Turning the federation clock back to 1901.

Jul 9, 2014

The Commission of Audit has made many unhelpful suggestions about budgetary and economic issues. It seems to have been driven more by ideology than fact.  See my blog of May 1 2014 “The Commission of Audit and facing the wrong way”.

One of its most unhelpful suggestions is that Australia returns to the 1901 intentions of the federation fathers and with clear lines of responsibility drawn between the commonwealth and the states as set out in Section 51 of the Constitution. The Abbott Government’s terms of reference for its White Paper on Federalism also suggest that his government would like us to go back to the arguments about sovereignty. We are being urged to look back to 1901 rather than focus on the way our constitution has evolved to date and will need to evolve in the decades ahead.

This sterile debate about states’ rights comes and goes, but the issue is never resolved. Malcolm Fraser attempted to do what Tony Abbott now suggests – defining sovereignty clearly between the commonwealth and the states. But Malcolm Fraser’s plans went nowhere. The same will happen over the present intentions of the government.

In his blog on the Federation on May 23, 2014, Michael Keating set out very persuasively I thought why the national government has become pre-eminent and why that trend is likely to continue.

  • We now have a national market and face strong global competitors in a way that our founding fathers would never have dreamt of.
  • The powers of the commonwealth government have grown remarkably eg pensions, health services, managing the national economy and migration.  The exercise of these powers by the commonwealth government has been necessary and beneficial.
  • The commonwealth government dominates the taxation field and that will continue. The states could impose state income taxes but have chosen not to. High Court decisions over the long term have been consistently against the states in key areas.

With three levels of government, commonwealth, states and local government, we are over-governed. With the territories we have nine departments of health, nine departments of education, nine departments of transport, and so on. There is great waste and duplication.

The best solution would be to abolish the states as Jeff Kennett and others have suggested and replace them with fewer local government bodies that have substantially increased powers and coverage. That would best serve Australia’s interests but unfortunately the abolition of the states is not going to occur.  The states remain poor and proud.

But there are possible ways that we could reduce duplication, waste and the blame-game between the commonwealth and the states.

The two biggest areas of overlap, confusion and expenditure by the states and the commonwealth are in education and health. In 2010-11, education spending by the states and territories was $48.1 billion or 24.3% of total state spending. In that year, spending by the states and territories on health was $49.9 billion or 25.1% of total state spending. Health funding by the states is likely to remain the fastest area of expenditure growth.

Together education and health are responsible for over one half of state budgets. Reducing overlap, confusion and spending in these two areas would make a substantial contribution to our federation and particularly the delivery of improved education and health services at lower cost.

For years I have argued that in the health field the best solution to end the blame-game and confusion, and to integrate health services and improve the quality of care, would be to establish a small joint commonwealth-states health commission in any states where political agreement could be achieved. See my blog of June 3 ‘The blame-game in health’. A small planning commission would cost very little compared with large likely cost savings. Further the cost could be reduced by scaling back commonwealth and state government health department costs.

A joint agreement on governance in health, the pooling of all commonwealth and states health funds in that states, and the implementation and monitoring of an agreed health plan in that state would be a major improvement in health services. Those services would continue to be delivered by the existing suppliers – commonwealth, states, local or private. An obvious example of the benefits of such a joint health commission is a reduction in hospital admissions. It is estimated that about 750,000 admissions to public hospitals each year in Australia could be significantly reduced if the commonwealth government improved the services available in primary care in the critical weeks before hospital admission. The problem is that the commonwealth largely funds primary care and the states largely fund public hospitals with poor integration between the two.

Implementation of such a joint arrangement would be relatively easy. The real obstacle is securing a political agreement.

We should also keep in mind that when Kevin Rudd proposed a takeover of states hospitals as a last resort, there was strong public support for this action as shown in opinion polls. Unfortunately he backed down and the health confusion continues.  The public would be open to a major reform in health.

I am confident that joint arrangements in health that I have suggested would be the best way to end the confusion between commonwealth and state responsibilities. It would be more in keeping with our current needs and aspirations than going back to the federalism of 1901.

It was a great achievement for Australians to come together in the federation of 1901. It was a real break-through at the time but the split of commonwealth and state responsibilities in 1901 is not particularly helpful for us in this century or the next.

The key features of such an arrangement in health could be applied in the education field.

Although with some rancour, our federation has evolved since 1901. We should look forward to the sort of society and economy that we should become in the future rather than nostalgically looking back to 1901.

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