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GST, federalism, state bashing « Previous | |Next »
March 26, 2005

Doesn't this strike you as odd.

In the late 1990s the Howard Government praised the GST on the grounds that it gave financial autonomy to the states in our federation. This reform, it was said, saved federation, as it gave the states their own growth revenue base.It counter balanced the centralists giving the Commonwealth income tax powers in the 1940s. This fiscal dominance effectively crippled the state's financial autonomy. So the GST was a progressive tax in a federal sense.

Now the Howard Government is engaged in state bashing across a wide front (health, education & vocational training, infrastructure), and it openly desires to do away with the states.

A strange reversal isn't it. And it has happened so quickly---in five years. This grab for centralized power should make Australian conservatives very uneasy. However, I doubt that they will passionately protest on the streets. They are a wimpy lot. I reckon that they will pretend that they are all for responsible government British style and not federalism American style--and that have been all along.

So why repudiate federalism? What is going on? What is Howard up to?

Is it just party political politics arising from the Coalition being in power in Canberra and the ALP being in power in all the states and territories.

Is it a case, as Laura Tingle suggests in the Australian Financial Review, that the commonwealth and states need to bash each other to legitimate their activities, or their lack of action?

Is it a case of the old state righters being closet centralists. Or being reborn as fervent centralists?

Or is a case of the nationalists working to bolster and enhance national power to deal with the effects of globalization on the Commonwealth's power?

You can see that Howard & Co are chafing at the bit at coming up against the federal limits on the power of the Commonwealth. The States are not going along with the Commonwealth's centralizing push. So far federalism is working as it is continuing to provide checks and balances on political power.

Will the checks and balances of federalism hold under the impact of globalization?

I just wish that the ALP states would become a little more active in looking after Australian citizens, would loosen the death grip of their ideologically fixated Treasuries, and stop being negative when it is suggested the states ought move beyond the mere administation of the economic machine. The states are doing very little apart from producing media releases and plans.

Surely with the ALP being in power in the states, they will rethink their traditional assumptions about making the Commonwealth the over-riding body of government in Australia and then acting to reduce any impediment to Commonwealth power?

Can we expect those on the left to start rethinking their assumptions that the Commonwealth should be based on a UK-style of responsible government system. When will they start to question their taken-for granted beliefs that all power, money and authority is located in Canberra with the states being mere administrative units?

| Posted by Gary Sauer-Thompson at 2:23 PM | | Comments (5)


Government suffers from having an inexhaustible thirst for more revenue. Money is how the more powerful government hooks the smaller ones. In the US with the "No Child Left Behind" act, the federal government added new costs, hassles and a new layer of beuarocracy to State education. Yet only Utah threatened to throw the money back at Washington DC. Utah caved in too. They caved in for 133 million USD. Federalism as a principle is not even worth 133 million to the states in the US.

The Commonwealth funding the states is bad. Whether it is grants or GST; it allows too much meddling in State politics from the Commonwealth level. As you pointed out, the High Court has been centrist, the Commonwealth constant in its demands for state responsibilities and the States weak in asserting their rights.

You can hardly call Costello berating the states over much-needed infrastructure renewal co-operative federalism, can you. Even though all the states have been neglectful on this, one would have expected Costello and the states to work together rebuilding.

Two points about the centralizing thrust of Australian federalism:

National unity has been emphasised at the expense of diversity during the 20th century.

The centralist government thrust in Canberra can be read as anti-democratic.

Howard's conservatives have fallen back into the old nationalist cause, which argued for a strong national government with flexible powers and which rejected a strong Senate as the protector of States' and democratic rights. Combining responsible government(ie., executive dominance) with a strong Senate remains anathema to this crowd.

Howard is just like Keating really. Or Gough Whitlam for that manner.

Gary, I would argue that the Commonwealth governments have been indistinguishable in this respect. The first commonwealth majority government (Fischer) put four referendums IIRC on the table to increase federal power; covering trade, commerce and industrial relations. Unsurprisingly, they all failed. No voter in their right mind would give a politician more power.

It has been money which has been used to usurp the States. The Lang vs Lyons face off was because the Commonwealth under-wrote state loans. Fortunately back then NSW and the Commonwealth had rival power. I could not see Carr being able to rival Howard for power. The breadth and size of the commonwealth government dwarfs the NSW government for power now. Back in 1932 it was a 50-50 bet. Now it is a gone conclusion.

If we go the path of a republic; and wrap up constitutional rejuvenation into the republic then a clause prohibiting the sharing of revenue is necessary IMNSHO. I would also ensure fiscal autonomy between governments by explicitly closing off any avenues for the mixing of revenue collecting and dispersal.

Federalism requires the states to be powerful as well, enough for at least one or two to rival the Commonwealth Government. Kind of like a Shays Rebellion, but with Cold War like deterrence through obvious power. NSW and Victoria offered that until 1942 when the feds got their hands on the income tax pie.

If the Commonwealth can have its wings clipped then groupings like the Eastern, Southern and Western economies can have an influence on the Commonwealth, rather than the simple-minded top-down collapse to the Commonwealth we have now.

This isnt to exclude the States of criticism. They have been weak as well. It is important they are strong, politically and economically. The States have to understand for us there is liberty in diversity. If NSW turns into a police state then Victoria, South Australia, the Northern Territory etc instantly become desirable places to move to.

Nation-states limit immigration heavily so if the Commonwealth government turns into a police state or tyranny, there is no way people can leave. Some will be able to, but the majority will be stuck under the bad decisions of the one and only Commonwealth government. It is far easier to move between states if one of them falls into tyranny or despotism.


If we go back to the constitutional conventions of the 1890s it would seem that you would be in favour the federal constitution rather than a unitary national constitution.

Apparently this was federal model was unanimous amongst the delegates to the 1891 and 1897-1898 Conventions. The appeal of the federal model was that it enabled the creation of a new sphere of national governance while preserving the established colonial systems of self-government including local government.

However, it was not be. Those arguing for a strong national government--eg., Alfred Deakin, H. B. Higgins and Isaac Isaacs---ultimately won out. The reach of Commonwealth power was then consolidated through the decades of the 1940s and 1970s prompted initially by the modernizing dictates of national defence and subsequently by postwar reconstruction and nation building.

That's how I understand what has happened in the 2oth century.

Presumably, the judgement of those who adhere to the 1890s federal position is that Australian federalism has undergone such a sustained process of centralisation that it can scarcely be called a federal system any more.

Hence the need to roll back the extent of centralizaton. That will not come from the ALP, nor from the Coalition. Maybe from the effects of globalization?

Are there not different kinds of federalism? Kinds that reflect the different weightings given to political power of the state and commonwealth? Can we think of a continuum here rather than either or??

Gary, I agree our current system is having difficulty being recognized as a federal system. It is more like an anti-confederation with regional fiefdoms. I think the centralisation stems from the natural state of government which is to accrue more power to itself. I also believe that the Westminster system is poor in stopping that entropy toward the centre.

As to rolling back the centralisation, I think our best bet is constitutional rejuvenation through a Republic. Canada had an informal constitution spread across several Bills and Acts. They took the oppurtunity to rejuvenate their constitution in the 1980s - adding a Charter of Rights in the process.

There is not a history of constitutional innovation in Australia. We have a strong history of electoral innovation, but at the constitutional level we have nada. It shows too, our constitution is a fiction in relation to the reality of our federal government.

Queensland recently rejuvenated their constitution into one document, similar to what the Canadians did. But there is no innovation in it. WA, SA and Tas all have informal constitutions based on UK Bills. We just dont have that innovative constitutional history. Bloggers will probably have to give us that.

Everyone is to blame for the present centralism though. The feds covet the states responsibilities. The states give up their responsibilities willingly. Voters returned the Howard government on the issue of the GST. It would be nice to see a Federalist become Premier somewhere and stake their claim against the Federal Government. It probably also would require a constant awareness of federalism issues as well in the the court of public opinion.

Like you said I cant see the Liberals or Labor letting it happen. Another truism of government seems to be that once they get hold of a responsibility, they refuse to give it up.