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Election 2013 Issues: Governing Australia

So far in the campaign, neither party has released a policy on how to forge a better relationship with the states. Image from

Welcome to the The Conversation’s Election 2013 State of the Nation essays. These articles by leading experts in their field provide an in-depth look at the key policy challenges affecting Australia as the nation heads to the polls. Today, we examine the issue of governance, the role of the states and the challenges facing the future leader.

Federal election campaigns are increasingly focusing on a broad range of issues, such as education, health and law and order, which are largely the responsibility of the states and territories. Despite this, establishing and managing the relationship between the Commonwealth and state governments is seldom a top priority for an incoming prime minister.

Both Tony Abbott and Kevin Rudd claim to be federalists rather than centralists. Kevin Rudd announced himself as a cooperative federalist in the run-up to the 2007 election. Tony Abbott’s conversion is more recent. In his 2009 book Battlelines, Abbott declared the federation “Australia’s biggest political problem” and outlined his desire to abolish the states. He has since updated that view, and in May this year committed to a white paper on federalism, if elected.

For the first time, we have two potential prime ministers with previous experience of Commonwealth/state relations and who have committed to forging a better relationship with the states and territories. But so far in the campaign, neither party has released a policy on how to make this a reality.

Abbott and the states

Abbott has been the most forthcoming and committed to reviewing the Council of Australian Governments (COAG) and seeking to clarify responsibilities between the different levels of government and reduce duplication.

He has campaigned with Coalition premiers in their states and has no doubt been influenced by their stories and concerns about the “megaphone federalism”, with the prime minister of the day publicly announces policy well in advance of any negotiations with the states and simply assumes they will fall into line. Though this didn’t stop Abbott announcing his paid parental leave scheme last week, whose funding, the premiers realised with alarm, was dependent on “savings” from the states.

Abbott’s views position him as a radical decentralist. AAP Image/Alan Porritt

Nevertheless, the opposition leader’s renewed intellectual commitment to reducing centralisation, acknowledging the sovereignty of the states and increasing local autonomy is music to the ears of the premiers, both Labor and Liberal. But this commitment to local autonomy also includes local government, with the implication that the states should also seek to devolve responsibility to as close to the community as possible.

Abbott’s views position him as a radical decentralist, rather than a classic federalist, and he will look to support models where local communities run local services, rather than the state bureaucracies. We therefore might expect to see a reprise of Howard’s “parallel federalism”, with attempts to bypass the states and provide direct funding to hospitals, schools, community organisations, and possibly local governments.

Rudd and the states

Rudd has so far not announced anything during this campaign on his intentions about managing Commonwealth/state relations. But during the 2007 election, his commitment to cooperative federalism was seen as a positive. For Rudd, cooperative federalism is about delivering “national outcomes that are politically sustainable” and these outcomes should be achieved collaboratively with the states.

In 2007, Rudd harnessed a mood for change, both from the states and territories and a public who were put off by the endless blame shifting and bickering over intergovernmental negotiations. As a cooperative federalist the first time around, Rudd changed the role of COAG and made progress on a range of issues around productivity and infrastructure provision which had been top of the agenda for the states and territories.

Rudd made some progress on COAG reforms his first time in government. AAP Image/Paul Miller

Yet territorial cracks soon appeared with Rudd’s commitment to “fix” the health-care system. His plan in 2010 to hypothecate a third of the GST revenue paid to the states for dedicated health care funding meant a loss of control of GST revenues and an unwelcome centralisation of policy control from Canberra.

This was followed by a unilateral announcement of a resources tax, without any consultation with the resource states of Queensland and Western Australia, and was the death knell for any aspiration to cooperative federal-state relations.

Post-election challenges

No matter who wins government, both Abbott and Rudd will face similar challenges in rebalancing Commonwealth-state relations.

The first challenge is to rethink the role of the Commonwealth government within the federation. The spotlight usually falls on the states and territories as the “problem” but in reality the states remain clear, as does the constitution, on their service delivery responsibilities. It is the Commonwealth role which is unstable, with different departments and programs springing up and then disappearing as prime ministerial attention wanes.

The review of roles and responsibilities, which Tony Abbott has committed to through his white paper, will hopefully bring some clarity to this confused area.

The next challenge is in developing a clearer role for COAG, supported by new institutional arrangements. COAG agendas are becoming large and unmanageable and the institutional arrangements favour the Commonwealth control of both the agenda and the funding.

Either a Labor or Coalition government will need to rethink the role of COAG and establish an agenda that can drive reform in areas that require the cooperation of both levels of government.

As part of this process, a debate on what constitutes the “national interest” could clarify what genuinely needs the involvement of the Commonwealth or can be managed through sub-national jurisdictions.

No re-establishment of the roles and responsibilities of the different jurisdictions can be undertaken without reviewing the extreme vertical fiscal imbalance which characterises the Australian federation and leaves the states unable to meet the increasing funding burden of expensive service delivery. This issue has sat in the too hard basket since the establishment of COAG in 1992 by prime minister Bob Hawke and underlies much of the dysfunction which has come to symbolise Commonwealth-state relations.

COAG agendas are becoming large and unmanageable. AAP Image/Alan Porritt

The final challenge facing the new prime minister is that of implementation. The COAG Reform Council (CRC) was established to regularly report to COAG on the outcomes on implementing national agreements. The lack of structure and certainty around COAG meetings has meant the detailed reports of the CRC have not been given the consideration by COAG they deserved. The valuable lessons learnt from these agreements are in danger of being lost to the next tranche of intergovernmental reform.

Change in the federation is complex and difficult because it involves public, private and political interests as well as constitutional and institutional constraints. Since Whitlam, there have been waves of so-called “new federalism”. But with two-thirds of Australians now concerned federal and state governments are not working well together, the stars might have aligned for the next prime minister of Australia to commit to reforming this fraught area.

Any change requires some relinquishment of Commonwealth power, whether fiscal or policy, which has been growing since 1901. Australia’s next prime minister will need rock solid and bipartisan support from state premiers, as well as Cabinet buy-in, to shift the ingrained Commonwealth centralist culture.

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