Mr FILING (7:22 PM) —In the few moments remaining in the time before the adjournment debate, I want to make a couple of comments in relation to the Health Legislation Amendment (Health Care Agreements) Bill 1998 . Firstly, I think the matter that has attracted the most interest recently has been the fiasco with the Premiers Conference last week. I would think that, when they go back to their home states, most of the Liberal members—with the exception of the member who has just spoken, the honourable member for Macquarie (Mr Bartlett), who is from New South Wales and who does not have this problem—would keep very quiet when they appear perhaps at their state councils or their various Liberal Party organisational bodies in taking on their local premiers over that particular walk-out, which to many people represented the crisis that is not only affecting the Medicare system and the hospital system but also the whole process of Commonwealth-state fiscal relations.

I just want to touch on the area of cost shifting, a matter that took some time in the speech of the previous speaker, because obviously, as the Bills Digest explains, this bill introduces amendments dealing with a new health care agreement between the Commonwealth, the states and territories—to apply from 1 July 1998; provides that financial assistance will be conditional on adherence to the health care agreement principles and the development of a public patients charter; and establishes the position of a health care commissioner.

Health care agreements are a longstanding method of negotiating the arrangements for funding the health program for delivery in the states and the territories. They rely on the Commonwealth providing financial assistance to the states and territories for public hospitals and other health services, and payment in the past has been predicated on each state and territory entering into agreement if it wants to receive assistance.

In this country we have, despite its faults, one of the finest public health systems in the world. I suppose one could then argue that its main failing is that costs are skyrocketing, and that is quite clearly the principal complaint of the premiers. There would be hardly a person in Australia today who does not know that the state premiers felt that they had to walk out of the latest Premiers Conference over the issue of health sector funding. Equally, few would not have heard the response of the Prime Minister (Mr Howard) that the premiers were acting like kindergarten children and that the Commonwealth would stick to its promises. What they may not have heard or may not know of is the term `vertical fiscal imbalance'. Many people probably do not understand it or do not have much of an idea what it is all about.

The Commonwealth and state governments, however, not only know what vertical fiscal imbalance is but know what the effects are and what has to be done to overcome them. I remember that in 1991, when the member for Mayo (Mr Downer) was trying to pressure Mr Hawke, the then Prime Minister, Mr Hawke defined reducing vertical fiscal imbalance as:

. . . trying to get a closer equation between the responsibility that a particular level of government has for raising revenue and the proportion it has to spend.

At that time he rejected the concept, much to the chagrin of coalition members, many of whom are now ministers in this government.

In fact, in an MPI on the next day, the current Treasurer, the member for Higgins (Mr Costello), lambasted former Treasurer Keating for his reluctance to give the premiers a fair share of tax revenue and for the potential breakdown of the 1991 Premiers Conference dealing specifically with vertical fiscal imbalance and unemployment. In his support of a resolution over the imbalance in financial relations for the states and the Commonwealth, the current Treasurer said:

The longer it carries on, the longer they jeopardise action on the economy and the longer they jeopardise Commonwealth-State relations . . . and we ought to do everything we can to take firm and hard decisions on Commonwealth-State relations. The longer these two titans—

meaning the states and the Commonwealth—

fight it out, the worse it will be for Australia.

That was in 1991 and here we are, seven years down the track, with exactly the same set of circumstances facing the country, and the people looking at that on television watching these events take place in front of their eyes must honestly think, `What on earth is going on?' This is almost a pantomime-type situation: everybody troops to Canberra; the premiers—admittedly, out of habit these days—come in with a claim that they know is likely to be rejected; however, they are looking for some sort of compromise position with the Commonwealth government but, faced with an implacable Prime Minister, they decide, `There is no point in our staying and we are going.'

The area of cost shifting was mentioned by previous speakers. Cost shifting is a serious problem, but it is not only a problem in the case of hospitals; it is a problem in a whole range of community services. One of the reasons for cost shifting is that the states are getting a disproportionately smaller share of economic growth in revenue from the Commonwealth. This is a serious problem. In the case of Western Australia, it has been estimated that over the past five years alone Western Australia has lost about $778 million in shortfalls in what that state considers to be the share that it should have enjoyed in states grants to its budget revenue and expenditure.

That means, in essence, that the sorts of services delivered by state governments that people rely upon, including hospital care, end up suffering as a consequence. I asked a question of the Prime Minister because I was concerned that there had been reports in the West Australian newspaper that there had been little to no criticism by the WA Liberal MPs—senators and members of this House—of the federal government's reluctance to reform vertical fiscal imbalance between the Commonwealth and the states. In fact, there was some comment in the West Australian that they had spent some time `chewing the ear' of the Prime Minister and other senior ministers to try and overcome this particular problem.

When I asked the Prime Minister what I ought to tell constituents in my electorate about the effects of vertical fiscal imbalance on the delivery of what they consider to be obviously important services from the government, he made the statement that he did not think there was a problem. That was at complete odds with Premier Court's comments and at odds with the comments of WA Liberal members who had said they had been spending some time in the backrooms trying to convince their own government of the necessity to reform vertical fiscal imbalance. Obviously, either the senior members of the government were not listening to them or they were not shouting loud enough or they ought to perhaps resort to coming into this place and representing their constituents' interest and making it absolutely clear to their own government that there is a dire necessity to reform the fiscal relations between the Commonwealth and the states.

The whole area of taxation, government revenue, expenditure and states grants is very much in need of reform. I urge the Treasurer, as part of the process of tax reform, to urgently examine the question of vertical fiscal imbalance between the Commonwealth and the states. It is clear that, if this serious issue is not redressed in any tax reform process, we are going to see—no matter who is in government—future occurrences of the ilk of last week's premiers walk-out from the Premiers Conference, an event that would have caused utter perplexity and consternation in many instances in the loungerooms of citizens around Australia as they saw what were the otherwise serious, sensible leaders of their various states doing what people would consider to be taking their bat and walking home because they were being told, in essence, by the Commonwealth that they were not going to get any money, no matter what they said.

I would imagine that the representatives of the various state Liberal parties going home to their various branches are going to be given a fair old serve by their premiers and by their own party organisations to try and do something about this. As I said earlier, this whole process—this bill and the rest of it—is part of a dire need for a thoroughgoing reform of Commonwealth-state fiscal relations.