May 15, 2014
The Abbott Government has not only broken its election promises, it also has torn up a multibillion-dollar agreement with the state governments with Canberra proposing to cut the funding guarantee for hospitals from July 1. The blame game returns.
This is no tidy-up of the social democratic state--it is making Federal or commonwealth government smaller. It does this with around $80 billion of slashed funding for both health and education (Gonski). This way of cut back the power of the federal government and giving back to the states power that was deemed to have been taken from them forces the states to either cut services or increase taxes. This is small government, Abbott style.
The Abbott Government is simply dumping the job of fixing the hospitals and education back in the laps of the states happening with no advance warning. The Abbott government is washing its hands of any major responsibility -- over the medium term -- for the public health system and for education which it argues, are state responsibilities and must be state funded.
The funding of these services is up to the states, and any extra taxes should be levied by them. They need the extra revenue to pay for the rising health costs, given that the Abbott Government has dumped investing in primary /preventative health primary care, which is a federal responsibility.
What Canberra has done, for instance, is to cease the funding guarantees made under the Gillard Government's National Health Reform Agreement 2011, (NHRA), and by revising Commonwealth Public Hospital funding arrangements from July 1 2017. From 2017-18, the Commonwealth will index its contribution to hospitals funding by a combination of the consumer price index and population growth-- but not for growth costs in the health system, which are greater than the rise in the consumer price index.
Financially starving the states means that the states are being put in a position to ask for the GST to be increased or broadened or both, since the states don’t have the practical capacity to expand their revenue to meet such a gap. Federalism can be seen a compromise between the extreme concentration of power and a loose confederation of independent states for governing a variety of people usually in a large expanse of territory. Australian federalism, since the mid -20th century, is premised on the Commonwealth having the taxing powers. Co-operative federalism assumes that the two levels of government are essentially partners.
Is it all cheap political theatre with the state Liberal governments in on the act? Paula Matthewson argues that:
It's not too long a bow to imagine Abbott holding a private meeting with the Liberal premiers - outside of COAG - to advise that they'd take a haircut in the Budget but would be the beneficiaries of federation and taxation reform. That is, play along and you will be rewarded.The other clue to this being the true state of play is the states protesting that they only want a fairer share of the existing GST pie. This is an unsustainable position if the pie remains static. For every state that gains more GST revenue there will be another that gets less, so the only way for all states to get more (in actual terms) is for the overall pie to grow. And to do that the GST must be increased or broadened.
It may be the case that the Abbott Government's shifting the burden back onto the states by financially starving them without warning is to prepare the ground for for broadening and extending the GST.
However, It also represents a remodeliing of Australian federalism from a co-operative one to a competitive one. The states are seen as sovereign in their own sphere and as competing against one another.
Dual federalism assumes that the two levels are functioning separately. In this kind of state-sovereignty federalism the national and state governments are equally sovereign, each supreme within its own sphere, and the line between them is determined by fixing upon those subjects that must remain within state jurisdiction. The coexistence of the states and their power is of itself a limitation upon the commonwealth's power.
The competition bit arises when the wealthy mining states refuse to share their wealth with the poorer states (eg., SA + Tasmania), so that the latter are forced to run down their health and education services. And that's their problem. There is to be no welfare for the mendicant states.
This is the Commission of Audit's view of Australian federalism.