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Thursday, 1 September 1994
Page: 780

Senator KERNOT (Leader of the Australian Democrats) (12.04 p.m.) —The States Grants (General Purposes) Bill 1994 has some deficiencies, but not in the states rights mantra—suggestions that we are always hearing, and we have just heard yet again, from the Liberal Party, in this case Senator Abetz. What this bill does is to authorise the payment of almost $15 billion of general purpose grants to the states and territories for 1994-95. It also puts in place the agreement reached at the Premiers Conference in March this year. Grants authorised by this bill include financial assistance grants, special revenue assistance grants and $350 million of identified arterial road grants.

  In recent weeks, in the lead-up to the Darwin meeting of the Council of Australian Governments, the states have called for a larger share of the Commonwealth's payments to the states to be given as general purpose grants rather than for specific purposes. General purpose grants now comprise less than half of the total payments made to states. Prior to Labor's taking power in 1983, general purpose grants comprised almost two-thirds of all federal assistance to the states.

  This sort of states rights mantra—and it really is a mantra; it is trotted out and repeated time after time—of the Liberal Party preaches that the rise and rise of specific purpose payments has seriously affected federal relations, with the Commonwealth increasing its powers of interference in state affairs. We in the Democrats have generally disagreed with this response. Too many of us have seen how service provision levels in the smaller states have tended to lag behind service provision levels in the larger states. For example, even after five years of Labor government, Queensland still spends far less on housing, health and welfare services than the other states, forcing volunteer agencies in that state to cope with ever increasing numbers of desperate clients and fewer and fewer resources.

  Over many years, states have shown a far greater interest in big ticket, pro-development economic expenditures at the expense of maintaining a reasonable level of community services. Take Victoria, for example. In that state, Premier Kennett can find the money to procure a grand prix but not enough to keep basic services like schools and hospital wards open. So Senator Abetz should not talk about priorities.

  In short, the growth of specific purpose payments has been necessary because of the failure of the states to order their expenditures in accordance with some national priorities. It is not a matter of centralism or anything else. It is saying that people in Australia have a right to some national standards and those standards should not be determined by which geographical area they happen to live in.

  The states rights mantra rings very hollow, given the poor performance of most states in agreeing to national standards of community service provision and then actually meeting them. At the March COAG meeting in Hobart, the Prime Minister (Mr Keating) laid out four key principles which could provide a useful starting point for a broader national agreement on rearranging federal-state issues. He called for the due recognition of the vital governmental role of the states; for increased cooperation between the Commonwealth and the states for substantial reforms; for a fully discussed reordering of relative roles and responsibilities with a view to better policy outcomes; and the retention of existing Commonwealth taxing powers.

  Unfortunately, the premiers have not endorsed these principles. Indeed, in Darwin a few months later, the premiers—most notably, premiers Court and Kennett—displayed a complete lack of interest in reaching any real consensus on federal reform not involving more power or money for themselves and their states. I believe that it is possible to make major progress on key federal dilemmas like vertical fiscal imbalance, tied grants and fiscal equalisation, within the Prime Minister's parameters, without a precondition of transfer of taxing powers to the states.

  The Community and Public Sector Union, which represents more than 200,000 state government employees, has recently produced what I think is quite a fascinating blueprint for change in federal-state relations. It is called Reshaping Australian Government. In this blueprint the union calls for an end to the banal states versus Canberra power argument and a new commitment for the states and Canberra to agree on key national objectives of government, including a formal commitment to reducing unemployment and then reorganising federal grants and federal-state responsibilities accordingly.

  Under the CPSU plan, tied grants and untied grants would be abolished, with Canberra making single line payments to the states. In return, the states would develop with the Commonwealth national planning agreements, including agreed national outcomes in nine key service sectors. This could place even stronger requirements on the states to fulfil their constitutional responsibilities in key spending areas. It would also allow the Commonwealth to review the effect of increased state taxes and charges on consumers, businesses and its own balance sheet. I include the iniquitous payroll tax in the list of state taxes in urgent need of national review.   The CPSU argues that the growing gap between the needs of citizens and the delivery of state government services could be bridged by developing a citizens service charter, which would identify key service needs, services goals, citizens' rights and duties, as well as viable national benchmarks. While the Democrats might not agree with everything in this CPSU blueprint, it seems to me a fair comment that the employees of state governments are coming up with more realistic reform solutions to federal-state relations than the leaders of our state governments. For those state leaders, it is the personal, individual, political agenda that is always more important. What is urgently needed is a much wider agenda for the reform of federal and state relations than Prime Minister Keating was prepared to suggest or pay for in Darwin.

  The bill includes a condition on the states to the effect that, if the states in turn affect the capacity of higher education institutions to provide support to student organisations, the state grant will be reduced by a necessary amount to fund the student organisation. The Democrats support these provisions. They are necessary to ensure that students are provided with a full range of services and a full capacity to participate in university affairs.

Senator Abetz —So you compel them.

Senator KERNOT —We do not have this bogyman called unions. Student organisations are not unions in the true industrial sense; they are student organisations. We have nothing to fear from students collectively deciding on the services for their university. We are committed to the protection of student organisations in law. They are an integral part of the fabric of campus life and of a holistic education. They provide a wide range of services, including sporting facilities, funding for interest groups and clubs, games rooms, child-care facilities, refectories, cinemas, radio stations and bookshops. We endorse the representative function of student organisations and we endorse their ability to join together for the benefit of the whole—that is the important point. It is timely that this debate occurs while the broad issue of states rights is being debated.

  These attempts by the Liberals to evoke notions of states rights are irrelevant in this case because state governments are not responsible for the funding of universities in Australia. Any interference with that funding represents an intrusion into something Liberals claim to defend: an intrusion into institutional autonomy. To continue to couch voluntary student unionism in language of individual freedom ignores the fact that, as a citizen, one has rights and responsibilities, such as voting, jury service, obeying laws and paying taxes, including rates and charges of all sorts. We are not free, as some speakers seem to be implying, to do exactly as we choose.

  I am a little surprised that the federal government has not placed a further condition on the funding of the states—that is, requiring the states to take enterprise bargaining seriously. It is interesting that the Liberal Party has not thought this a matter of concern. In the most recent version of the accord, the federal government has recognised that the state government employment sector has recorded the slowest progress in enterprise bargaining. The Commonwealth committed itself to seeking to facilitate the funding of enterprise agreements if genuine bargaining was entered into, recognising the Australian public sector agreement as a reasonable model. With the exception of a smaller rise in Tasmania and an arbitrated wage rise in New South Wales, no state government has reached an enterprise agreement with its employees.

  Senator Abetz interjecting

Senator KERNOT —Senator Abetz did not hear me. I said `with the exception of a smaller rise in Tasmania'. There is growing evidence that public sector productivity has been rising—with teachers, nurses, police and public servants managing to do more with less. But states are failing to recognise the significant contributions that their employees are making to improving productivity, and the Commonwealth is failing to use its financial powers to encourage the states to do so.

  The Queensland Labor government, for example, has enjoyed the benefit of $107 million in general purpose grants, which probably should have been paid out in salary increases, and almost $200 million in hospital and specific purpose grants. It is true to say that in Queensland, teachers, nurses, police officers and public servants have funded about a quarter of the Goss government's much admired budget surplus.

  The final issue I want to raise in relation to this bill is to note that this is the first time since 1927 that the Commonwealth has not made available general purpose capital assistance grants to the states. From 1988-89 to 1993-94 these grants fell in real terms by more than 18 per cent. I suspect this fall was part of the government's general rundown of infrastructure spending, which the Prime Minister admitted was done to help reduce the deficit without having to raise revenue through other means.

  It is no surprise to find that the grant pool has become so small as to be insignificant and that the reform of the Loan Council arrangements allowed the Commonwealth to end any pretence that it was interested in whether the states were sufficiently resourced to fund infrastructure spending. This is despite the admission in the 1994 budget papers that most of the fall in public infrastructure over the last three decades has been because of reductions in state and territory infrastructure spending. Most of the fall in state and territory infrastructure spending has been since 1986, when the Commonwealth started dramatically reducing state general purpose grants. It is a case of pointing the finger and nobody doing anything about it.

  It is not a surprise to find that in the 1994 budget total spending on infrastructure fell by almost $700 million or 16 per cent this financial year. This is all part of the $3.4 billion halving of infrastructure spending between 1992-93 and 1997-98, which is the life of the deficit reduction strategy. This is despite the fact that in 1993 government spending on infrastructure in this country had fallen to an all-time, post-war low. I do not agree with the Prime Minister that cutting back infrastructure spending—whether it be grants to the states, funding of GBEs or capital outlays—is a fiscally responsible way to repair public finances.

  We inherited our infrastructure, our public assets, from our parents. Those assets are depreciating. We have to pay the costs of that depreciation with additional public investment to ensure that the assets we leave to our children and grandchildren are adequate for them to enjoy a standard of living at least comparable to our own. But, across the board, skimming on infrastructure spending is making its mark. Our rail system is a shambles. Our hospitals are in urgent need of capital injection. Our universities and science laboratories are often operating with equipment up to two decades old. Short cuts are being taken. Ocean sewage outfalls are a good example. State and local governments are having trouble finding the money to do the job properly—to establish proper tertiary treatment plants using readily available technology to properly treat sewage and to stop pumping raw or semi-treated sewage into our oceans and polluting our foreshores. I do not believe the appropriate answer is to pass it all over to the private sector to take it up simply because the government will not find the money to fund its responsibility to deliver a basic level of quality services and to build on the investments of the past.

  In summary, this bill is deficient. It provides for no quality control benchmarks or guarantees of state services. It provides for no equitable sharing of benefits between state employers and employees. It fails to provide for the future in terms of dedicated infrastructure investment. It fails to provide a reasonable base for the proper conduct of state and federal relations for the benefit of the people of Australia. But until agreement can be reached between the Commonwealth and the premiers on a better way of doing business, we will have to be content with this slightly third-rate financial legislation.