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Wednesday, 31 March 1999
Page: 4816

Mr ROSS CAMERON (10:29 AM) —Members on this side would acknowledge that the member for Melbourne is one of the more thoughtful, reflective and erudite members of the opposition. As a consequence, he is one person on the other side to whom I listen carefully whenever he makes a contribution in this place. But I have to say that that last contribution was the most half-hearted, limp-wristed, incoherent, faint and unconvincing performance I have ever heard him deliver. There is a simple reason for that: he does not believe it. He has been saddled with the difficult task of walking into this place, sent in by the leadership team, to argue a position in which he has absolutely no confidence or conviction.

We as members are often called into this place to speak on one piece of legislation or another which is essentially a housekeeping measure, an administrative change, a finetuning—some necessary but nonetheless uninspired legislative intervention. Very occasionally—perhaps once or twice a decade—we come into the chamber to speak to a piece of legislation which genuinely touches on a moment in Australia's history, which touches on a step forward, a break with the past—a truly innovative, creative, exciting development in Australia's public life. The A New Tax System (Commonwealth-State Financial Arrangements) Bill 1999 is legislation which I would put into that category.

I would have loved to have been in this place in December 1983 when the former government, to its very great credit, legislated for the floating of the Australian dollar. There was a moment at which the Australian nation turned away from its inward preoccupations and looked out to the rest of the world and set off on a path from which it knew it could never return, and thank goodness it did. As a consequence, we saw the inevitable deregulation of the financial industry in Australia; we saw the breaking down of centralised wage arbitration, which simply could not survive once that initial moment in history had taken place.

Today we stand on the brink, on the verge, of a reform which has been a running sore in the life of this nation since the time of Federation. What we have seen is the gradual erosion in the autonomy, the dignity and the self-reliance of the states and a weakening of the spirit of federalism. That has been concentrated on an attack on the ability of the states to raise their own revenue. The member for Cook preceded me by saying that this bill represents the most significant change in federal-state financial relations since Federation, and he is absolutely correct about that position.

It was M.K. Ghandi who said that the greatest expression of power is to give it away. This bill is in that tradition. It is the Commonwealth saying to the states after decades—in fact, four generations—of taking power from the states and centralising power in Canberra, `Today, in a gesture of peace, in a gesture of justice, in a gesture of faithfulness to the spirit of the Constitution, we hand back so much of that which we have abrogated unto ourselves.'

In a few moments time I want to touch on a couple of the remarks made by both the member for Hotham and the member for Melbourne, but first I wish to develop the question of vertical fiscal imbalance. This is one of the terms about which perhaps some of my constituents in Parramatta would say, `This is government jargon which reflects how out of touch all of you people in Canberra are.' Vertical fiscal imbalance is just talking about the extent of the discrepancy in the ability of one level of government to raise the revenues it requires to fund its own expenditure. Where you get an increasing imbalance or dichotomy or divergence between the capacity of local government, state government or federal government to raise the revenue it requires to deliver its own services all manner of inefficiencies and abuses come into play.

In Australia we have seen a further exacerbation of this imbalance with the High Court's decision in 1997 in relation to the state tobacco franchise taxes, which were struck down as unconstitutional. That happened because when the Commonwealth took exclusive responsibility for the raising of income tax in 1942 during the Second World War and never gave it back, the states were forced to get increasingly ingenious at raising revenue through indirect means and often with a questionable constitutional warrant for those fiscal adventures. We saw that again in the decision to strike down the state tobacco tax in 1997.

The member for Melbourne was correct in saying that Australia has a very substantial problem with vertical fiscal imbalance. In fact, it has the worst problem of any federation in the world as far as vertical fiscal imbalance goes. I would like to quote a paragraph from a paper by Denis James, of the parliament's own research service, entitled `Federal and state taxation: a comparison of Australian, German and Canadian systems' of November 1997. Mr James says:

Australia is characterised by the largest degree of VFI—

vertical fiscal imbalance—

between its tiers of government of any federal nation. In 1996-7 the Commonwealth raised $130.7 billion in revenue, representing 76% of total Cth and State general government revenues. On the other hand, Cth outlays for its own purposes were only 58% of total general government outlays. As a result, in the same year the Cth provided the states with grants amounting to $34.6 billion. . . Overall in 1995-6 Cth assistance comprised 45.8% of state and territory revenues.

The results of that imbalance are several, one of which is cost shifting whereby the states, because they do not have the revenue base to fund their own expenditure, look for ways to push more and more of their constitutional responsibilities underneath the fiscal branch of the Commonwealth. So, for example, in the roads area you will have, in some instances, a deliberate neglect by the states of funding for key arterial roads in the hope that the Commonwealth will then reach out and classify that stretch of road as a federal road—as a national highway—and thereby the states avoid having to reach into their own revenue to fund that expenditure.

I recollect a former life, as I follow today the member for Cook, and there is a certain closing of the circle, if you like. As a humble minion on his staff when he was one of Australia's most effective and successful ministers for roads, I remember the frustration he experienced in trying to map out the forward projections on expenditure for the RTA. Funding a major piece of road infrastructure required a forward capital program of three, four or five years if you wanted to get good rates from the contractors. But the problem was that the Commonwealth was funding roads on an annual budget cycle, so you simply never knew from year to year how much funding was going to be available. The result was that the contractors always fleeced the governments because we could only ever contract short stretches of road and we could never make strategic planning decisions. This piece of legislation today again takes this revolutionary step forward to hand back to the states certainty of funding.

In health you get cost shifting. The states have responsibility for public hospitals and the Commonwealth has responsibility for Medicare, so you get the public hospital administrators trying to find the most ingenious ways to push their costs under the umbrella of Medicare. This bill touches on the question of local government funding. You have situations where local governments, in order to generate further revenues, will approve residential housing zonings in areas which are flood affected, and then they will go to the Commonwealth and seek for the Commonwealth to provide funding to mitigate the damage caused by the flooding.

All of these kinds of inefficiencies flow from uncertainty of funding and from vertical fiscal imbalance. Aside from cost shifting we have a culture of blame shifting, and this is perhaps even more damaging. So what you see at each year's annual Premiers Conference and meetings of the Council of Australian Governments where the Commonwealth comes together with the states is that, instead of having a paternal or family spirit, they degenerate into a slanging match, an undignified spectacle of name calling, finger pointing and, for want of a more decorous expression, `arse covering'—

Mr Emerson —Dear, oh dear.

Mr ROSS CAMERON —where nobody wants to take responsibility for their decisions. The people who suffer are political leaders as a class because the public get so cynical and they say, `When are these guys going to take responsibility for their own actions instead of, constantly, the states blaming the Commonwealth and the Commonwealth blaming the states?'

The member for Melbourne again raised the chestnut about the certainty of the 10 per cent rate. I just want to give you four reasons for which the people of Australia can be guaranteed it will stay at 10 per cent: (1) this act provides that there can be no lifting of that rate without the unanimous agreement of states, territories and the Commonwealth; (2) it will be supported by the Commonwealth-state intergovernmental agreement; (3) it would be political suicide for the Commonwealth or for any individual state to advocate a rise in the tax; (4) and this is the most critical, the Commonwealth does not get the revenue. It all goes to the states, and that is why this is such a dramatic and historic step forward. This is a measure I strongly, wholeheartedly and with passionate conviction commend to the House, and I urge other honourable members to do likewise.

Mr DEPUTY SPEAKER (Mr Jenkins) —Order! Before calling the next speaker, I caution the member for Parramatta to in future be a little more decorous about the word he was searching for. Whilst I was not willing to intervene on this occasion, I caution him to be more careful.