National well-being should come before states’ rights

Devolving federal responsibilities for social services may cause inequities among the states. Flickr/Lisa Mayne

The reform of Australia’s federation is under review. In this special series, we ask leading Australian academics to begin a debate on renewing federalism, from tax reform to the broader issues of democracy.

In our final piece, Eva Cox argues the rather than worrying about duplication and overlap of services between the Commonwealth and states, we should set equity goals that ensure the national well-being.


As discussed elsewhere in the Renewing Federalism series, vertical fiscal imbalance gives the Commonwealth considerable coercive powers to set priorities and set national policies for funding on programs it does not control and for which it is not constitutionally mandated. This is obviously important in economic and defence areas, but also in setting social priorities.

The current pressures for economic growth to be the dominant issue for governments has tended to overshadow nation building with wealth building functions of governments. It is the balance of these functions in any examination of federation which may become problematic.

There are signs that interest in the current Federation exercise may lead to more devolved national policy decisions and related service delivery processes to the states. While current collaborative efforts like COAG or may be cumbersome, the rapid moves post-election to demolish the Gonski education reform national agreements does not send out good messages on national goal setting.

My concern is that the Government’s emphasis on “open for business” would increase the pressure to devolve large proportions of decision-making power back to the states and thereby reduce the costs of public services. This could result in serious risks of increased inequality between citizens depending on what state or territory they live in.

We need therefore to ensure we clearly identify why and where it is necessary to retain the national capacity to set and enforce national social goals so Australians have equitable access to those resources that are distributed via government.

We may otherwise find people’s access to preschool education, legal aid, aged and health care will be tied to where people live, with no possibilities of appealing to a higher authority for national fairness.

There are signs already that the states are pursuing self interest in some salvos being fired around the distribution of the GST. The basic untied grants that are offered by the states as their share of taxation revenue are currently allocated via formulae designed to balance spending possibilities equitably across states. As these differ in size, population density and age mixes, as well as access to natural resources, there have always been arguments on this allocation.

Wealthier states object when they receive less per capita than other states and often less than the GST collected from their residents. Now Western Australia is demanding the formula be adjusted to what they pay into the tax system and receiving some sympathy. This is opposed by those smaller states which have few resources and need higher subsidies.

If state-based financial self interest becomes part of the basis for new funding in return for more local decision making and control over setting priorities, the concept of setting national well being goals will be lost.

If debates on Federation focus on worrying about duplication and overlap at the expense of retaining the necessary means of setting national equity goals, the national well-being can be seriously damaged.

Questions such as inequality, which even the IMF now sees as a problem, will no longer be part of the national agenda.

Making financial growth less encumbered by reducing complexities is important, but not if it undermines our capacities as a nation state. While we may need to discuss subsidiarities, devolving decisions around which tier of government delivers our social structures cannot take on irrelevant colonial boundaries drawn up over more than a century ago.

Most of us define ourselves as Australians, not by state of residence or origin. The power moves over the past century have mainly been towards more centralised decision making as national governments took on more roles in setting policies across the spectrum. Moving towards a more federated decision making model seems to deny the need for a relatively small population like ours to make clear national decisions.


Renewing Federalism is in partnership with the Australian National University’s Tax and Transfer Policy Institute at the Crawford School of Public Policy and with the University of Melbourne School of Government.

Our Renewing Federalism series will culminate in a symposium on October 2 at ANU. If you would like to attend the event, please see event details and RSVP here.


Read more in the series here.

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