COAG Must Stay Focused on Its Agenda

24 August 2006

The Australian Financial Review

By Michael Chaney
Business Council of Australia

Continuing reform should be a key objective, writes Michael Chaney.

The rise in interest rates highlights how Australia has hit its growth speed limit and reminds us of the need to look at how we might increase our capacity to sustain strong growth and lock in future prosperity.

Most of us know Australia is having one of the longest runs of unbroken economic growth in its history. Those who delve deeper appreciate that these economic good times are in large part due to the reforms that successive governments have put in place over the past two decades.

But if past reforms are a key to our strong performance, what and where are the new reforms that will ensure continued economic growth?

Much of the answer lies with the Council of Australian Governments. The reforms needed to drive prosperity are ones that must be tackled together by the federal and state governments. COAG is the vehicle for doing this.

If COAG is vital to driving national reform, 12 months ago we would have been pessimistic about our prospects.

Historically, COAG has rarely been a strong vehicle for co-operation between governments. Its meetings have been marked more by political theatrics than reform commitment. The current picture, however, appears to be different.

COAG has had three successive meetings at which the Prime Minister and premiers have agreed to the details of a wide-ranging, ambitious agenda. Their agreement seems to be the basis for a major round of reforms that can meet the challenges of the next few decades.

Business has welcomed COAG's renewal and the commitment of our political leaders to reform and Australia's future. But we should not get carried away.

While COAG has agreed to much, it has so far delivered little.

This is a concern, because the opportunity for co-operation between governments will remain for only a few more months.

From November, state elections will be held in Victoria, Queensland and NSW, and will culminate in a federal election towards the end of next year. Inevitably, our political leaders will shift their focus from national reform agendas to local politics.

When this happens, there is a real danger the momentum for reform built by COAG will dissipate and progress will become lost among myriad ministerial councils and officials' committees.

Even if the elections are not a distraction, there is no guarantee that governments will turn their commitments into action.

The National Water Initiative is a case in point. In 2004, all governments agreed to an ambitious blueprint for national water reform, including a modest increase in water trading levels by July last year. That early milestone has already slipped out to July next year.

It is vital our leaders agree to an effective mechanism that will continue to drive the reform process while they focus on their elections.

Governments are now negotiating the make-up of a COAG Reform Council. COAG has already agreed the Reform Council will be an independent body that will report annually on progress in implementing the new national reform agenda.

Ideally, like the National Competition Council it is set to replace, the Reform Council should also determine the financial implications of governments' failure to meet agreed milestones.

There are worrying signs that governments are considering weakening the role of the Reform Council, even before it is established, with suggestions COAG itself should assess progress rather than an independent body.

This would never work. COAG is inherently, and rightly, a political body. It should make the decisions - but they should be based on independent and transparent advice and include objective measurements of whether governments are delivering on their promises.

If the commonwealth makes the final decision on how much federal money states have earned, this decision still needs to reflect an independent assessment of which governments have put in the hard work, and which are stalling.

The success of the COAG reform agenda is the key to building a modern, prosperous Australia.

The true measure of the sincerity of their commitment to this agenda will be whether governments agree to be held to account for their reform progress.



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