Overview of Australian federalism
On 17 June 2010, the Senate established the Select Committee on the
Reform of the Australian Federation. The committee's terms of reference
required it to inquire into key issues and priorities for the reform of
relations between the three levels of government within the Australian
federation with a view to developing an agenda for national reform. The initial
reporting date was set as the last sitting day of May 2011, but the Senate
granted an extension of time until 20 June 2011. The committee was granted a
further extension of time until 30 June 2011.
Conduct of the inquiry
The committee advertised the inquiry on its website and in The
Australian, and invited submissions from interested organisations and
individuals. The committee received 48 submissions, as listed in Appendix 1.
Public hearings were held in Sydney on 2 December 2010, Brisbane on 1 February
2011, Perth on 9 March 2011 and Canberra on 5 May 2011. A list of witnesses who
gave evidence at the public hearings is in Appendix 2.
The committee thanks the organisations and individuals that made written
submissions, and those who gave evidence at the public hearings.
Notes on references
References to submissions in this report are to individual submissions
received by the committee and published on the committee's website.
References to the committee Hansards are to the official Hansard transcripts.
The federal model
Australia has a robust system of government that has served it well. For
a hundred and ten years the country has enjoyed relative stability, prosperity
and democracy, and avoided revolution, coups or civil war.
Fundamental to Australia's constitution and governance is its federal
structure. Over twenty countries around the world, representing over a billion
citizens, are federations. It is a system of government that recognises
historical and geographical differences, such as the dispersed colonies that
occupied the Australian continent in the nineteenth century. At the same time,
however, Australian federalism ensures unity within that diversity, and creates
a nation for the continent.
Federations unite disparate states through focusing on common interests
and mutual goals. In the words of Edmund Barton, federation is a
'union of the states which we believe will do so much to promote interchange
and community of interests between citizens of the whole Commonwealth.'
Delegates at the 1898 Australasian Federal Conference considered that
the then draft Constitution drew on a range of models to create a new form of
federalism uniquely suited to a union of Australian colonies. In explaining the
new model of federalism, Sir Richard Barker commented:
There have been three types of government struggling for
mastery all though our deliberations. There has been, first, the type of what I
call true federation; there has been the type of federation imagined by some of
my honourable friends from Victoria; and there has been the British type of
government. Those three types are to a very considerable extent inconsistent
with each other. But in the work which we have completed traces will be found
of every one of them...
I believe, sincerely and truly, that the Bill which we have
framed is a machine that will work most smoothly.
Australia's federal system is a scheme of federation, not amalgamation.
Australia's constitution establishes a federal system of government in which
power is not centralised but divided between various levels of government.
There are three levels of government within Australia's federal structure,
namely, commonwealth, state/territory, and local. Of these, the Commonwealth Government
and the state and territory governments are recognised in the Commonwealth of
Australia Constitution Act (the Constitution).
Section 1 of the Constitution establishes a federal Parliament to
exercise 'the legislative power of the Commonwealth.'
Sections 51 and 52 of the Constitution define the scope of the
Commonwealth's legislative power, listing the matters with respect to which the
Commonwealth may legislate. Notably, the list includes matters referred to the
Commonwealth by the states, matters relating to external affairs, and matters
relating to corporations. The Commonwealth also has implied power over matters
incidental to the matters listed in sections 51 and 52. The
Commonwealth's powers are expressly defined and, therefore, expressly limited. In
this way, as Dr Zimmermann and Mrs Finlay noted, the Constitution constrains
the role and authority of the Commonwealth government.
Chapter V of the Constitution recognises, and therefore legitimises,
state constitutions, state parliaments and state laws. In contrast to the Commonwealth,
the power of state governments is plenary, being unlimited save where state law
contradicts validly made Commonwealth law.
That state autonomy was intended to be a key feature of the Australian
federation is evident in the deliberations of the 1898 Australasian Federal Conference:
[We are] dealing with matters on behalf of independent and
self-reliant states. And we have dealt with those matters on which the interest
of the states clashed, we have harmonized the interests of several states where
they differed, and we have provided a Constitution sufficient to provide for
the fullest and the most self-reliant government of a free people. We have
created an instrument of partnership between us which, I believe, secures the
independence of the several states, will provide for the joint control of
certain matters, at the same time as it also leaves free and complete
self-government on all matters not committed to the central authority.
The Constitution distinguishes between the role of the Commonwealth and
the role of the States. The founders of Australian federation envisaged a
Commonwealth government responsible for matters of national importance and state
governments responsible for matters of local significance. As Holder goes on
And this, it seems to me, is what we should have done — to
provide that national questions should be federalised, and that local questions
should be left to local self-government. And it is this, it seems to me, that
we have done; and thus we have done what we ought to have done and what our
constituents expected of us.
In evidence to the committee, Dr and Mrs Finlay argued that:
[t]he drafters of the Constitution thus wished to reserve to
the people of each State the right to decide by themselves on the most relevant
issues through their own state legislatures.
In contrast to the state governments, territories are not automatically autonomous,
self-governing members of the federal system. Section 122 of the Constitution
confers on the Commonwealth government the responsibility, and the right, to
make laws for the government of Commonwealth territories.
The Australian Capital Territory, the Northern Territory and Norfolk Island are
self-governing. However, while self-governing, the authority of territory
governments is limited rather than plenary.
As the Northern Territory Statehood Steering Committee noted, territory
self-government is granted through Commonwealth legislation.
The legislation expressly limits the authority of territory governments. The
level of restriction differs between the self-governing territories. The
Northern Territory Legislative Assembly is the least restricted, being
prohibited from legislating with respect to the acquisition of property, other
than on just terms, and euthanasia.
In contrast, the powers of the Australian Capital Territory's
Legislative Assembly are more circumscribed. The Legislative Assembly may not
make laws regarding the acquisition of property, otherwise than on just terms,
the provision by the Australian Federal Police of police services in relation
to the territory, the raising or maintaining of any naval, military or air
force, coining of money, classification of materials for the purposes of
censorship, and euthanasia.
Jeffery Harwood and others have argued that, as creatures of
Commonwealth law, territory governments are 'both fully revocable and
This was a view shared by the Northern Territory Statehood Steering Committee:
Limited self-government was granted to the Northern Territory
from July 1 1978 by an ordinary law of the Commonwealth Parliament
subject to change or repeal at any moment. Since then, the Self Government
Act has been changed on numerous occasions.
Commenting on the Northern Territory government, Harwood et al.
highlighted the circumscribed position of Territory governments within
Australia's federal system:
In constitutional terms, the status of the territories
vis-a-vis the Commonwealth is essentially the same as that of local governments
vis-a-vis their respective state government.
Local Government is not mentioned in, and therefore is not given
recognition by, the Constitution. On this point, the Hon Christian Porter MLA,
Western Australian Attorney-General, submitted that 'Australia's federal system
of government...is a relationship between two, not three, levels of government.'
Local governments, also known as local councils, are established through state
legislation, and are therefore responsible to state governments. 
The strengths of federation
Delegates at the 1898 Australasian Federation Conference, who were
tasked with developing a system of government to unite the Australian colonies,
considered that a federal system of government would bring innumerable benefits.
As a South Australian delegate, Mr Holder, declared: 'I can conceive of no
class of persons which will not benefit from the incoming of this federation.'
The extent of the expectations for the intended federal system are evident in
the statement of another South Australian delegate, Mr Symon:
No man can say that, even burdened with disunion, Australia
will not have great prosperity. No man can say that every state upon the
continent will not share it. But, in my opinion, all that prosperity will be as
nothing to the prosperity that will come from union. It will be a union with
strong foundations set deep in justice, a union which will endure from age to
age, a bulwark against aggression and a perpetual security for the peace,
freedom, and progress of the people of Australia, giving to them and to their
children and to their children's children through all generations the priceless
heritage of a happy and united land.
Reflecting on over a century of Australian federation, Wanna et al. have
concluded that 'Australia’s large land-mass, remote locations, disparate
regional areas and localised preferences mean that a federal system of
government is suited to the Australian context.'
The Council of the Australian Federation shared this view, arguing that
federation 'enables a geographically large and diverse country such as
Australia to maintain national unity and meet the pressures of globalisation
while at the same time accommodating regional difference.'
Dr Zimmermann and Mrs Finlay also submitted that a federal system is an
appropriate form of government in an increasingly global society, commenting
some of the largest and most internationally competitive
economies in the world are federations. A federal system is clearly not itself
an impediment to economic success in a globalised world, or to the delivery of
competitive and efficient services. 
On this point, Dr Anne Twomey and Dr Glennn Withers have noted that
internationally federation is promoted as a strong and viable model of
In the rest of the world, the prevailing trend is towards
decentralisation and federalism. Indeed, federalism is regarded as one of the
best governmental systems for dealing with the twin pressures produced by
globalisation – the upward pressure to deal with some matters at the
supra-national level and the downwards pressure to bring government closer to
Several submissions drew the committee's attention to the benefits of a
The following advantages listed by CAF are indicative of the those benefits:
Australia’s federal structure provides for a number of
significant benefits that in fact outweigh [the] perceived costs:
- The customisation of policies to meet local needs
- Incentives to innovate and experiment in policy and service
Supporting choice and diversity
Competition and comparison that supports continuous improvement
- Greater scrutiny of national policies as a result of the need to
- Protection for the individual by checking the concentration of
Importantly, the benefits of federalism do not preclude the
development of national approaches to common problems. In addition, the federal
structure allows for new ideas to be pioneered by one jurisdiction and, if
successful, to be adopted by others.
Customisation of policies to meet
CAF submitted that the consideration of the roles and responsibilities
of the levels of government in the Australian federation should include 'the
principle of subsidiarity'.
According to CAF, the principle 'holds that the most effective and efficient
allocation of roles is achieved where policy and service delivery
responsibilities rest with the lowest sphere of government practicable.'
The principle is concerned with ensuring that decision-making remains close to
citizens and enables the system to be judged for whether it remains responsive
to the needs of citizens.
The principle is notable within the European context. The principle
informs the activity of the European Union, with the terms of the Treaty on the
European Union directing that, other than in matters within its exclusive
competence, the Union will act 'only if and in so far as the objectives of the
proposed action cannot be sufficiently achieved by the Member States...but can
rather...be better achieved at Union level.'
In relation to the Australian Federation, CAF argued that:
[t]his principle is especially important in Australia’s
federal system, as we increasingly move towards a system of concurrent
federalism – where multiple levels of government will have a role to play in
key areas, such as health and education.
State and territory governments, it is argued, are in the best position
to make decisions about the types of services and regulations that suit their
communities. As Twomey and Withers have concluded:
Federalism accommodates the vast differences across Australia
by allowing policies that affect local communities to be tailored to meet the
needs of those communities by people who live there and understand those needs.
This view was reflected in evidence put to the committee. The Northern
Territory Statehood Steering Committee for example, noted that:
Federalism works and works well when it is allowed to promote
regional and local solutions for local and regional problems and allows policy
innovation to flourish within a unified but diverse structure.
Dr Zimmermann also noted the potential benefits of local decision-making
to social governance:
[A]t federal level you might have more people dissatisfied
with a federal law because you are actually taking into account the view of the
nation as a whole. Certainly, if you think about the local level you can
actually satisfy the will of a group that is located in a certain area of the
Territory far more than having their view counted in a territory such as a
country as a whole. So an advantage of federalism is to make more people more
content with the kind of laws they have.
The capacity for local decision making is one of the principles that underpins
the Australian Local Government Association's advocacy for recognition of local
government in the Constitution.
The fact that it is elected by the community and responsible
for a broad range of services in a clearly defined geographic area means that
local government is well placed to understand and meet local needs and respond
to those needs in ways that are most appropriate to local conditions.
Ascribing responsibility to the appropriate level of government, however,
does tend to assume a world where the appropriate level of decision-making is
clear cut and unambiguous. This is not necessarily the case. Professor Galligan
argues that there are two dominant modes for conceptualising federalism and
intergovernmental relations: coordinate and competitive. He holds that:
[C]oordinate – separate and distinct roles and responsibilities
– is not the paradigm of Australian federalism, nor do I think it could be of
any sophisticated modern federal system...The Commonwealth and states share
roles and responsibilities within most major policy areas: that is a fact of
life, and occurs for good reasons of governance matching policy and political
Competition, innovation, choice and
Federalism also encourages innovation, competition, choice and diversity.
A federal structure improves policy development and innovation by facilitating
the exchange of ideas across jurisdictions working on similar policy problems.
Wanna et al. see this as a product of horizontal cooperation across
jurisdictions at the same level.
Galligan submitted that the innovation comes through the inevitable competition
that occurs between citizens of different governments wanting or seeing better
programs and demanding the same from their own government.
According to Galligan, '[c]ompetitive federalism is much more potent and
important for understanding how federalism works and the processes for its
reform, and is the preferred paradigm for economists.'
The broad thrust of Professor Galligan's position is supported by Walsh
who sounds a cautionary note against cooperative federalism when he argues that:
[c]ooperative federalism also can be dangerous because, if it
succeeds in establishing itself as the way that governments organise their
interrelationships, it would free governments and their bureaucracies from the
forces of political competition, enabling them to behave, in effect, like
cartels in the private sector.
However, Walsh does go on to note that there is a risk of overstating the case for
regarding competition in inter-jurisdictional relationships as resulting in
‘efficient’ rather than ‘wasteful’ outcomes.'
His central point is that:
[m]any outcomes of federal relationships that are seen as
indicators or sources of inefficiency may, in fact, be desirable outcomes
of political competition — which, as we see around us, is capable of resulting
in mutually beneficial cooperation.
Linked to the notions of innovation and competition is the idea of
choice and diversity. Twomey and Withers state that:
Federalism gives people greater choices. People can, and
often do, choose to support a government of one political party at the State
level and another at the Commonwealth level, because they prefer different
approaches to different policy issues.
This choice and diversity extends to diversity in institutions as
federalism requires the development of multiple capital cities, each with its
own range of public institutions.
It was put to the committee that diversity should not be regarded as a
weakness but rather a key strength of federalism. Mrs Finlay cautioned against
viewing jurisdictional differences as a flaw in the federal system:
And there is a real underlying perception that any
disagreement, different policies or lack of unification between the states is a
problem, when in actual fact it is one of the benefits of federalism...there
are clear benefits to allowing the states to do things a little bit
differently, to reflect the fact that people in different parts of the country
have different needs. It is complicated, and there are some disadvantages to
it, but, in my view, on balance the benefits clearly outweigh the
disadvantages. The idea of competitive federalism can really be a driver to
achieving greater results rather than simply being a delaying or a destructive
type of disunity.
Cooperation – greater scrutiny of
Where matters cross jurisdictional boundaries, a federal system requires
inter-jurisdictional cooperation. Dr Zimmermann and Mrs Finlay argued that such
cooperation can benefit the federal system as it 'should...result in better
decision-making by building a heightened level of debate and scrutiny into the
The view that joint endeavour leads to more informed policy is evident in the
position of Twomey and Withers:
The involvement of more than one government means that a
proposal will receive a great deal more scrutiny than if it were the work of
one government alone. Problems with implementing the proposal in different
parts of the country are more likely to be identified. Where there is conflict
between governments on the nature and detail of the proposal, there is more
likely to be a public debate, as different governments are forced to put their
positions and justify them in the public domain. While this has the
disadvantage of sometimes slowing down reform, the need for co-operation has
the corresponding advantage of ensuring that reform, when implemented, is
better considered and more moderate in its nature.
It has, however, been asserted that cooperation may be linked to
increased centralism. Speaking as part of the Senate Occasional Lecture series,
Professor Geoff Gallop has argued that what may begin 'as an inspiration for a
"national" solution involving all levels of government...more often
than not finishes up as a Commonwealth
In evidence to the committee, Dr Twomey reported similar concerns:
I am told by former colleagues in various states that the
Commonwealth is back to its old tricks and basically says, ‘You just do what we
say or else.’ So the veneer of cooperation over the top has not actually been
so much reflected in reality underneath
Protection for the individual
Perhaps the most fundamental democratic benefit of a federal system is
that it provides protection for individuals by dividing power across a range of
players. Speaking of the Constitution, in 2006 Justice Kirby of the High Court
underlined this benefit stating that:
[t]his Court and the Australian Commonwealth need to
rediscover the federal character of the Constitution. It is a feature that
tends to protect liberty and to restrain the over-concentration of power which
modern government, global forces, technology, and now the modern corporation,
tend to encourage. In this sense, the federal balance has the potential to be
an important restraint on the deployment of power
The tendency of federal structures to disperse power is supported by
There is also evidence that federations fare better in terms
of governmental integrity than do unitary states. Transparency International
survey data supports this view, with OECD federations having a 5.4 per cent
higher integrity rating on average than OECD unitary states. Under federalism,
power is more dispersed and is more open to scrutiny and to comparison by other
It was put to the committee that the distribution of power is a key and
deliberate feature in the design of the Constitution. The Pearce Division of
the Liberal Party stated that '[i]t was the specific intention of the framers
of the Constitution that no level of government would become overly powerful,
or indeed all powerful.'
FamilyVoice Australia put forward a similar view, stating that:
Federalism is one of several aspects of the Australian polity
that avoids the concentration of power because of the inherent tendency of
power to corrupt. Other aspects of the polity giving effect to this notion
include the separation of the executive, legislative and judicial powers;
bicameral legislatures and regular elections.
The importance of a federal structure as a barrier to centralised power
was underlined by the submission from the Western Australian Attorney-General
Commenting on the effect of High Court decisions such as the Engineers Case,
the Tasmanian Dams Case and the Work Choices Case to widen the
scope of Commonwealth legislative powers, it argued that such a tendency:
is inappropriate firstly because this centralisation of power
is not warranted by the Constitution's text and structure. Secondly, it is
inappropriate because it destroys the benefits of federalism. These benefits,
in stark contrast to centralised power, include diversity, limitations on power
and dispersal of power. It is important to note that in a country as
geographically large as Australia, this latter benefit enables both localised
exercise of power by political decision-makers and the corresponding direct
responsibility and accountability to the people who elected them.
Evolution of the Australian federation and its limitations
While the Australian model of federalism has the capacity to deliver
significant benefits, a recurring theme across the evidence presented to the
committee was the potential for Australia's federation to be strengthened and
its effectiveness improved. For example, the Gilbert and Tobin Centre of Public
Law stated that '[t]he federal system, while having many strengths, is not
working as well as it should be.'
Rethink Australia commented:
The Australian Constitution is noted for its comprehensive
and generally robust Commonwealth/State provisions, however, there is
considerable room for improvement.
On this theme Professor Williams submitted that Australia's federal
system, rather than meeting its potential, is currently dysfunctional.
According to Professor Williams, this stems from the system's failure to
adapt to address issues that have arisen as the federation has evolved.
Australia’s Federation is internationally regarded as one of
the most dysfunctional, and there are a few reasons for that. One is that it is
so old and has undergone so little change. If you look at most of the
federations around the world, they have been created in recent decades and have
learnt from many of our lessons. They have a
better division of powers, they deal with financial matters more effectively
and they deal with democratic accountability more effectively. So they have
learnt from our mistakes and we have then failed to learn from our own mistakes
and make those changes...Other systems that are old, like Germany, have gone
through major changes. We are simply an old, intransigent system that should be
a Federation but simply works nowhere near as well as it should.
Three of the most significant areas of concern raised during the inquiry
are fiscal and policy centralisation; enduring vertical fiscal imbalance; and
the marginalisation of local and regional governance. Other issues that place
limitations on Australian federalism are the high degree of shared
responsibility for policy issues across all levels of government and the
difficulty of changing the constitution.
Fiscal and policy centralisation
Despite the intention behind Australia's federal structure to disperse
power, there has been a clear trend towards fiscal and policy centralisation
over the last century. A wide range of submitters were critical of this
centralising trend, including individuals, a local council and state
The Tasmanian government was critical of 'opportunistic federalism or
"aspirational nationalism"', arguing that it undermines the
federation and is 'counterproductive to efforts of the Commonwealth and state
and territory governments to work together on challenges facing the nation'. It
singled out the federal government's unilateral announcement of its intention
to take over a Tasmanian Hospital as an example of actions that work against a
smoothly operating federation.
The submission from the Western Australian Attorney-General highlighted
the impact of this centralising trend on the distribution of judicial powers
across the Australian federation.
Of course, the Commonwealth Constitution also effects a
federal division of executive and judicial powers. Again, the distribution of
these powers between the Commonwealth and the States has increasingly moved
away from the balanced federal division towards greater Commonwealth power. In
the executive sphere this is obvious from the control which the Prime Minister
and Commonwealth Ministers exercise in Ministerial meetings, as well as
resulting intergovernmental arrangements...
In the judicial field, the same tendency is obvious,
especially since the creation in 1976 of the federal court, of increased
federal jurisdiction, which combined with accrued or associated jurisdiction,
has meant that the role and importance of State courts exercising State (and
federal) jurisdiction has correspondingly diminished.
As chapter three will explore further, Dr Zimmermann and Mrs Finlay
argued that the beginnings of this centralising trend are evident in decisions
of the High Court from 1906.
It was then, they argued, that the High Court began to adopt a more centralist
reading of the Constitution. Dr Zimmermann and Mrs Finlay submitted that the
centralising tendency, evident in such cases as the Engineers Case and
most recently the Work Choices Case, has affected financial
relations between the Commonwealth and the States. It was argued that through
cases such as Victoria v Commonwealth (Second Uniform Tax Case) and Paton
v Milk Board (Vic), the High Court has limited the states' capacity to
generate income, while permitting the Commonwealth to provide conditional
financial grants to the states and thereby exercise authority over matters not expressly
granted to the Commonwealth in the Constitution.
Dr Zimmermann and Mrs Finlay conclude that 'all the advantages of federalism
sought by the Australian founders have actually diminished over time, in no
small part due to the actions of the High Court of Australia.'
The policy centralisation represented by the increasing activity of the
Council of Australian Governments (COAG) and other ministerial councils has
also become a source of criticism. Increased coordination of government policy
is often supported, but in COAG and ministerial councils, many have argued it
is done without transparency. Civil Liberties Australia made the argument in
very strong terms:
CLA believes that the growth and out-of-the-limelight
development of COAG, SCAG (Standing Committee of Attorneys-General) and the 41
other Ministerial Councils has been the most detrimental development to
Australian democracy since federation. We have been writing, speaking and lobbying
parliamentarians on our opinion on this topic for more than two years.
What Executive government – that is, the elite-with-the-elite
of the ruling political party federally, and in each State/Territory – sees as
ʻefficiencyʼ of the COAG, SCAG and Ministerial Council process is in
fact a way of denying parliamentarians their traditional role.
COAG, SCAG and Ministerial Councils are emasculating the
power of parliaments, and the proper role and responsibility of
parliamentarians, particularly backbenchers from all parties.
Vertical fiscal imbalance
Another concern about the Australian model of federalism is the strong
mismatch between the revenue raising capacity of governments and their
expenditure. Such discrepancies in revenue raising and expenditure between
state and national levels of government are referred to as vertical fiscal
imbalance (VFI). VFI is a systemic feature of federations: in Shah's major
study of federal systems, all countries showed national governments raising
more revenue than they expended (though Spain and India came close to being
vertically fiscally neutral). However, Australia has one of the most severe vertical
fiscal imbalances. With Australia's imbalance measured at 18.7 percent of total
revenue in 2006, only Belgium, Spain and South Africa were in the same league.
The result of this vertical fiscal imbalance is a 'breakdown in
accountability for cost-effective service delivery as different levels of
government seek to attribute poor service delivery to each other's failings.'
This is discussed in more detail in chapter four of the report.
Local government – bit player or
The role of local government in the Australian federation is another
area of concern. The Australian colonies have had local government structures
in some cases as far back as the 1840s. Despite this, recognition of its role –
and the money to match – has been uneven. In particular, the highly variable
funding situation is widely conceded, such as by the House of Representatives
Standing Committee on Economic, Finance and Public Administration in 2003,
and by the Productivity Commission in 2008.
In almost no other federation is local government such a minor player in
government finances as a whole. Only India and Malaysia have local government
funded at the same proportion of GDP as in Australia (around five or six
percent). Data from Shah indicate that amongst OECD federations Australia
stands alone, with local government in other countries receiving at least twice
the amount of GDP as in Australia.
The role of local government in the Australian federation is explored in more
detail in chapter six of the report.
A time for review
A common theme across the submissions is that it is timely to review and
reform some of the structures of Australia's federation. Professor A J Brown's
research project studying Australian citizens' attitudes to federalism found
a substantial majority of Australian adults (up to 86 per
cent) believe that the current system does not work well, either in general or
in terms of key desirable attributes, or that a federal system is undesirable
in principle... This perception increases rather than decreases with respondents'
level of direct experience with the operations of government.
More broadly across all layers of government, there has been increased
interest in collaboration to tackle cross-jurisdictional and cross-governmental
policy issues. Writing in 2009, Professor Wanna et al. said:
[t]here appears to be a shared commitment to move away from
the negative 'blame game' politics that has hampered good policymaking in the
past. In place of rivalry, there appears to be a growing awareness that real
policy outcomes are enhanced most effectively when governments work together to
achieve common objectives.
The 2020 Summit's final report in 2008 included as one of its themes
'creating a modern federation':
9.4 Reinvigorate the federation to enhance Australian
democracy and make it work for all Australians by reviewing the roles,
responsibilities, functions, structures and financial arrangements at all
levels of governance (including courts and the non-profit sector) by 2020.
A three-stage process was proposed with:
- an expert commission to propose a new mix of responsibilities
- a convention of the people, informed by the commission and by a
process of deliberative democracy
- implementation by intergovernmental cooperation or referendum.
9.5 Drive effective intergovernmental collaboration by
establishing a national cooperation commission to register, monitor and resolve
disputes concerning intergovernmental agreements.
9.6 Engage the Australian community in the development of an
ambitious long-term national strategic plan that delivers results.
Support for reform was also reflected throughout the evidence presented
to the committee. For example, the Tasmanian Government contended:
It is now more important than ever that we revitalise it
[Australia's federal system] so that Australia can fully realise the
democratic, social and economic benefits that a well functioning federal system
Similarly, CAF submitted that there is a 'growing consensus across
politics, business and the community of the need for a clarification of the
roles in the federal system.'
A number of court cases have given impetus to the calls for change.
Local government has been particularly concerned by the effects of Pape v
Commissioner of Taxation
(the Pape case) in 2009.
Others have criticised the centralising tendency, and seemingly limitless reach
of the corporations power, implicit in the Work Choices legislation and the
2006 High Court case against it,
which was lost by the states.
The committee considers that federalism is the right model for dealing
with issues relating to Australia's population, culture and economic
development. However, this model needs renewal. The Australian federation
should be dynamic, and open to carefully considered reform. A willingness to
reform will ensure that the principles of federation remain central to
governance structures and process. It will also ensure that we reap the
benefits of federalism for communities, while not allowing outdated governance
arrangements to prevent those benefits being delivered.
As has been outlined above, and as will be explored in further detail,
participants in the inquiry identified a number of areas for reform, and also
provided insights on what processes might be used to implement change. In the
110 years since its inception, federalism in Australia has come under growing
pressure. Increasingly complex policy issues, an entrenched imbalance between
the Commonwealth, the states and the territories in their capacity to raise
revenue, and a high degree of overlapping responsibilities has presented
challenges for all levels of government to work together effectively. The
willingness to cooperate across the three levels of government has waxed and waned
in response to political and financial pressures. At times there has been a
strong tendency for Commonwealth governments to invoke the need for
“cooperative federalism” when often it is less a reflection of a desire for
cooperation, than a determination to assume greater Commonwealth control. Perhaps
not surprisingly, this has created tensions in federal state relations and been
a factor in undermining the power and authority of the states and territories
to be true partners in the federation.
The Senate has asked the committee to 'explore a possible agenda for
national reform' on a limited range of issues, and not to determine what the
outcome in any area necessarily should be. While the committee is conscious of
other constitutional debates taking place at the present time, including
discussions of Australia becoming a republic, amending the preamble and
recognition of Australia's indigenous people, such matters are not within the
inquiry's terms of reference and are therefore debates for another time.
The report will explore and outline a reform agenda to build and
formalise the institutions that support the Australian model of federalism. It
is the committee's belief that the agenda for national reform should aim
squarely at building and formalising an 'architecture of cooperation'
and in so doing preserve the benefits of federalism.
The following chapters outline the most important areas in which changes
could be made to help maintain the effectiveness of Australia's federal system.
Chapter 2 looks at the institutions of Australia's intergovernmental relations,
and in particular COAG. Chapter 3 examines constitutional questions. This
primarily concerns cooperative legislative schemes and the referral of powers,
but also incorporates a broader discussion about the distribution of powers in
Australia's vertical fiscal arrangements, including the vertical fiscal
imbalance, are considered in Chapter 4. Chapter 5 looks at horizontal fiscal
equalisation. Chapter 6 discusses the role and funding of local government. Effective
regional governance and service delivery are taken up in Chapter 7. The final
chapter discusses mechanisms for advancing the agenda of federal reform, other
than those already recommended in previous chapters.
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