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Thursday, 18 November 1993
Page: 3218


Senator KERNOT (Leader of the Australian Democrats) (9.59 p.m.) —The State Grants (General Purpose) Bill gives effect to the arrangements agreed to at the July Premiers Conference and Loans Council meeting for grants to the states for the 1993-94 year. As Senator Kemp said, the bill authorises payments of general revenue grants, including financial assistance grants, arterial road funding and special revenue measures. The total amount of assistance provided by the bill is estimated to be $14.4 billion in 1993-94.

  The necessity for parliament to approve this legislation is obvious. Without the annual cap in hand performance of the premiers and without the begrudging transfer of huge sums of money from the federal to the state level of government, the federal system in this country would collapse. In many respects this is because of the gross imbalance between the revenue raising powers of the federal government and the spending needs of the states. In 1992-93 state and local governments collected 33 per cent of government revenue in this country, but accounted for 48 per cent of total government expenditure. About 40 per cent of all state revenue comes from federal grants, and this raises the key question that federal grants play in state budgets.

  Figures show that the federal government over the last decade has required far greater expenditure constraints from the states than from its own sources. The University of New South Wales estimates that, in the seven financial years from 1985 to 1992, the level of financial assistance from the Commonwealth to other levels of government fell by 18.9 per cent in real terms. When one takes into account population growth on a per capita basis, the real cuts were even more severe. Federal government outlays were not required to be cut by amounts anywhere near this magnitude. Indeed, they grew in real terms. In 1991, faced with a collapsing revenue base, the premiers, as part of the then in vogue new federalism debate, persuaded the federal government to agree to guarantee that financial assistance grants would not be reduced in real terms for three years. The government has stuck to this commitment and the bill before us tonight marks the last of those three years of maintained grants.

   The forward estimates in the budget papers suggest that the grants will continue to be maintained through to 1996-97 in real terms. That remains to be seen. I think there is a bit of a question mark over the future. Treasurer Dawkins has set up a committee headed by the good old Industry Commission—this is the revamped one, the new John Dawkins Industry Commission—to pursue an additional $3 billion in state government budget savings by forcing each of the six states to reduce their levels of services through benchmarking to that of the lowest serviced state.

  The sting is in the various budget papers and the regular lectures from Canberra to the states on their reluctance to increase their own taxes. This ignores the fact that state taxes tend to be highly regressive. Most state taxes take the form of flat fees or levies which do not take into account capacity to pay. By far the largest single state tax is payroll tax, which is frequently cited by business as a major disincentive to employing more people. So what the federal government has been telling the states is to collect more regressive taxes and more taxes on employment. I do not think that in the middle of a recession—or at any time—that is good public policy.

  In all of this debate about figures we can lose site of the real issue. I think the real issue is that at the moment, under our federal system, states deliver many of the basic services to the community—services such as education, hospitals, social services, roads and so forth. I honestly think that we should take the opportunity between now and the end of this century to examine the appropriate powers of the different levels of government in this country, because something is not working.

  Nevertheless, at the moment states have a particular role. They are required to fund their services from a declining pool of federal funds and from a narrow and regressive tax base. The result has been two-fold: funding of basic services has been stretched to the bone and state budget deficits, with the exception of Queensland, have risen significantly. Employment in the state budget sector has been dramatically pared back over the last decade as Canberra has attempted to shift its budgetary problems to the states.

  Earlier in the week I met with representatives of the public sector unions. They provided me with figures which show that in the three years from 1991 to 1994 more than 145,000 jobs will have disappeared from the state public sectors. Job cuts of that magnitude in the middle of a recession are really quite staggering. The Keating government, aided and abetted by state governments of both political persuasions around the country, have deliberately increased unemployment by reducing by an excessive amount—not an reasonable amount, an excessive amount—the number of government jobs. To make matters worse, they have borrowed hundreds of millions of dollars to pay for redundancy packages. So we have been adding to our national debt to increase unemployment.


Senator Kemp —Let's raise taxes and have superannuation levies!


Senator KERNOT —That is good public policy, too! We support efforts to make the public sector more efficient and to improve productivity. Productivity, however, should be measured against better quality standards delivering better services. I do not think that the loss of 145,000 jobs can be called an efficiency measure. It can be called slash and burn, but finetuning productivity it certainly is not.

   What I am increasingly concerned about is that a decade of Canberra enforced cutbacks on state governments is now seriously affecting the ability of the states to deliver basic services. Take education. Surveys by the Australian Teachers' Union have shown that in the last four years class sizes right across Australia are starting to rise. For example, almost half of early childhood classes now have more than 25 students, up by a third from four years ago. The proportion of senior secondary classes with more than 25 students has almost doubled. The worst increases have been in Victoria. With class sizes rising and subject choices falling, teachers are now noticing a marked decline in school retention rates, particularly in Victoria's western suburbs. Yet the redundancy packages which fuelled the fall in teacher numbers in western Melbourne, Labor's so-called heartland, have been funded willingly by the Keating government.

  Welfare services have been even more stretched at the state level. We all know that welfare spending is usually the first area to be cut by the states because their clients are least able to lobby and to defend their interests. Data from the Commonwealth Grants Commission shows that in the four years to 1992, spending on state welfare programs per capita fell in real terms in five of the six states. In Queensland per capita welfare expenditure has actually fallen by an incredible 35 per cent.

  The gross inadequacy of current state welfare services is highlighted by the two incisive reports by Brian Burdekin, one into mental illness and one into homelessness. In both reports he identified a gross inadequacy in back-up and support services for two groups least able to fend for themselves. The mental health report exposed the failure of the deinstitutionalisation program. Mentally ill patients have been thrown out into the community with virtually no back-up, and they simply cannot cope. Something like 50 to 70 per cent of the overnight stays at St Vincent de Paul hostels are now estimated to be mentally ill people who cannot fend for themselves in the community. Burdekin's youth homelessness report displayed a similar unmet need for community services.

  We like Australia to do well. We like Australia to be the best at things. Well, Australia has the highest teenage suicide rate in the industrialised world. This can only be seen as a cry for help from a troubled generation. Yet the Burdekin report concludes that there is an overwhelming picture of inadequate funding, inadequate training, inadequate in-patient care, inadequate coordination between agencies, research and data collection and an inadequate commitment to the establishment of prevention and intervention services.

  Youth suicide and suicide attempts have increased alarmingly over the past 20 years. This risk is exacerbated for rural youth, particularly young males, young prisoners and homeless youth. There is a desperate shortage of child and adolescent psychiatric services, despite the fact that 10 to 15 per cent of children and adolescents show significant psychiatric disturbance and one per cent of them need urgent treatment.

  For young people with acute adolescent problems there are around 30 beds in New South Wales and Victoria, virtually none in Queensland, none in the public sector in South Australia and none in Western Australia. According to Mr Burdekin, there are serious deficiencies in even the most basic services for young people and state and federal budget priorities have been identified as the most fundamental problems. I will say that again: state and federal budget priorities have been identified as the most fundamental problems. One witness stated:

In the 1990-91 Victorian Budget, resources allocated to child and adolescent health services were reduced. One facility was actually closed, and it was the only facility in the State which provided an inpatient service to the late adolescent group aged 16-20. Other facilities had staffing and general running cost cuts.

. . . These cuts have been made worse by the reduction in other services for children and adolescents in general health, education, welfare.

An immediate funding boost for state and regional mental health care for young people is imperative to ensure appropriately trained staff, improved administration, community crisis services, effective in-patient services and out-patient treatment, as well as suitable adolescent accommodation, education, employment and training, and social and recreational activities for those recovering from mental illness. Otherwise, as Burdekin recognises:

The human rights of disturbed and at-risk young Australians are being seriously denied by such glaring omissions, with often tragic consequences for the individuals and families involved.

Another report by Justice Fogarty into Victorian child protection services showed that resources are now so sparse that 56 per cent of cases reported could not be followed up for over a week—key delays at a key time in 56 per cent of cases. Fogarty noted that the state child protection service had virtually abandoned the care of adolescents, due largely to budget constraints.

  The state run public hospital system is having difficulty coping with demand as well. The proportion of health expenditure funded by the public sector decreased from 71.8 per cent in 1984-85 to 68 per cent in 1991-92. This decrease is entirely due to a fall in the Commonwealth proportion of health funding. For example, it has meant in Queensland—a state with an exploding population—some 2,000 jobs disappearing last year from the public health system in the middle of a massive health budgetary crisis.

  These are just some of the effects of the cutting of 145,000 jobs from the state public sector. I think the policy is crazy. True, the public sector needs to aim for the highest possible level of efficiency, but not at the price of withdrawing services from the mentally ill, from disadvantaged youth and from other groups who simply are unable to defend their interests.

  Public sector unions have raised what I think is an excellent suggestion for the Prime Minister's unemployment working party. They have argued that priority to job creation should be given to work in the community sector. Many of our pool of 982,000 unemployed have been storing life experience skills which could easily be put to good use in providing support services. Any attempt to reverse the growing disparity between demand for community services and the supply and delivery of those services must be a step in the right direction.

  The necessity for this bill to be passed highlights the inadequacies of the Australian federal system. There are huge inadequacies. I just wish that we as a nation would grapple honestly and intelligently with them, instead of going on, year after year, knowing where the problems are and doing nothing about them.

  I have called for an extension of the current debate about the constitution to include the issue of the role of the states and the appropriate levels of power of our existing three tiers of government. But before that debate continues, we need to seriously address the accumulating evidence that Canberra has been exporting its budgetary problems to the states. This is now affecting the delivery of basic government services and forcing increasing reliance on highly regressive taxes.

  It is time that the interplay between the fiscal policies of the federal government and the fiscal policies of the states was properly debated. The cap in hand, heart on sleeve premiers conferences have become a joke. They have failed to resolve the problem since World War II. It will require a strong statement by the community that enough is enough before the bureaucrats and then politicians get out of their trenches, abandon the posturing and start talking rationally. So, with some misgivings, I support this anachronism of a bill.