Submission on The National Independent Inquiry into the Reform of the Australian Federation (Federal Reform Inquiry)
I am Katerina Burtaev, an independent Australian Public Law expert with a strong interest towards federalism in Australia as I am directly affected by the democratic process of decisions by the state and national government. I believe that Australia’s implementation of federalism is a stark contrast to the flexible and efficient structure which is used worldwide. The weaknesses of our current system are perpetuated by increased yet ineffective centralisation. As such, I support the view that the current States should be maintained, but with a new and clearer division of powers and responsibilities between the Commonwealth and the States. I believe that any problems with federalism lies in its practical operation in Australia, rather than the fundamental principles of federalism itself.
Federalism contains many benefits, including the division of centralised power, customisation of policies, and cooperation of jurisdictions. It is a system of governance which promotes diversity and removes the physical and social separation between government and society. The loss of such goals leads to a federal system which contradicts the needs of our nation, hence, a reform which reinstates the benefits of the system and caters to our modern society is most ideal.
This submission will consider the current state of governance in Australia, the ideal state of governance in theory, and then conclude by evaluating practical solutions for our broken federalism. This discussion of strengths and weaknesses will then determine how improve the current system into one with a clearer separation of responsibilities and powers.
THE CURRENT STATE OF GOVERNANCE IN AUSTRALIA
The Premier of NSW, Gladys Berejiklian, says the Commonwealth “desperately needs a massive overhaul” due to the flawed federal system currently implemented. Australia has been experiencing an increasing trend towards the centralisation of power which contradicts the world-wide favouritism of federalism. The Productivity Commission declared that our federal system is not only defined by a high centralising trend, but also vertical fiscal imbalance. Both aspects depict the problematic state of Australian federalism and what must be targeted in order for improvement.
The movement away from decentralisation has been encouraged primarily by the High Court of Australia’s (HCA) decision in NSW v The Commonwealth (2006). The HCA had a broad interpretation regarding section 51 (xx) of the Constitution, which gives the Commonwealth Government the power to enforce laws regarding constitutional corporations. Previously this power had a narrow interpretation, however, it was debated whether this provision could be interpreted broadly such that it included the power to introduce laws regarding employees of constitutional corporations. The judgement of a broad interpretation resulted in the Commonwealth having full control of legislative powers despite the text and structure of the Constitution. Hence, the interpretation allows the Commonwealth to legislate State responsibilities and further centralises power with the Commonwealth.
Vertical fiscal imbalance occurs due to the Commonwealth retaining more financial power whilst States are unable to raise sufficient funds to support their responsibilities. The Commonwealth has always received more revenue under s 90 of the Constitution which asserts them power to levy excises and earn more revenue with respect to their responsibilities. Despite s94 of the Constitution which provides for any excess revenue to be distributed between the States each month, the Commonwealth does not do this.
Hence, States only receive funding through GST revenue which is paid under a need basis to provide services, and through tied payments which have conditions imposed on them by the Commonwealth, effectively dictating the way the funding is used. Consequently, the fiscal imbalance has only further accentuated the need for federal reform in Australia.
A GOOD SYSTEM OF GOVERNANCE
A theoretical standard of a good system of governance must be established in order to have an ideal political system for Australia, which will act as criteria against which alternative solutions can be evaluated. An optimal system should include checking concentrated power, coordination and diversity and choice.
Checking Concentrated Power
Federalism requires all authorities to share their power, hence, enforcing democracy. Justice Kirby states “[federalism] is a feature that tends to protect liberty and to restrain the over-concentration of power”. Consequently, the division of power within federalism is an important stimulant for the implemented distribution of power.
The checking of power prevents the Commonwealth from having legislative power over all matters. Moreover, the existence of several governments leads to a greater pressure for governments to publicly justify their actions, resulting rational decision-making. Thus, under federalism, power is decentralised and is exposed to scrutiny by opposing jurisdictions.
Coordination
Co-operation of States is needed to achieve national outcomes. COAG and the anti-terrorism laws illustrate the appropriately scaled balance of governance between the States and Commonwealth and how even in a decentralised system, it is possible to centralise when the situation arises. For example, in 2002 the Commonwealth Government introduced anti-terrorism laws and asked for referrals from the States due to section51 (xxxvii) of the Constitution. The States allowed the law and the power to amend it in the future, however, amendment must again be approved by majority of the States and Territories. Thus, when the Commonwealth purported to introduce more laws it had to seek approval from the States and Territories, which then resulted in an agreement made whereby States and Territories included new safeguards. Hence, coordination between States, Territories and the Commonwealth is crucial to achieve national harmony and support by different jurisdictions.
Alternatively, another example of ideal coordination is the Council of Australia Governments (COAG). COAG was established in 1992 to conduct reforms in a cooperative manner. Notably, in 2006 COAG implemented a National Reform Agenda to promote collaborative federalism, and Michael Keating observed that under the agenda, the need for collaboration with states and policy input was even more crucial to achieve their policy goals. The Council for the Australian Federation followed from this in 2006 to achieve greater cooperation and to encourage harmony and consistency of laws amongst the States, Territories and COAG. As such, a system of governance which pursues collaboration between different levels of governments is effective as some issues require cross jurisdictional governance; some decisions cover a local scale whereas other cover a national scale.
Diversity and Choice
Individuals tend to prefer a system of government where an option to support a certain political party at the State level and an alternative party at the Commonwealth due to the multiple approaches towards issues. Generally, citizens favour a certain party at the Commonwealth level due to its approach towards defence and managing the economy, however, will prefer another party at the State level due to its control of education. As such, a centralised government would result in a standardised resolution of issues.
Not only does federalism allow choice between political parties, but it also promotes diversity between jurisdictions. When states have freedom to impose their supposed ideologies, families can physically move to a better or more appropriate jurisdiction if they feel as though their current system is inadequate to have access to alternative resources. The process of inter-state migration in Australia has greatly increased due to diverse policies enacted by state governments, hence, further justifying the strength of federalism in Australia. Choice between different levels of governments also enables individuals to have multiple methods of approaching parties. Oftentimes, local matters will not be addressed at the Commonwealth level, thus, by raising the issues in an alternative level of government they can still be discussed in the public domain. Consequently, different levels of government under federalism leads to a greater chance of improving policy flaws.
As such, the criterion of checking power, coordination and diversity is optimal and are features of a political system which is favourable for Australia. As such, all solutions to be considered must reasonably satisfy these aspects in order to justify a change in our nation.
WHY MAINTAINING THE STATES IS IDEAL
As established, the current federal system in Australia is flawed and outdated. As such, two solutions can be proposed in order to change the status quo, these include: creating a unitary system or maintaining the states with a clearer division of powers. The alternative argument will be rejected, in order to further support why a federal system is the best solution for Australia.
A unitary government is one where all power is centralised in the Commonwealth Government, effectively reducing the separation of power and responsibilities between alternative levels of government. In this political system, checking concentrated power is not conducted as there are no jurisdictions with the authority to control or debate any tyrannous actions. As such, decisions are not exposed to public scrutiny nor debated by the local representatives of less vocal areas. Additionally, coordination between states would also not occur as all decision-making power is held by the Commonwealth, hence, consideration of the States and Territories is not required. Lastly, diversity and choice would be limited as there would not be any variation in the nation, rather, standardised policies will be applied to all of Australia. It can be argued that a standardised application of policies is better, however, “all Australia citizens have access to a minimum level of basic services, beyond that, there should be room for choice.” Nevertheless a unitary government would result in fast and efficient implementation of policies and change, as coordination with other jurisdictions is unnecessary. Consequently, any required policy changes can be introduced to target issues immediately.
In contrast, maintaining the states will satisfy the criteria completely. By having a system with multiple levels of government, citizens have access to various jurisdictions and methods of political processes to suit them. Moreover, an increase in local parties and governments will inherently require cooperation as a consensus cannot be achieved otherwise. Political and legislative changes cannot be made without agreement, otherwise it risks the smooth and civil operation of the nation. Furthermore, the distribution of power avoids tyranny or centralised power. Hence, a division of responsibilities between the Commonwealth and States leads to a democratic and liberal method of governance.
Although there is merit to both solutions, a unitary system of government does not meet the function of checking concentrated power to avoid the potential abuse of power. Despite meeting other criteria for a good system of governance, control of concentrated power is the most important as it is a key stimulant to achieve a clearer division of roles and responsibilities between the States, Territories and Commonwealth. Consequently, this leaves no doubt that the option to maintain the States and redesign their roles as being the superior solution. Perhaps federal reform can be achieved by targeting one of the barriers to federalism in Australia- fiscal imbalance. Taxes on goods can become State ambits and form part of their plenary powers, this then leads to greater roles for the States. The Commonwealth would also have decreased fiscal power, which would then decrease Australia’s fiscal imbalance. However, a barrier to this is that constitutional change is required in order for a clearer division of responsibilities.
Nevertheless, the need for change in Australia’s system of governance has been stressed. The fundamental issues in our ‘federalism’ prevent society from experiencing the benefits of decentralisation. As such, I beg the Federal Reform Inquiry to consider this submission in order to avoid further national disappointment.
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