Tag Archives: federal-state financial relations

COAG April 2015: Australian federalism business as usual

Federalism is based on the principle that sovereignty is divided between national and territorial governments but there are different ways in which power is divided between these two tiers of government. These include a confederation where there is no agreement by the territorial governments to cede authority to the national government; coordinate federalism where the national government and the territorial governments operate in separate and discrete spheres of jurisdiction and cooperative federalism where the national and territorial governments are supposed to reach agreement and engage in collaborative joint action to deliver policy outcomes (Singleton et al, Australian Political Institutions 10e, Pearson Australia, Frenchs Forest, p. 95).

The Australian federal system as practised today functions within a framework that bears a resemblance to the principles of cooperative federalism to the extent that the Commonwealth and the states and territories do reach agreement on some policy issues. The Council of Australian Governments (COAG) is the peak forum where the prime minister, state premiers, territory chief ministers and the president of the Australian Local Government Association meet to deliberate on policy issues that require their agreement. These heads of government are supported at the meetings by their relevant ministers and public service officials.

The politics of Australian federalism discussed in Singleton et al Australian Political Institutions, 10e pp 116-125 include the centralization of federal-state financial relations that has developed over time because of the Commonwealth government’s access to an increasing pool of revenue compared to that received by the states. This is always a bone of contention not only between the Commonwealth and the states and territories but also between individual states and territories seeking to maximise their share of the ‘money pot’ on offer.

The April 2015 COAG meeting continued this pattern with differences between the Commonwealth government and state and territory governments over the distribution of federal-state finances. Western Australia had been exerting pressure on the Commonwealth for an increase in its share of the allocation of the GST (Goods and Services Tax) (see blog of 30 March 2015, ‘Will the Abbott government increase the GST?’. All states and territories were demanding the Abbott Commonwealth government restore the $80 billion it had cut from their funding for schools and hospitals in the May 2014 federal budget and if that was not forthcoming threatening to restore state taxes abolished with the introduction of the GST (Coorey, P. 13 April 2015, http://www.afr.com/news/politics/states-threaten-to-bring-back-old-taxes-as-new-gst-war-erupts-2015041301mjmzy).

Disagreement among the states and territories was also a factor with the other premiers and chief ministers determined that Western Australia’s push for a revision of the GST distribution would not succeed (Kenny, M. & Harrison, D. 17 April 2015, http://www.smh.com.au/federal-politics/political-news/states-spoiling-for-fight-at-coag-over-schools-hospitals-and-gst-20150416-1mmjqv.html). All except Western Australia signed a joint letter opposing any compromise on the current distribution of GST revenue (Owens, J. & Lewis, R. 17 April 2015, http://www.theaustralian.com.au/national-affairs/coag-meeting-state-premiers-gather-in-canberra/story-fn59niix-1227303446035).

Cooperative federalism was also evident in the agreements reached on tackling significant issues, including ‘a national cooperative effort to reduce family violence and fight ice usage’ and ‘new levels of collaboration to increase our efforts to counter violent extremism and terrorism in Australia’. It was stated that the mechanism for federation reform would require ‘the states, territories and Commonwealth to work together to meaningfully address these long-term funding pressures and also look at structural reforms to ensure services can be delivered in the most effective way’ including the Tax and Federation White Papers being developed by the Commonwealth government (COAG Communique, 39th meeting, 17 April 2015, http://www.coag.gov.au). The states’ and territories’ insistence that the Abbott government’s $80 billion cut from state funding be part of those discussions has the potential to put some strain on the cooperative process (Grattan, M. 17 April 2015, http://theconversation.com/more-than-one-elephant-in-the-coag-meeting-room-40381).

The rhetoric of cooperative federalism was evident in the proposal by prime minister Abbott to bring together the state and territory leaders in a COAG leaders’ retreat without officials to discuss ‘the whole question of the fundamental reform of the federation’ (Abbott, T. 17 April 2015, http://www.abc.net.au/lateline/content/2015/s4218911.htm). Of course, it remains to be seen whether agreement on such a significant issue in which the Commonwealth, states and territories, each protecting and their own interests would be forthcoming.

The politics of Australian federalism more often than not has been fraught with disagreement when a prime minister has had to deal with states and territories headed by parties in opposition to the politics of the Commonwealth government of the day (Singleton et al, ibid. pp 125-126). The Abbott government, however, secured agreements at April’s COAG meeting which included state and territory leaders representing both Coalition and Labor governments because each had an intrinsic interest in progressing the agreed policy outcomes.

The flaws in the cooperative ideal induced by the basic and essential political interest of state and territory leaders intent on securing the best deal for their own jurisdictions was highlighted by the Western Australian premier’s extreme expressions of his discontent with the Commonwealth and the other states and territories over their refusal to countenance any change to the current distribution of the GST. While ‘leaders were crooning the same reassuring tune’ at the post COAG news conference ‘about their constructive talk and cooperation’, the Western Australian premier ‘declared he must have been at a different meeting’ adding ‘the elephant in the room is the GST and that’s what this COAG has been significantly about’ (Grattan, ibid.)

COAG creates the forum for the display of cooperative federalism but it also exposes the flaws in the system when states and territories and the Commonwealth fail to agree. It must be borne in mind that COAG meetings last for a mere 2-3 hours and provide the state and territory leaders with ‘the theatre’ for posturing and protesting about the inadequacies of the Commonwealth’s financial largesse. The ongoing work undertaken by Commonwealth, state and territory ministers and their supporting bureaucracies provides the basis for much of the cooperative work and consultation that helps maintain Australia’s system of federal-state relations as a functioning polity, whatever its flaws. Without this it might deteriorate into a situation described by Tony Abbott as ‘feral’ federalism: ‘Whether it is an unbuilt freeway, dilapidated railway, needy schools, overcrowded hospitals or inadequate support services for people in trouble, the demand goes up for federal assistance and the finger of blame is swiftly pointed at Canberra. Welcome to feral federalism, where state governments try to fund the infrastructure and services which are their particular political priority but demand the Commonwealth help for everything else that needs to be improved’ (Abbott, T. cited in Western Australian, 28-29 June 2003. See Singleton et al ibid. p 128).

If Western Australian premier Barnett’s threat to disengage with the rest of Australia came to pass the outcome would be a fractured federation (Alexander, D. 16 April 2015, http://www.abc.net.au/news/2015-04-16/alexander-how-to-carelessly-lose-a-federation/6396802). There is no secession clause in the Australian Constitution (Singleton et al, pp 453-473). In 1933 a successful referendum supporting Western Australian secession was rejected by the British government on the grounds that it did not have the legal power to do so. Some useful information about this referendum and the issues it raised about the capacity of a state to secede can be found at: Foley, G. 2013, ‘”Westralia Shall Be Free” – The Western Austrailan Succession Referendum in 1933’ 4 April 2013, State Records Office Western Australian Government, http://www.sro.wa.vg.au/blogs/westralia-shall-be-free-western-australian-secession-referendum-1933; Williams, G. 11 May 2010, ‘Too rich, too weak to succeed seceding’, http://www.smnh.com.au/federal-politics/political-opinion/to-rich-too-weak-to-succeed-seceding-20100510-uoma.html; Musgrave, T. 2003, ‘The Western AustralianSecessionist Movement’, Macquarie Law Journal, Vol. 3, pp. 95-129.

Dr Gwynneth Singleton
22 April 2015