This will form the basis of a federalism reform plan which the Business Council of Australia will release for debate and discussion at the end of this year. Of course, there will always be reasons not to change the system and put parochial, short-term point-scoring above national, long-term interests.
Pointing the finger is a convenient way of ducking responsibility. Yet there is no choice other than to address the broad problem of a dysfunctional federation if we are to continue being a prosperous, fair nation.
Business and community can propose solutions, but ultimately only governments can fix it.
Plans to boost infrastructure
Australia's infrastructure has failed to keep pace with its economic and social needs. Electricity, urban transport, intercapital freight and water systems face major challenges.
Road congestion is choking our cities, leading to economic inefficiency, yet many public transport systems are losing patronage and not coping.
Road and rail regulation is out of sync across Australia, leading to delays, distortions and inefficiencies; and transport planning is poorly aligned between the Commonwealth and states.
The BCA has estimated that by 2025, most major Australian cities will consume more water than is sustainable.
The BCA's Infrastructure Action Plan tackles these challenges and, if implemented, will boost our economy by $16 billion a year or 2 per cent of GDP.