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Federation needs a fix

By George Williams - posted Tuesday, 27 March 2007

It is widely acknowledged that Australia's federal system is broken. What we did not know is how much this is costing us. The price tag has now been estimated at $9 billion each year in wasted taxes. This amounts to $1,100 per family.

That is a conservative estimate by the Business Council of Australia. It is how much the community pays for the duplication of services and inefficiency that bedevils the relationship between our federal and state governments.

Even this understates the true cost. It is only the amount of extra tax we pay and does not include the money lost to businesses in having to comply with unnecessary red tape or the cost of sub-standard health and education services.


Taking these into account, it has been estimated that the duplication and extra co-ordination costs in the Australian Federation are an astonishing $20 billion a year. This amounts to 9 per cent of all general government expenses or 3 per cent of GDP.

Duplication and waste are rife across government. Control is shared, or more often fought over, in all the most important policy areas, including health, education and water scarcity.

An example is our high schools. State power is being challenged by federal intervention in everything from standardised testing to school report cards and in the future perhaps the teaching of specific subjects such as history. The result is a regulatory mess.

In other areas we have the opposite problem where instead of battling for control, governments seek to avoid responsibility. Mental health has been an example. Dental health is another.

A report last week found one in five people are forgoing dental treatment because they cannot afford it. Politicians agreed that we have a major problem. However, the states said it should be fixed by extra Commonwealth funding, while the Commonwealth said it was a state issue. The result? No action.

We face a choice. The first option is to continue to pay extra tax and accept second-rate government services. This is the path we are on now. We have been led here by generations of politicians who have found it easier to leave the system as it is.


A reason for this is that the system benefits those in power. Without clear lines of responsibility, federal and state leaders can seek credit for successes, but shift blame to someone else for inaction or failure.

The alternative is to do the hard work over the longer term to fix our system of government. This might seem impossible given our poor record of achieving change. In fact, the international experience shows otherwise. It suggests that what we lack is not new models and ideas, but the vision and leadership to bring them about.

The best way to start the reform process is to highlight the problem at a specially convened constitutional convention. This was how our federal system was drafted in the 1890s and is a way that all interests can come together to debate the issues and propose reform. The convention would underscore the importance of the topic and create space for new ideas.

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First published in The Age on March 21, 2007.

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About the Author

George Williams is the Anthony Mason Professor of law and Foundation Director of the Gilbert + Tobin Centre of Public Law at the University of New South Wales.

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