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Do we need a plebiscite on federalism?

By Fred Argy - posted Wednesday, 5 September 2007

The Prime Minister is increasingly turning his back on co operative federalism and making enforced incursions into areas of state responsibility. He is doing that by using both his constitutional and fiscal powers (through tied funding).

The latest incursions are directly in local affairs. The PM says that “we should be focused on outcomes not systems” and that “local communities want good services and care little what levels of government deliver them”. This is true but begs all the questions.

No one denies the need for co-ordination and harmonisation of policies and regulations across the country in some areas (such as industrial relations and river management) and there is nothing wrong with the Commonwealth adopting a general "overwatch role". But we are seeing a growing reluctance on the part of the Commonwealth to consult and co-operate with the states on nationally important issues and an increasing desire to get involved in local affairs.


Assuming the Prime Minister’s centralist approach to federalism is not just a transient politically opportunistic move and that it will endure as a template for governance after the elections, what is the rationale for it?

It is no answer to say that, thanks to the High Court, the Commonwealth has the constitutional power. The High Court seems prepared to allow much latitude here but it does not mean that the power has to be used to the full. Similarly, it is not relevant that the Commonwealth happens to have much more financial firepower than the states - partly because of the long-standing federal-state fiscal imbalance and partly because the Commonwealth is getting the lion’s share of the fortuitous revenue windfall from the export price boom. This particular problem can be rectified by correcting the fiscal imbalance and/or converting specific purpose payments into more general grants.

In short, the constitutional and financial powers of the Commonwealth provide it with the instruments of action but they do not, per se, justify what is happening to our federal system. So what is the underlying rationale for the growing centralisation of power in Canberra?

It can hardly be argued that state public servants are less professional and competent administrators than their federal counterparts. Nor is the Commonwealth necessarily more economically rational in its approach to policy. Indeed when one examines its illogical stance on government borrowing for infrastructure and its recent populist interventions in areas like state technical training, hospitals and local council mergers, the opposite may be the case at present.

So we are left with one simple explanation for the Commonwealth’s centralist grab: a desire to impose its own brand of political and policy ideology on the states, even at the local level.

This raises a number of important questions of democratic principle. Are Australians happy to see such a concentration of policy power in the hands of a few federal leaders (and particularly the Prime Minister) and a further erosion of the long-standing checks and balances in the federal system? Are communities happy to leave decisions on local services to Canberra - the most remote level of government? Do they want policy responsibilities to become so muddied that voters do not know who to hold accountable?


More fundamentally, are Australians willing to give up the key advantages of federalism - the opportunity it provides for policy diversity, competition and choice?

These questions need to be debated and Australians given a chance to speak on the future of federalism. What about a plebiscite?

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First published in The Canberra Times on August 22, 2007.

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About the Author

Fred Argy, a former high level policy adviser to several Federal governments, has written extensively on the interaction between social and economic issues. His three most recent papers are Equality of Opportunity in Australia (Australia Institute Discussion Paper no. 85, 2006); Employment Policy and Values (Public Policy volume 1, no. 2, 2006); and Distribution Effects of Labour Deregulation (AGENDA, volume 14, no. 2, 2007). He is currently a Visiting Fellow, ANU.

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