Chapter 8
Reforming the federation
8.1
As noted in chapter one of this report, this inquiry was established to
'explore a possible agenda for national reform' on a limited range of issues.
It was not established to determine what the outcome of any change should be.
8.2
Even so the committee's work has proceeded on the basis that Australia's
system of federal government is the most appropriate for a country of its
geographic, political, economic and social character and has overall the
support of the Australian community. As noted earlier in the report, however,
over time the foundations of the federation have been eroding causing among
other things cost-shifting between the different levels of government, an
increasing concentration of political and economic power in the hands of the
federal government and growing ambiguity over the constitutional roles and
responsibilities of national, state and local governments.
8.3
During the enquiry, the committee heard considerable evidence that this
process of evolution was less the result of well considered policy decisions
than the ineluctable consequence of a series of rather ad hoc responses to
pressures for change. The consequences of this, as Dr Zimmermann and Mrs Finlay
noted in their evidence to the committee, are that:
[t]he continual expansion of Commonwealth powers has resulted
in a Federation far removed from that originally envisaged by the framers.
Along the way, many of the advantages of federalism have either been lost, or
are not being realised to their full extent.[1]
8.4
Many of the submissions to the enquiry noted that the pressures on the
structures and processes of the federation had become especially apparent over
the last decade or so. As a consequence steps to restore the federation to
health are becoming increasingly urgent. Writing in 2006, the Business Council
of Australia commented that 'no significant [economic] reform is possible
without effective cooperation between the federal and state governments' and
that 'reform of our federal system must be part of that agenda.'[2]
This urgency is, if anything, more acute today. The committee looks forward to
this report contributing to this process.
8.5
While the previous chapters of the report have attempted to identify the
key issues for change on an agenda for reform, in this concluding chapter the
committee explores several ideas and suggestions as to how this agenda might be
advanced with particular attention to the forums most appropriate to the task.
An architecture supporting cooperation and competition
8.6
When approaching the challenge of reform, the committee believes that the
objective should be to build and formalise, in the words of Wanna et al., an
'architecture of cooperation' to preserve the benefits of cooperative
federalism. While offering its broad support for the ideal of cooperation
between the different levels of Australia’s federal system of government, it
notes, once again, that ‘cooperative federalism’ can often be a mantra for the
Commonwealth assuming more power in a field not previously part of its
constitutional authority. Federations need to be responsive to changing
circumstances, but institutionalising greater power in Canberra is only one
possible response to this challenge. The committee recognises that one of the
benefits of federalism can be the competitive tension federalism introduces
into policy making and service delivery. This competitive tension is both
horizontal (between states) and occasionally vertical (between the states and
commonwealth, for example in those areas where there is overlap in
responsibility). Accordingly, the committee sees considerable merit in the
retaining and strengthening of these competitive tensions. This is particularly
true of those tensions generated at Commonwealth level through the exercise of
its distributive funding powers.
8.7
Professor Galligan clearly articulates this relationship between
cooperative and competitive models of federalism.
Competition and cooperation are complementary dynamics in
Australian intergovernmental politics and public policy. Besides explaining the
fiscal federalism and how it has developed in Australia, these two modes
capture the dynamics of political federalism and intergovernmental relations.[3]
8.8
Noting the benefits that follow from some federal competition, the
essential operating model for Australian federalism, however, is cooperative federalism.
This approach commanded widespread support in many of the submissions to the
enquiry. For Wanna et al., this 'architecture' consists of three broad and
interrelated elements:
1. Principles to guide cooperative federalism
2. Supporting legal and institutional arrangements
3. Appropriate cultural practices and attitudes.[4]
8.9
The Business Council of Australia has approached the reform agenda in a
more functional way emphasizing a process of change consisting of the following
steps:
-
Step 1 recognises that the challenges
Australia will face in the coming years and decades cannot be met without
collaboration among our Governments. A first step towards a better functioning
Federation might therefore be to ensure there is an effective vehicle for that
collaboration.
-
Step 2 then focuses on using those
collaborative institutions to redefine the relationship between the
Commonwealth and the States and to ensure responsibilities and functions are
allocated appropriately. Effectively, this means re-invigorating and adapting
the framework under which the two tiers of Government operate.
-
Step 3 then suggests using this redefined framework to
rationalise Government policy development and service delivery to ensure the
Federation operates effectively and efficiently.[5]
8.10
In yet another approach, Dr Zimmerman and Mrs Finlay focus on reform through
the prism of the issues and methods. Accordingly they argue change should
address:
a) The distribution of constitutional powers and
responsibilities;
b) processes for enhancing cooperation between the various
levels of Australian government;
c) financial relations between Federal and State governments;
and
d) possible constitutional amendments.[6]
8.11
When considering the most appropriate pathway to reform, the committee accepts
the general conclusion of Professor Galligan, among others, that not all the
changes necessary to restore health to the federation require constitutional
amendment. Indeed, as many others have pointed out, proposals for
constitutional amendment have a poor record of success in Australia with only
eight of 44 referenda passing in a 110 years of federation. There are no doubt
many reasons for this level of failure, but the committee sees merit in
Professor Galligan’s view that 'Australia's poor referendum record is in fact a
record of poor referendums.'[7]
8.12
The committee is also of the opinion that Australia has not been well
served by the inclination of governments to approach reform in a rather
haphazard way, a tendency exemplified by the long periods of time between
constitutional referenda and the periodic creation, and then dismantling, of
constitutional conventions. The committee believes that the maintenance of the
federal compact in Australia requires a more continuous program of review, one
that makes use of existing (or newly created) institutions, that can manage a
process of change in an orderly way and that is responsive to the constant
challenges confronting federal state relations.
8.13
Having regard to these imperatives, the committee considers that reform
is more likely to meet the needs of the federation if it is conducted in
accordance with three broad principles. First, a commitment to regular but
evolutionary change directed towards the maintenance of the federal compact.
Second, a recognition of the need to pursue change in more creative ways, using
institutions, mechanisms and processes that encourage collaboration between the
different levels of government and encourage a commitment to sustainability,
transparency, accountability and democracy. Third, an acknowledgement of the
value and importance to Australia of sustaining a high level of public
knowledge and understanding of federal state relations together with a
significant level of academic research and teaching expertise within the
tertiary sector. [8]
Implementing the principles of reform
Principle one: a commitment to
regular, orderly change
8.14
The committee recognises that some significant reforms have taken place
in federal state relations in recent years. Among the most notable have been
the creation of the COAG Reform Council, the restructuring of Specific Purpose
Payments and the process recently commenced, of reviewing the formula for
horizontal fiscal equalisation. While the committee welcomes these developments
as reflective of a desire to modernise some of the key management processes of
the federation, it notes that given that they are very recent reforms and in
one case yet to be completed, it is not possible to assess their long term
significance.
8.15
At the same time, however, the committee considers that a pattern of
change characterised by sudden bursts of reform energy followed by relatively
long periods when little or no change occurs is neither an effective,
responsible nor desirable approach to the management of federal state
relations. Aside from the political and bureaucratic pressures created by this
approach to reform, it is not obvious that it necessarily picks up all the
issues that may be in need of attention, such as the consequences of periodic
High Court decisions.
8.16
The committee believes that in a mature federation such as Australia’s,
it should be possible to formulate and implement a more orderly and rational
method of reform. It notes that while no federal system has fully perfected the
challenge of managing change, there are several examples of countries that have
recently managed significant reshaping of their federal systems. Twomey and
Withers believe this is most evident in Europe and provided the following
examples:
In Germany, a federation, major constitutional reforms,
described by the Bavarian Premier as the ‘mother of all reforms’, took effect
on 1 September 2006. The Bundesrat (the upper house of the federal parliament),
which is comprised of representatives of the States (Länder), has had its veto
over legislation reduced in exchange for sole responsibility for certain
matters, such as education, being transferred to the Länder.
In Spain, a de facto federation, health care and social
services spending has been devolved upon Autonomous Communities, along with
increased tax powers. Negotiations continue around giving greater powers to the
Autonomous Communities.
In Switzerland, a federation, the distribution of powers was
clarified by constitutional amendment in 2000 and further reforms were ratified
by the Swiss people and Cantons in a referendum in November 2004. These reforms
included the reallocation of some powers (such as responsibility for people
with disabilities being transferred to the Cantons) and a new formula of fiscal
equalisation between the Cantons.[9]
8.17
Federations, like all forms of government, are shaped in large measure
by their unique constitutional history, institutional structures and their
political culture. None is perfect and applying an overseas model to
Australia’s own unique federal system is unlikely to be successful.
Nevertheless the institutionalisation of a pattern of governance that enables
Australia’s federal and state governments to respond to the need for change in
an orderly, collaborative and timely way is an objective the committee
considers to be strongly in the nation’s interest.
8.18
As noted earlier in this report, the committee recognises that Australia
has some of the mechanisms in place to respond to this challenge. For example,
COAG and the processes that surround it are significant in this respect. But
as the committee noted in its discussion, COAG has some significant deficiencies
in its structure and processes. These need to be addressed if COAG is to be
reflective of the values of sustainability, transparency, accountability and
democracy mentioned above. To this end the committee reiterates recommendation 5
in chapter three of the report proposing that COAG be reformed.
Principle two: a more creative
approach to change
8.19
In addition to the need to develop more regular and orderly habits of
reform, Australia needs to develop a more creative approach to change, one that
employs better mechanisms to both evaluate and implement reform proposals. The
committee is of the view that for this to become a reality Australians need to
re-evaluate the way they think about constitutional change.
8.20
As we have seen, constitutional amendment is not easy in Australia. For
this reason Australians often see it as a mechanism of last resort. This
attitude stems at least in part from problems with our constitutional
architecture and the evolution of our political culture. The committee believes
it would be immensely helpful to managing the challenges of a complex
federation if Australians were able to develop both less distaste for, and a
more sophisticated approach to, constitutional innovation.
8.21
At one level, this might enable sound constitutional reform to take place
more readily. At another it might help to discourage a state of mind that tends
to equate real and lasting change whether in the area of federal state relations,
or in relation to some other matter, as dependant on constitutional amendment. This
state of mind appears to underpin, at least in part the strong desire of some
to have local government recognised in the constitution.
8.22
The committee acknowledges that on occasions governments may have little
option but to seek a constitutional amendment if serious reform is to be
possible. The often invoked means of responding to this need is through some
form of constitutional convention.
Constitutional convention
8.23
In this regard, the committee notes the suggestion in a 2008 report of
the House Standing Committee on Legal and Constitutional Affairs' calling for
the creation of a regular constitutional convention.
8.24
A convention was also one of the recommendations from the 2020 Summit
(in 2008) relating to the reform of the Australian Federation. It was proposed
that there be 'A convention of the people, informed by the Commission [of
experts looking at the mix of Commonwealth, State and Territory
responsibilities] and by a process of deliberative democracy.'[10]
8.25
The importance of a constitutional convention was reinforced by the
Gilbert and Tobin Centre of Public Law in its submission to the committee:
Conventions are an accepted way of debating changes to
Australia’s Constitution and system of government. A Convention on the
Australian Federation would signal serious intent to deal with major questions
concerning the future shape of our federal system. It would also do so in a way
that brought together a range of voices, and focused media and popular
attention on the reform agenda. Importantly, it would also have the potential
to produce momentum for reform.[11]
8.26
The Centre went on to propose a model that uses COAG as the central
coordinating organisation.
It would be important for this Convention to have a clear and
specific agenda. COAG will be the most effective body for framing the agenda,
determining which issues can best be resolved at the Convention and which are
best left for resolution in other forums. The types of matters that should be
placed on the Convention agenda should include many of the matters listed in
this inquiry’s terms of reference, including the division of roles and
responsibilities, fiscal relations, and the position of local government. COAG
should also determine the rules of the Convention, its composition and all
other matters connected with its operation.
The idea of a Convention of the Australian Federation has
widespread support. It has been championed by a broad section of interests,
including the Council for Australian Federation, the Victorian and West
Australian Governments, and the Business Council of Australia.[12]
8.27
The Law Council of Australia endorsed this position,[13]
while Rethink Australia proposed 'citizen deliberations' as a process 'where
public policy, legislation and changes to the Constitution can be meaningfully
proposed and discussed by the wider community.'[14]
Committee View
8.28
It is the committee's view that regular constitutional conventions would
form an important element of more robust processes and institutions necessary
to ensure Australia's Federation is able to respond to changes in society.
Currently, mechanisms to effect changes to the Federation and to the
constitution are developed on an ad hoc basis. Regular conventions with
appropriate resourcing at an interval of about every ten years would help to provide
a regular timetable against which constitutional change could be considered.
8.29
The committee sees merit in the Gilbert and Tobin model for organising a
constitutional convention, but believes that for this to be an effective
process COAG would be required to have the responsibility for planning and
organising the convention once a decade to be written into its mandate. If the
requirement for regular meetings were not included in the mandate, the
committee expresses caution in assigning COAG the sole responsibility for
deciding whether a convention should take place. The committee considers that
progress towards a convention should not be able to be frustrated by a COAG
process that may not support it.
8.30
The committee believes that this matter requires further evaluation
alongside the desirability of permitting governments, other than the
Commonwealth, to raise issues for consideration at referenda.
Recommendation 16
8.31
The committee recommends that propositions for change to the
Constitution be referred for consideration to a constitutional convention and
that responsibility for the agenda and organisation of the convention be the
responsibility of a newly institutionalised COAG.
A federation committee
8.32
While the committee notes that
conventions have a well established place in Australia’s processes for
constitutional reform, it also notes considerable evidence to the inquiry
highlighting the possibilities for change without the need for a constitutional
amendment. Professor Brian Galligan is very clear on this point. He argues
that:
The most promising avenues for reforming Australian
federalism are political rather than constitutional ones. This is contrary to
the approach of constitutional lawyers and others who, when they perceive a
problem with Australian federalism, reach for the Constitution and set about
devising constitutional remedies. Constitutional change is an unlikely vehicle
for federal change, however, and in any case most of what needs reforming can
be done via sub-constitutional politics.[15]
8.33
The committee considers that one of the challenges to undertaking timely
and successful reforms in the area of federal state relations is the absence of
a credible, well established pathway for ensuring that proposals for change
receive considered evaluation. COAG could assume this role, but the infrequency
of its meetings, its dependency on government bureaucracies for support (even
after reform), its primary role as a body to implement change and the potential
conflicts of interest that may arise as federal, state and local governments
evaluate proposals for reform, all raise doubts as to its appropriateness.
8.34
During the enquiry the committee was presented with a proposal to assist
in addressing this problem. As part of a continuing and reinvigorated approach
to managing the challenges of federation it was suggested that a new
parliamentary committee be established. The committee would be designed to be
an integral part of the processes of governance in federal state relations.
8.35
The most developed articulation of this proposal came from Professor
John Uhr. He suggested a senate standing committee with responsibility for the
state of the Australian federation. Its status as a senate committee would
recognise the chamber’s unique constitutional, though underdeveloped, role as a
states’ house. Professor Uhr suggested the committee might have three key
responsibilities. It would:
[h]ave a watching brief to report regularly on the
constitutional and institutional development of Australian federalism,
particularly the changing balance of powers and responsibilities shared by the
Commonwealth, the States and the Territories...
[be
required] to hold an annual inquiry into COAG. The annual COAG inquiry could
contribute much-needed parliamentary oversight and accountability to
Australia’s most prominent example of governmental power-sharing...[and]
given Australia’s role as an outstanding federal democracy in
the Asia-Pacific region, the proposed standing committee could sponsor an
ongoing regional dialogue among
elected representatives and parliamentary bodies on the political management of
decentralised and devolved national governance.[16]
8.36
Dr Zimmermann and Mrs Finlay similarly proposed the establishment of a
Senate standing committee to examine the state of Australian federalism,
arguing that it was an appropriate function for the 'states house'.[17]
Committee View
8.37
The committee considers that the establishment of a new parliamentary committee
has the potential to be a valuable and significant addition to the
institutional architecture now required to manage Australia’s modern
federation. While the committee understands the logic of establishing the new
committee as a senate committee, it considers that the likely remit and burden
of work of the committee requires that it be supported by both houses of the
parliament. It also believes that for the committee to have the status and
credibility necessary to succeed in its role, it should be established as a
joint standing committee of the parliament, though one supported
administratively by the senate and with a senator serving as its chair.
8.38
The proposed committee could be established under a standing order that
allowed it to undertake a range of responsibilities including to:
-
report periodically on the activities of COAG;
-
take references from either house of parliament on matters related
to the management of federalism;
-
examine legislation relating to federal state relations,
including proposed referrals of power discussed in chapter 3 of this report;
-
evaluate the constitutionality and desirability of any cooperative
schemes for the delivery of policy between the Commonwealth and the states; and
-
explore the necessity for proposals for constitutional amendment involving
the distribution of powers between the Commonwealth and the states.
8.39
The committee envisages that the new parliamentary committee might
commence its work by looking at several of the matters raised in earlier
chapters of this report, including proposals to make COAG processes more
transparent, consideration of proposed intergovernmental agreements, and the implications
of the decisions in Re Wakim and R v Hughes for cooperation
between the federal and the state and territory governments.
8.40
While the committee recognised there could be considerable value in
Australia playing a role in promoting a dialogue on devolved democracy among
the countries of the Asia-Pacific region, it is concerned that such a role
might be a distraction from the conduct of the committee’s core
responsibilities. It suggests that the Senate Foreign Affairs, Defence and
Trade References Committee might undertake a short enquiry into the merits of
this proposal and the way it could be carried forward.
Recommendation 17
8.41
The committee recommends the establishment of a Joint Standing Committee
of the federal parliament to be administered by the senate and with a senator
as its chair. The committee should have a mandate to conduct its own inquiries
and be assigned a range of oversight responsibilities that would enable it to
assume a significant and integral role in helping to manage Australia’s modern
federation. This should include the responsibility to provide regular oversight
of COAG.
Recommendation 18
8.42
The committee recommends that the Senate Foreign Affairs, Defence and
Trade References Committee undertake an inquiry into the merits of Professor
Uhr’s proposal that Australia sponsors an ongoing regional dialogue among
elected representatives and parliamentary bodies in the Asia Pacific on the political management of decentralised
and devolved national governance.[18]
Principle three: promoting
knowledge and understanding of Australia’s federal system of government
8.43
The committee received considerable evidence during the inquiry that the
challenges of managing Australia’s federal system of government were not well
understood within the Australian community.
8.44
The committee notes that there is considerable work done in primary and
secondary schools in providing school children with an introductory
understanding of issues around Australia's federation and the Australian
constitution. Organisations such as the Museum for Australian Democracy, the
Parliamentary Education Office in Parliament House and the Australian Electoral
Commission have developed extensive resources relating to federalism and
provide onsite school education programs. Australia's federation is also a
component of the history strand looking at key figures and events that led to
Australia's Federation including British and American influences on Australia's
system of law and government. Federalism is also considered as part of civics
and citizenship education courses.
8.45
In contrast, opportunities for improving understanding of federal issues
in the post-school population are much more limited. This is despite several
parliamentary inquiries into the topic. As Professor Brown pointed out, this
committee has been traversing well trodden ground. He placed this inquiry in an
historical context:
The Committee’s work follows in the footsteps of reviews of the
functioning of the Federation such as undertaken by the Peden Royal Commission
on the Constitution (1927-1929) and the Parliamentary Joint Committee on
Constitutional Review (1956-1959)...along with the work of the Australian
Constitutional Convention (1973-1985).[19]
8.46
More recent inquiries include those by the House of
Representatives Legal and Constitutional Affairs Committee, namely: A Time for Change: Yes/No? (2010), Reforming our
Constitution (2008) and Harmonisation of legal systems within Australian
and between Australia and New Zealand (2006).
8.47
A recurring theme across these inquiries is the necessity to engage the
Australian public more effectively in debate around the nature of Australia's
federation. The 2008 report referred to above held that:
We need to inspire Australians to engage with the
Constitution – to recognise its importance as the founding document for our
nation, to seek reforms so it is a relevant document that reflects our current
nation, and to debate how it might shape our nation into the next century.[20]
8.48
Former Senator Andrew Murray, responding to the Australian Government's
September 2009 Electoral Reform Green Paper, Strengthening Australia's
Democracy, saw community engagement in terms of a 'dialogue with the
people'. He argued that:
A holistic approach is needed. It is difficult to improve the
economic or the social entirely without also improving political governance.
That means reassessing the constitution, the separation of powers, a republic,
whether the federation should stay and if it should in what form, and the
powers states and the commonwealth should each have. It means reassessing how
power is acquired and restrained, who has power over what, how money is raised
and spent, and by whom.
To achieve lasting reform, anticipate a ten year struggle as
for the original Constitution, to allow time for dialogue with the people.
To ensure momentum what is needed is a standing elected
constitutional convention, serviced by a permanent secretariat, and with a
budget to allow for full engagement and dialogue. This could be supplemented by
a university based institute for constitutional change, producing discussion
papers and fostering public awareness and debate. This is serious business and
needs a serious approach.[21]
8.49
With respect to the challenge of generating a deeper knowledge and
understanding of the importance of the Constitution, some submitters focused on
targeted education campaigns around specific referendum proposals. The preferred
model for the Australian Local Government Association, for example, is
an education campaign which is aimed primarily at informing
voters in advance of a referendum vote...[including] a national program run by
the Australian Electoral Commission which focuses on the role of the
Constitution, the mechanism by which it can be changed and the role of
individual voters. This should be designed as a factual campaign involving
pamphlets and television and radio advertisements. It should be approved by
Parliament and the Auditor-General to ensure its acceptance as legitimate
public advertising.[22]
8.50
As well as hearing evidence that there was a need for Australians to be
better educated about their federal system of government, the committee was
informed of the limited attention being given to high quality university
research on the subject. While Australia has a strong tradition of academic
research in the field of systems of government and many distinguished
individuals working on various aspects of the subject, several of whom appeared
before the enquiry, this expertise is spread unevenly across the country.
8.51
The Committee heard evidence that there is currently no university based
research and/or teaching centre concentrating on the academic study of Australian
federalism. Australia lacks any institution of sufficient size and capacity to
undertake high level academic research into the nature and challenges of
Australian federalism. The committee was surprised and disturbed to learn of
this deficiency in Australia’s intellectual capital.
8.52
This was not always the case. The inquiry was told that until relatively
recently, the Australian National University's Federalism Research Centre
played an important role in raising awareness of issues related to the
Australian federation. This research centre, became defunct when its funding
was discontinued A subsequent proposal for the establishment of a research centre
under the Centre of Excellence scheme sponsored by a group collaborating with
Professor Brown was not funded.
Committee view
8.53
The committee considers the absence of a centre dedicated to research
and/or teaching of federalism is a serious deficiency in the nation’s capacity
to comprehend fully the increasingly complex challenges of managing a modern
federal system of government. An institution within a public university and perhaps
jointly funded by the Commonwealth, states and territories is necessary to provide
an important academic adjunct to Australia’s federal system of government. In
his submission Professor Brown offered one possible model for such an
institution.[23]
Recommendation 19
8.54
The committee recommends that funding be made available by the federal,
state and territory governments for the establishment within an Australian
university of a centre for the study and dissemination of ideas relating to
federalism and Australia’s federal system of government.
Recommendation 20
8.55
While the committee acknowledges the important work done by organisations
such as the Museum of Australian Democracy and the Parliamentary Education
Office in improving Australians' knowledge and understanding of Australian federalism,
the committee nevertheless considers there is a need to promote a deeper
understanding of federalism in the wider post-school community. The committee recommends
that enhanced funding be made available by the federal, state and territory
governments to appropriate institutions to promote this deeper understanding.
Recommendation 21
8.56
The committee recommends that the Australian Research Council identify
Australian federalism as a priority area for research funding.
In Conclusion
8.57
By way of general conclusion, the committee considers that there is a
pressing need for Australia to pay far greater attention to ways in which it
manages its federal system of government. It believes there is particular need
to recognise that the processes and structures used to undertake reform within
the federation is in several material ways outmoded and unresponsive to the
needs of modern Australia. Three of the recommendations in this chapter,
namely those proposing the conduct of regular constitutional conventions, the
establishment of a standing committee of the federal parliament, and the
rebuilding of Australia’s academic research capacity in the area of federalism,
would all make, if implemented, a major contribution, to maintaining the health
of the Australian federation and to further developing a considered agenda for
its orderly reform.
Senator Russell Trood
Chair
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