After the election, this is the reform we need to focus on most

Rather, what is missing from the debate over reform is a clear and candid indication from the states about just what they want by way of revenue-raising powers, a key issue, that will better match their service-delivery obligations.

One can be forgiven for suspecting sometimes that states eschew seeking from the Commonwealth greater revenue powers lest they be accountable thereafter for funding shortfalls or other system failures.

Federal governments will certainly need to do their part too, but we need to get beyond the myopic arguments around blame and cost-shifting that leave everyone exasperated.

In an age when we speak often of nation building and infrastructure visions, we likewise ought to take a rare opportunity to engage in nation building of this elevated variety.

Whatever the outcome next Saturday, the next couple of years will offer something quite unique, albeit brief. There will be no federal or state elections for some time, although Queensland will next go to the polls in October 2020.


This scenario could offer a brief window for a constructive national dialogue aimed at redesigning our federal system to improve delivery of services and better align responsibilities and powers across that system.

If recent years have illustrated anything, it’s the need for a clearer definition of the roles and responsibilities of the different levels of government in our federation. The problems and their ramifications are far-reaching.

While we can attribute to social media substantial blame for the forbidding, vituperative and unwelcome character of so much of the discourse we see, not only in Australia but the rest of the world, we can’t dismiss the role our system of government plays in that environment.

Blame shifting, duplication and the lack of accountability feed into popular discontent about government generally. It’s certainly not a new phenomenon, having blighted our system for so many years.

Beyond the adverse impacts failing to address this will have on public sentiment, the costs of ignoring the challenges are very real. Incremental efforts over many years have proved largely fruitless and a renewed dedication to such an agenda to redesign aspects of the system would be wholly warranted.

To be sure, it’s hard to inspire the public about the benefits of reforming our federation.

Maybe we need someone to write a folk song that will stir hearts and stimulate minds, but until then we’ll just have to rely on reason and eloquence. And numbers.

Analysis commissioned by the Business Council of Australia some years ago found that the costs of duplication between governments were around $9 billion annually and maybe more. Other studies have suggested even higher figures.

Beyond the directly quantifiable costs of our current federal arrangements, the financial impact of the long-standing handicap on states of vertical fiscal imbalance are real and have been enduring.

In Australia, the Commonwealth government raises around 82 per cent of total tax revenue, while the states and territories raise around 15 per cent. Local government raises around 3 per cent. In similar federations such as Canada, federal governments raise around 45 per cent of total tax revenue.

And, generally, state budgets are reliant on Commonwealth transfers (including the GST) to the extent that they constitute a little under half of their total tax revenue.

These problems affect all Australians. If you value the principle of subsidiarity which aims to locate decision-making as close to those who will be affected by those decisions, then reforming our federation matters, even apart from the financial costs of such an unwieldy system.

But more than this, we have a range of tipping points we are encountering that ought to train our attention acutely on this and expedite the collaborative work needed to ensure we have a federation that’s fit for the purposes we must meet now and in the coming years. Population growth, congestion, advances in technology, responsible environmental stewardship and regional security all charge this issue with greater urgency.

With so complicated a reform area, it would be unfair to blame any level of government more than another for long-standing impasses. But what is clear is that the process lacks a clear indication from the states about just what greater revenue powers they ideally would want and what responsibilities they are prepared to assume as part of that effort.

Without a collective vision from the states that sets out some big ideas on change, it’s hard to see how we can supersede the incremental reforms the COAG process and its predecessor mechanisms have delivered over the decades to move the process forward.

After Saturday, and whatever the outcome, Victoria should lead that process.

John Pesutto was Victoria’s shadow attorney-general from 2014 to 2018.

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