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Trends towards centralised government in Australia: what are the implications for the delivery of programmes and services? Address to the Roundtable on Federation, IPAA National Conference, Perth.



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David Borthwick

Secretary, Australian Government Department of the Environment and Water Resources

IPAA National Conference, Roundtable on Federation

Burswood Convention Centre, Perth

19th September 2007

Trends towards centralised government in Australia: what are the implications for the

delivery of programmes and services?

Today, I would like to reflect on the historical division of Commonwealth-State responsibilities,

examine how the balance of Commonwealth-State powers has shifted during the years since

federation, and pose some questions about the implications for the delivery of programmes and

services.

Division of Commonwealth and State responsibilities

The Australian Constitution sets out the boundaries of law-making powers between the

Commonwealth and State governments. The division of responsibilities set out in the Australian

Constitution is underpinned by the principle of subsidiarity; that is, a central authority should only

perform functions which cannot be performed at a more immediate or local level. This principle is

one of the tenets of federalism and has served us well. It is found in several Constitutions around

the world and, more recently, formed the basis of the 1992 Treaty of Maastricht and European

Union Law. The principle is not just a historical relic, it has maintained its relevance over time.

In line with the subsidiarity principle, the Australian Constitution gave the Commonwealth

Government powers for a range of specific matters including defence, immigration, and

international and interstate trade. The States retained a general power to make laws for ‘peace,

order and good government’. In practice, this meant that the States had powers over areas such as

education, health and land management.

Trends towards centralised government

The Australian Constitution is not a static document; how it is interpreted by the High Court has

evolved over time. With increased mobility of people and ideas, our views on what issues should

be handled at the national level have broadened (and the High Court’s view has evolved as well).

Correspondingly, the Commonwealth has drawn on its existing Constitutional powers (which

haven’t been utilised to their full extent) to exert greater influence across a number of areas. A

recent example is the Commonwealth’s introduction of the ‘Work Choices’ reforms. The High

Court upheld these amendments to the Workplace Relations Act 1996, which were based primarily

on the Constitutional power to legislate with respect to corporations. This judgment surprised

some people. It shouldn’t have. The Commonwealth has long held a view that through resorting to

corporations, interstate trade and external affairs powers, it could do more in this and in other

areas. For the most part, Commonwealth governments have chosen not to press the envelope.

In some rare cases, the States have been prepared to confer some of their powers on the

Commonwealth to facilitate a national approach to issues. An example being the States’

agreement to the Commonwealth Corporations Act 2001, which created uniform corporations

laws across all Australian jurisdictions.

These shifts of power to the Commonwealth have often been contentious, but they have generally

been consistent with the subsidiarity principle; there are strong arguments for why these issues are

best handled at the national level.

Trends towards a more centralist government in Australia are particularly evident in the

environmental field. At federation, powers over land management remained with the States. At

this time there wasn’t a consciousness about environmental protection and what it meant. As

environmental consciousness has increased, the Commonwealth has controversially used its

Constitutional powers to intervene in ‘State business’ on a number of occasions: firstly, in 1976 to

prevent export of sand mined on Fraser Island, using international trade and commerce powers;

and, notably, in 1983 to stop the construction of the Franklin Dam in Tasmania, relying on

external affairs (and other) powers. The Franklin Dam case set a precedent for the use of

international treaties to legislate domestically on a number of fronts.

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Since this time, the Commonwealth’s interest in environmental matters has evolved from case-by-case interventions to something more sophisticated. This evolution reflects an improved scientific

understanding of the inter-connectedness of the environment we are managing. A prime example

is the introduction of the Commonwealth Water Act 2007 to reform water resource management in

the Murray Darling Basin. The Murray Darling Basin crosses four States and one Territory and

needs to be managed at the basin level not the jurisdictional level. However, consensus style

decision-making by the Commonwealth and basin States has not served to adequately manage the

joint resource and a ‘circuit-breaker’ was required.

The Commonwealth has not only gathered greater control via legislative means but, perhaps more

significantly, it has used financial instruments to make a mark on a range of issues traditionally

within the States’ domain. It has done this via specific purpose payments (in nominal terms, total

specific purpose payments have increased by 72% since 1999-20001) and, more recently, via

direct payments to individuals or communities (bypassing the States altogether). I think that, over

time, we will see much more of this.

Since Federation, and by various means, more and more responsibility has been acquired by the

Commonwealth, either through decisions of the High Court, referral of power, assertion of power,

or through the exercise of financial power. This trend is unlikely to reverse and the

Commonwealth Government is likely to acquire more responsibility over time. This won’t always

be the Commonwealth’s choosing, as the national government will continue to be drawn into

issues of State responsibility by the community. If there is a problem to be ‘fixed’, the community

no longer accepts that it only has one court of appeal and expects Commonwealth engagement.

This, perhaps, is in part because the history of the Commonwealth’s own interventions, and dual

responsibility for funding or service provision in many areas, has raised community expectations.

Implications

What are the implications of a steady acceleration of responsibilities towards the Commonwealth

government?

Firstly, is it financially sustainable? Or will the Commonwealth’s revenue base effectively cap the

extent to which the Commonwealth can move into areas traditionally serviced by the States? At

1 Budget Paper No. 3 Federal Financial Relations 2007-08

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first blush, one would think that, with an ageing population, the Commonwealth’s income tax

revenue will decline at a faster rate than the States’ revenue base (which includes GST).

Accordingly, spending would, over time, swing in favour of the States. However, this is unlikely

to happen any time soon. The strong growth in the terms of trade and, as a result, strong income

tax collections, puts the Commonwealth in a healthy fiscal position. Nevertheless, if the

Commonwealth is to take a greater interest in major areas of State responsibility (public hospitals,

education or infrastructure provision) it would, in the longer term, need to have a look at

respective revenue bases, including some of the GST revenue.

Secondly, what are the implications of more centralised government for the way the

Commonwealth and the States administer programmes and deliver services? It could be argued

that some of the Commonwealth’s recent interventions mark a departure from the subsidiarity

principle; that is, the Commonwealth is taking on responsibility for programmes and services that

it is not best placed to deliver. However, the counter argument is that, in the current

communications age, physical proximity doesn’t necessarily make a government better equipped

to administer a programme. The Commonwealth Government is certainly capable of devising

ways and means of managing complex projects and issues at a local level; for example, through

direct delivery, engaging third party providers, utilising local government, or establishing

regionally-based groups. Furthermore, just because the Commonwealth Government assumes

responsibility for a particular service, it doesn’t mean that the service delivery model must be ‘one

size fits all’; different needs in different parts of Australia can be catered for. However, we do

need to be aware of the risk of losing a culture of innovation. Differences in services and policies

between jurisdictions are not prima facie a bad thing and each case needs to be looked at on its

merits. New and innovative initiatives are often borne out of different jurisdictions trying to find

solutions to similar problems.

I would contend though, that the current division of responsibilities between Commonwealth and

State governments is not operating effectively. Key areas of split responsibility, including health,

education and transport, account for large chunks of GDP in their own right, and are critical for a

well functioning society and for enhancing long term productivity growth. All areas are crying out

for attention, yet no single jurisdiction is responsible.

The pace of work and modus operandi of the responsible ministerial councils operating in these

areas is unlikely to make the necessary breakthroughs. Perhaps reform through COAG offers the

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best prospect of success, but that too has been tried many times without substantive

breakthroughs; reform is hard, unanimity of view is difficult to forge, financial implications can

loom large, and jurisdictions are inherently suspicious of one another’s motives and bona fides.

The most likely prospect is that we will continue to muddle through, with the Commonwealth and

States testing ideas and perspectives in the court of public opinion on a case-by-case basis.

In conclusion, I am an advocate for good government, one which delivers sensible programmes

and policies beneficial for Australia’s economic, social and environmental progress. By and large,

the principle of subsidiarity has served us well in that regard. That principle though, is an evolving

concept. It has evolved in ways which has ceded more responsibility to the Commonwealth.

Nevertheless, we should work to clarify the boundaries of responsibility and, where there is shared

responsibility, determine how jurisdictions can best work with each other in delivering better

services.

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