Conflict and co-operative federalism

In 2005, Kevin Rudd delivered a paper entitled The Case for Cooperative Federalism, a sentiment that seems to have been maintained in most of his public utterances. The promotion of the concept of co-operation continued in the early days of the new government when it was claimed that the Commonwealth providing an additional $150 million to the states to cut hospital waiting lists was some sort of federalist break-through. It was, of course, nothing of the sort. Providing some extra money was hardly likely to meet opposition.

What undoubtedly would arouse controversy is Rudd’s statement that he will take over running all the country's 750 public hospitals if state and territory governments have not agreed to a national reform plan by the middle of 2009. He has said that such a move would be designed to “end the blame game between Canberra and the states on health and hospitals”. This is hardly what most would consider “co-operative federalism”.

Outside health, the federalism issue that received the most publicity in the new Government’s first 100 days has been its intervention in the delivery of infrastructure. It has been reported that the Prime Minister recently told his Cabinet colleagues that the setting up of Infrastructure Australia “could be the most important move in commonwealth-state relations since Federation”. If accurate, this comment reflects both hyperbole and over-optimism.

It is unclear what will ensure that the Commonwealth will make wiser infrastructure choices than the individual states. Whatever the final composition of the body, headed by Sir Rod Eddington, it is hard to see how they are better placed to determine infrastructure priorities than democratically elected state governments.

One can see conflict on various fronts. The first is debate over how best to deal with a particular infrastructure bottleneck. In Melbourne, Eddington is currently heading an inquiry into transport options to the north of the CBD and, whatever mix of new roads and new public transport solutions he might propose, the ideological decision that entails can ultimately only be decided by a democratically elected government.

Even when the roads versus public transport ideological dispute is not involved there will be the prospect of many more issues like that of the Goodna bypass where there was conflict between the Commonwealth and the Queensland Government in the dying days of the Howard Government about the best actual solution to a road congestion issue - surely a decision best decided by a state government.

As well as conflict about how best to address existing problems there will undoubtedly be conflict between the states. The howls of protest from the Western Australians who felt that the Howard Government did not provide them with a sufficient proportion of Auslink roads funding will only increase as, under the Rudd Government, the Commonwealth determines priorities in an expanded number of infrastructure areas. Are state governments and state-based chambers of commerce going to meekly accept that the upgrade of their port is not a “national priority”?

Yet, many of those who one might expect to be critical are actually praising the Rudd Government for its actions. Some of the same business people expressing concern at the prospect of Kim Carr running a more interventionist industry policy seem perfectly relaxed about his fellow left winger Anthony Albanese running an interventionist infrastructure policy.

Large sections of the business community seem to believe that centralising power in Canberra will not only deliver consistent and less bureaucratic regulation, but also mean more decisive and business-friendly decision making. It is hard to see what evidence there is of better Commonwealth decision making over the years. One needs only to compare the success of the purchasing decisions of the Commonwealth Defence Department and your typical state’s roads authority to see that the evidence, if anything, supports the contrary view.

If the Australian Federation is to be improved all involved need to appreciate that what is required is not coercion of the states by the Commonwealth, nor is it co-operation with both parties having a finger in every pie. What is required is a system of cohabitation by equal parties that guarantees the states and territories explicit responsibility for key areas.

In asserting the ongoing value of the role of the states, there is no reason to preclude a reassessment of which areas are the responsibility of which tiers of government. As part of that reassessment there should also be consideration of whether there are any ways that the world’s worst example of vertical fiscal imbalance can be improved.

However, whatever the split up, and however wide the divide between the taxing powers and spending responsibility of different tiers of government, it is crucial that the federal government, accepts that if something is deemed a state area, the Commonwealth cedes any form of interfering or oversight role.

States should be able to make the key decisions about hospitals, schools or infrastructure in their domains. If they are not, the remedy lies with the voters in the states.

The Commonwealth needs to accept that they have equal partners in the running of the nation and the states need to accept the responsibility that entails.