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With friends like the Feds, life becomes even harder for Napthine government

Victorian Premier Denis Napthine faces an uphill battle at November’s state election. AAP/Lukas Coch

On the ropes already and facing the polls on November 29, the Victorian Liberals have yet again been knocked by their federal colleagues.

Tuesday’s move to reintroduce fuel indexation by the tariff route, with the gamble that validating legislation will get through later, is a clever tactic from a federal government desperate to secure what it can of its outstanding budget measures.

But even a very small petrol price rise on November 10, as voters are tuning into the state campaign, is unhelpful for the Napthine government.

Harder to understand is the timing of Tony Abbott bringing the GST back onto the agenda.

Abbott was delivering a major speech on federalism at the weekend, as work continues on a white paper. But he did not have to include an explicit declaration that the federal government was willing to consider a deal with the states to broaden the indirect tax base.

That would mean increasing or widening the GST, or both. All GST revenue goes to the states.

Napthine retorted that he was “not interested in increasing the GST”, but Victoria did want a fair share of the revenue.

Napthine launched a further attack when the fuel hike was announced, declaring that “any increase in fuel excise hurts Victorian families and hurts Victorian businesses”. He pointedly added a dig about the way it was being done: “any such proposal, I would believe, should go through the proper parliamentary process”.

This week’s blows are the latest from Canberra to hit the Victorian government. The state budget was popular, only then to be overshadowed by the highly unpopular federal one.

There is plenty of opportunity in coming weeks for the state opposition to associate Napthine with Abbott and urge people to send a message to Canberra.

This week’s Galaxy poll has the state government trailing Labor 48-52%, although Napthine leads opposition leader Daniel Andrews as preferred premier 43% to 27%.

Liberal optimists say people haven’t tuned in yet and put Napthine’s chances of survival at 50-50. The more common view is that the government, which has operated in an often shambolic hung parliament, is headed for a loss.

ABC election analyst Antony Green says state Labor has been ahead in the polls since the change of government in Canberra. “Labor’s favoured to win,” he says. “Of the nine government marginal seats on the new boundaries, only three have sitting members to defend them.”

The fuel decision won’t help, Green says. “It’s one of the few costs men notice.”

Ironically John Howard scrapped indexation when, after the introduction of the GST, petrol prices featured in big backlashes in West Australian and Queensland elections in 2001.

Earlier this year the Liberals had hoped to pick up South Australia from Labor, which would have put all the states in conservative hands. They just missed out.

If Victoria were lost, two of the six states would be Labor. But in political terms, Victoria is much more crucial than South Australia.

A Labor win there would be important in the ALP national rebuilding effort. Queensland and NSW are set to stay in conservative hands when these states face elections early next year, but significant swings would affect the national political mood.

Defeat in Victoria would set back Abbott’s hopes of any big tax shake-up. He told the joint parties meeting on Tuesday that on the GST “nothing will happen unless all of the states want it, because it is a tax for the states”.

From the vantage point of Melbourne the Abbott government is very Sydney-centric. Not one of the four Liberal Party parliamentary leaders, or the treasurer, is Victorian. There are just four Victorians in the 19-member cabinet – Kevin Andrews (Social Services), Andrew Robb (Trade and Investment), Greg Hunt (Environment) and Bruce Billson (Small Business).

Although voters distinguish state and federal elections, if the Victorian Liberals lose, there is likely to be a good deal of that familiar federalism game of blame-shifting from Melbourne to Canberra.

Listen to the latest Politics with Michelle Grattan podcast, with Ken Wyatt here.

A future Labor government would almost certainly turn back boats if any were coming

Opposition leader Bill Shorten faces a difficult policy problem with boat turn backs. AAP/Lukas Coch

Bill Shorten is in a awkward place on the issue of boat turn backs.

Richard Marles' suggestion that under certain conditions a Labor government might embrace the policy recognised reality. But the immigration spokesman’s comments were incendiary to many within Labor, and frustrating to others for taking attention off the government.

The official line is that the ALP’s policy hasn’t changed.

Marles, who lit the fire on Sunday, had the hose out on Monday. The government gloated at the apparent change and then the (well, sort of) retreat.

“The shadow minister … got turned back on turn backs,” Immigration Minister Scott Morrison declared, a few days after Labor was trumpeting how Morrison’s colleagues were turning back his expansionist ambitions.

Many in Labor are waiting for Shorten (who is close to Marles) to have something to say publicly or in Tuesday’s caucus. The left will be listening carefully for any weasel words.

The leader is caught between the politics and the party. He has already stretched the tolerance of quite a few of his followers by his bipartisanship on the government’s tough national security legislation, the second tranche of which is due to go through parliament this week.

Left-winger Melissa Parke, who was a lawyer with the United Nations, says: “For Labor to support turn backs, there would need to be a change of policy at national conference. I don’t think this would occur because it would be against our Labor values and our commitment to uphold international law and human rights”.

Results dictate that Labor has to recognise that turning boats back has been one factor in stopping the people smuggling trade, though secondary to Kevin Rudd’s tough pre-election declaration that all arrivals would be sent offshore with no chance of resettlement in Australia.

Marles, interviewed on Sky, said on Sunday that the turn back policy “has had an impact”. Labor was “open minded” about it, but had anxieties revolving around safety and how it affected relations with the Indonesians, who “hate” it.

“If safety and the relationship with Indonesia can be satisfied, well then this is a totally different question”, and a Labor government “might” turn back boats. But those questions hadn’t been answered. Marles pointed to remarks from new Indonesia president Joko Widodo, who in a Fairfax Media interview flagged a strong line on sovereignty and warned against any repeat of Navy vessels straying into Indonesian waters.

On Monday, Marles said: “We’re open-minded about anything which saves lives at sea but we retain two real concerns about the turn back policy, and in this respect, our position has not changed”.

Pressed on whether he would argue in the election lead up that Labor would turn back boats if it were safe and didn’t erode the Indonesian relationship, Marles said: “I’m not going to walk down the path of answering hypotheticals”.

Privately, he told colleagues he wished he’d put things differently on Sunday.

Changing a position is difficult and often painful for a party. Labor has been adamant for a long time in its opposition to turn backs. In a 2011 background briefing organised by the Gillard government, the then-head of theiImmigration department Andrew Metcalfe said that while Howard’s policy of turning back boats was effective at the time it would not work again.

But events have overtaken predictions and Labor’s stance.

What of the two conditions?

The Coalition’s policy has been to turn boats back “where safe to do”, although secrecy has shrouded operations. A Labor government could make its own judgements about safety.

The Indonesians have periodically stated concerns about encroachments on their sovereignty, now reiterated, but whether the policy will be a problem in the future remains to be seen, partly depending on whether there are boats to be turned back.

All things being equal, by the time of a Labor government, whenever that might be, it’s likely turn backs would not be a big thing. If they were still needed, it’s probable Labor would keep the policy, arguing satisfactory conditions could be met. It would not want to risk a repeat of the boat trade starting again.

Meanwhile, Labor would do best to get past turn backs and give more of its attention to the plight of those asylum seekers stuck on Manus Island and Nauru.

There are plenty of points to pursue, questions to be asked. Papua New Guinea is still considering its attitude on resettlement for those found to be refugees. What is the Australian government doing to put pressure on it? Bad stories regularly emanate from Nauru.

We are not hearing enough from Labor about the plight of the unfortunate people in these places. As time goes on, Morrison, so successful in stopping the boats, is going to have increasing difficulties on those fronts. He’s sitting on powder kegs.

Abbott floats GST change but puts limits on commitment to major federation reform

Tony Abbott described Australia’s federation as a ‘dog’s breakfast of divided responsibilities’. AAP/Alan Porritt

The headline out of Tony Abbott’s weekend Henry Parkes Oration on federalism was his highlighting that the federal government is willing to contemplate a more onerous GST – on certain conditions.

The more subtle message was his note of hesitancy about charging full bore ahead on trying to dramatically reform Australia’s federation.

The government has a white paper underway, and Abbott would like change. But he sounds tentative.

He knows the political cost could be high for something voters mightn’t care about too much.

He acknowledged that “the Australian people, deep down, could actually prefer the messiness and ambiguity of our current arrangements because they make it harder for governments to change what we’ve learned to live with.

“The federation we have – for all its flaws – has spawned a vibrant democracy, a strong economy, and a cohesive society”, and it “is being reformed - incrementally – all the time” through decisions and agreements its governments make.

The federation was a “dog’s breakfast of divided responsibilities” but “not entirely or even substantially dysfunctional” - just “plainly not optimal”.

To borrow one of his own phrases from another context, Abbott over the years has been something of a weather vane on federalism.

“As health minister … between 2003 and 2007, the practical experience of trying to make a coherent system from out-of-hospital Commonwealth-funded treatment, on the one hand, and largely state-funded public hospital treatment, on the other, slowly turned me from a philosophical federalist to a pragmatic nationalist.”

That was when he tried unsuccessfully to persuade John Howard that it would be a good idea for the Commonwealth to take over responsibility for the states' hospital systems.

When he wrote his manifesto Battlelines in 2009 he was in his high centralism phase. “Back then, my thinking was that the states should become subordinate legislatures to the Commonwealth, in a parallel to the way local councils are subordinate to the state governments.

“I now doubt that any such constitutional change could succeed, and, in any event, it’s a good principle to propose the smallest change that will actually tackle the problem – that’s why resolving the mismatch between what the states are supposed to deliver and what they can afford to pay for is worth another go.

“That’s what my colleagues and I meant when we said repeatedly, before the last election, that our federation reform white paper was meant to make each level of government more ‘sovereign in its own right’”.

That sounds neat and logical in theory but, as Abbott appears to sense, it could be a painful journey to a dead end in practice.

Take health. The Commonwealth is not going to take over responsibility for the hospitals. Nor is it going to devolve responsibility for Medicare.

Labor’s attempt at better rationalisation caused friction and still left problems.

In some areas, both levels of government are going to stay involved for a combination of policy and political reasons.

Then there is the separate but related question of whether the Commonwealth and states can “better align their revenue with their spending”.

“To address ‘vertical fiscal imbalance’ we could either adjust the states' spending responsibilities down to match their revenues, or we could adjust their revenues up,” Abbott said.

The first approach would mean the Commonwealth doing more and the states less. Alternatively, the Commonwealth could stop funding programs in areas of state responsibility, he said.

We know the government would prefer to push functions down. And here is the sharp point: “The Commonwealth would be ready to work with states on a range of tax reforms that could permanently improve the states' tax base – including changes to the indirect tax base [meaning the GST] with compensating reductions in income tax”.

A higher and broader GST would advantage the states because they get all the GST revenue. How much better off they were in fact would depend on changes in responsibilities and other Commonwealth funding.

Abbott also said that it also should be possible to make the distribution of the GST revenue more equitable between the larger states with the smaller states no worse off, which does sound like a loaves and fishes exercise.

The Prime Minister plans to meet before mid-2015 with all premiers and chief ministers solely to discuss reform of the federation. He made a point of saying this would be after the coming state elections - occurring in Victoria this year, and in NSW and Queensland next year.

By then the federal election will be only a little over a year away. Abbott asked rhetorically: “Might the states be prepared to accept responsibility for broadening the tax base?” But it would be the federal government, which levies the tax, that would carry the burden of putting to the people a plan for a higher or broader (or both) GST. Abbott has pledged any proposal for tax changes would be taken to the voters, rather than being brought in before the election.

Yes, there would be offsetting income tax cuts, and compensation for low income earner not in the tax system, and Abbott says the government is determined to avoid any increase in the overall burden of tax.

And yes, given all the problems in the current revenue base, the GST should be changed.

But a government needs plenty of political capital to do anything that means people would pay more GST. Would it have a lot more such capital by 2016? Would people have greater trust in Abbott and Treasurer Joe Hockey than they currently do?

By its deep budget cuts in the longer term estimates of funds to the states for health and education, the federal government has put maximum pressure on the states to play ball on tax changes.

But Abbott is giving himself an out before the serious work begins.

“We’re not going to have a pointless fight sponsoring change that the states aren’t even prepared to consider – because, if it’s to happen, reform of the federation has to be owned by the states as well as by the Commonwealth,” he said.

“The fundamental test that all parties and all levels of government will face over the next year … is this: are we prepared to have a rational discussion about who does what, or do we think that the current arrangements, perhaps with some adjustments at the edges, are the best that can be managed under the circumstances?”

Abbott has over the years done a full circle on federalism, although he uses the description “pragmatic nationalist” to describe his position now as well as when he was a centralist. At the weekend the pragmatism seemed much on display.