Three-Step Plan for a Better Federal System

01 August 2006

The Canberra Times

By Michael Chaney
Business Council of Australia

There is certainly no shortage of views that paint a glass-half-empty view of federal–state relations. Long-standing difficulties and tensions have been highlighted in recent weeks with comments by the Treasurer that the states should hand over their economic powers and the Prime Minister's criticism of the way states have managed energy and water.

The premiers have responded with concerns over the way the Federal Government distributes revenue to the states and have generally rebuffed the idea that Australia's federal-state system requires a wholesale review. The business sector shares concerns about federalism as it stands, but takes a glass-half-full approach.

There is no doubt the federal–state contract is clearly under significant stress and the results are evident in nearly every part of our community.

Weaknesses in the federal–state system are also creating real problems that put our economic growth and future prosperity at risk. Education and health services suffer through a lack of clear lines of responsibility and from inconsistent directions from different levels of government.  Lack of coordination means forward planning and targeted investment in important infrastructure has been lacking.

The burden of regulation on the community and business sector grows yearly as governments add to the stockpile of overlapping, and inconsistent laws. These problems are manifest in all major areas of economic management and service delivery in which the Federal Government and states share responsibility: health; education; infrastructure; natural resources; business regulation; and taxation.

From a business perspective, weaknesses in our federal system add unnecessarily to business costs, damp innovation and sap our economic strength. The business sector therefore has a keen interest in working with governments to improve the efficiency of the federal system.

The BCA believes the existing system is basically sound, but that there are practical and straightforward solutions that would see it reinvigorated.  The starting point is that no government alone can respond successfully to the challenges and opportunities presented in the 21st century, including an ageing population and increasing competition from globalisation. Our federal system means shared responsibility across three tiers of government for crucial parts of the Australian economy, for critical policy development and for efficient service delivery.

Yet the basic problem is that, over time, the line between Commonwealth and state responsibilities has become blurred and confused. As a result, blame-shifting and finger-pointing too often becomes the standard response to issues and challenges around government service delivery and policy making.

Identifying the problems is easy. Finding workable solutions has proved more difficult. Some advocate the abolition of one tier of government, while others call for the Constitution to be rewritten.  In reality, there is ample scope, for example, to improve existing institutions that should allow a federal nation to work collaboratively to deal with emerging national issues. Workable and politically tenable reforms should therefore be the starting point for improvement, even if more significant changes are ultimately needed.

To this end, the BCA has proposed a three-step process toward revitalising federal–state relations.

Step one requires recognition by all tiers of government that a better functioning federation requires collaboration to be embedded into federal-state relations, and in turn, committing to an effective vehicle for that collaboration.

The existing Council of Australian Government structure, involving the Prime Minister, and state and territory leaders, is a good start.  But it needs to be supported by a strong independent secretariat and an independent research body. It needs to meet regularly and have an agenda determined collaboratively between the tiers of government in order to make it truly effective.

Step two then focuses on using those collaborative institutions to redefine the relationship between the Commonwealth and the states and to make sure responsibilities and functions are allocated appropriately. Effectively, this means re-invigorating and adapting the framework under which the two tiers of government operate.

Step three then suggests using this redefined framework to rationalise government policy development and service delivery to ensure the federation operates effectively and efficiently.  The BCA has prepared a background paper that details plans on how to introduce the three steps and, more broadly, initiate discussion on how Australia's federal system of government can be reformed in the short term to meet our current and future needs.

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 system of federal–state relations work better and meet the challenges of this century.

This will form the basis of a federalism reform plan which the BCA will issue for debate and discussion at the end of this year.  The business sector and community can propose solutions, but ultimately only governments can fix the problem.

Let's hope the recent spat between our political leaders over the future of federal–state relations becomes a platform for more reasoned discussion around what needs to be done to make Australia's federal system work much better.



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