States should embrace reform - it’s in their interest

Second, it can be implemented by acting directly to expose to competition the services provided by government, either through purchaser-provider arrangements under which such services would actually be delivered by the private sector, or through public-private partnerships (PPPs).

Victoria has taken the lead in this approach by both contracting out to private operators, for example, some public hospital operations and by using PPPs for infrastructure projects such as the Casey Hospital, the re-development of the women’s hospital and now the children’s hospital. Victorian Treasurer John Brumby claimed at a Canadian conference last November that Victoria was leading the market for PPPs by, inter alia, establishing a national PPP forum among the states.

So why is it likely to be in the governments’ interests, when an increase in the private sector's role will mean a smaller government sector? The answer is that the provision of services through a competitive framework will benefit the consumers of those services - that is, most state residents.

This is not a view confined to one side of politics. Federal Opposition finance spokesman Lindsay Tanner and Queensland Federal Labor MP Craig Emerson have recently highlighted the advantages of competition.

And because an increased private sector role offers potential for a lower level of taxation as well as better services, it is difficult to see that any government implementing a pro-private sector role would fail electorally.

The COAG agenda needs to include proposals for state governments to positively and comprehensively encourage private sector involvement across the whole range of government services. The Federal Government should not provide additional assistance when it is in the states' own interests.