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The Forum > Article Comments > Federal system needs new deal > Comments

Federal system needs new deal : Comments

By George Williams, published 6/3/2006

Australia needs to take a fresh look at how its federation works.

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Queensland is the only State where the population in the regions exceed the population of Brisbane, we are a truely decentrealised State, which carries different challenges for government.

The SE corner is condensed so is easier to provide infastructure to it than for example North Queensland. That said it appears to those of us in North Queensland that the further from Canberra you live, the less you get, the further from Brisbane you live the less you get.

Fraser and Hawke were the last of the PM's who took the whole of Australia into consideration. Our section on the national highway is a goat track compared to southern roads, our section from Sarina to Cairns [1,000klm's] has been ignored since 1985, when it was reccomended for upgrade. Governments used to plan in advance for infastructure, up here our infastructure is run down. The last piece of major infastructure we had was 20 years ago from Hawke, the Burdekin Falls Dam.

Federation does need a revamp and I like some of the suggestions so far, however it must be remembered that if the Commonwealth{joke only} distributed the funding it should [$17 billion projected budget-surplus] fairly amoung the States, who are the service providers {Commonwealth does not employ nurses, teachers etc} there would be very little shortages of service.

Sadly a State government cannot force a Federal Government to allocate fair funding, there lies the problem, does anyone have a solution?
Posted by SHONGA, Monday, 6 March 2006 4:46:27 PM
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George Williams says in his article:
"Over the 2005-2006 financial year, NSW and Victoria will subsidise the other States by $3.4 billion. It has been estimated that NSW alone will raise $13.2 billion in GST revenue and receive only $10.4 billion back, amounting to a subsidy to other States of $2.8 billion."

According to the West Australian treasurer, WA is a net contributor when considering the entire picture:

http://www.mediastatements.wa.gov.au/media/media.nsf/0c079b992e7e607a48256a5a0016e16b/377504b7cfa53e78482571240024159e?OpenDocument

Here is a quote from the media release:
"Other States talk up their GST contributions, but stay quiet on the total picture," he said.

"If you take all Commonwealth taxes and revenues sourced from WA, less what is given back, we are net contributors to the Federation of about $3billion per annum.

"This equates to about $1,500 for every Western Australian, more than double that of either NSW ($720 per capita) or Victoria ($520 per capita). All the other States receive a net subsidy."

So who is right?
Posted by FlipTop, Monday, 6 March 2006 9:45:49 PM
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No, Faustino, you have it wrong. About 60% of capital expenditure is outside the Brisbane statistical district but the district of Moreton (Gold and SS Coasts) takes this total for SEQ to 55%. There is also some very significant fudging and slight of hand in the capital budget, particularly in relation to the commercial activities of corporatised government power, rail and port infrastructure which is located outside SEQ but which is located where the coal is, on a purely commercial basis, and is fully funded by those commercial activities.

Other items, like the capital cost of classrooms, are allocated to regions even though the classrooms are all demountables manufactured in Ipswich. Ditto for public housing in the bush. This type of "regional capital outlay" doesn't create a single regional job and is highly misleading.

Take all these items out of the budget and the actual regional share of the discretionary capital outlays is well below 35% of the pie. Furthermore, the capital budget is only 10% of recurrent expenditure and this is heavily concentrated in SE Queensland.

The normal proportion of "Head Office" type departmental expenditures etc are in the order of 20% of total outlays and this produces a very serious reverse multiplier in regional economies.

Do the numbers. If 15% of GDP is State Government expenditure and 20% of that is not spent in the regional economy then the regional economy must grow by 3% a year just to mark time. So take out your calculator, key in 0.97 X 1 and hit the "=" key twenty times (for 20 money cycles) and you are left with only 0.5437 of what you started with. That is what centralised government does to regional economies if there are no compensatory transfer payments.

And as the regions make up a third of Qld, this leakage of regional GDP to the South East means that Brisbane can produce no growth of it's own and still grow by 1% per annum.

A new regional State capital will keep the money circulating in the region and reduce the need for transfer payments.
Posted by Perseus, Monday, 6 March 2006 10:04:18 PM
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Something doesn’t add up here. Perseus is putting forward coherent points of debate, albeit sophistry. He is not being rude to the person with whom he finds disagreement!! Seems as though someone else is writing this stuff for him. If it is his, then why does he take such an extraordinarily different (simplistic and offensive) approach on some other OLO threads?

One of the most fundamental problems with Perseus’ desire to keep states “fully sovereign” and monies flowing only internally is that wealth differences will develop between states or regional governmental units, because sources of wealth are unevenly distributed. Now we can’t have that. One country – one quality of life. A reasonably equal distribution of wealth is necessary and any barriers by way of the implementation of new states and resultant restrictions on wealth flow will only serve to make some richer and others poorer, which is a recipe for civil strife.

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Shonga writes; “our section from Sarina to Cairns [1,000klm's] has been ignored since 1985, when it was reccomended for upgrade.”

Sorry to disagree with a fellow North Queenslander. As one who has travelled that highway frequently for 20 years, I can say that there has been a great deal of work done on it. In fact roadworks (upgrades) were constant a feature, which only this year seems to have stopped.

I don’t think infrastructure in NQ is run down compared to SEQ, and certainly not in per-capita terms. In fact, one of the major arguments against a separate state for NQ has been that we in the north would receive way less than we do now….if SEQ kept all its wealth to itself and NQ had to look after itself.

I think the distribution of Qld state tax and other government revenue is fairly well distributed on a per-capita basis, with some skew towards the less populated areas, especially those areas with growth such as Townsville and Cairns. Obviously SEQ gets the lion’s share, but this is perfectly fair and reasonable, as it is where the vast majority of people reside.
Posted by Ludwig, Monday, 6 March 2006 11:32:34 PM
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Some comments on the thoughtful contributions so far.

Coyote: Appoint delegates (as per Constitutional Convention prior to 1999 Republic vote) via proportional representation and by voluntary vote. You would thereby get all interests represented without the filtering effect of uninterested voters.

Michael T: There is a specific reason why federations were originally chosen as forms of government (as compared to unitary govts. such as the UK or NZ). That is: that peoples who march to the beats of different drums can still come together for reasons of common defence, trade, and immigration. When you say “it is crazy to have different laws in different parts of the same country” are you aware of how much legislation gets passed in a partisan manner? Abortion, VSU, Unfair Dismissal Laws, Child Maintenance, Capital Punishment, sell off of public utilities, aid to private schools, etc. Legislation passed relating to every one of these issues leaves approximately half the concerned Australian population disgruntled. With federation in its fullest form, if you vote at the ballot box and lose, you can then vote with you feet and win. Look at America: if you’re a ‘string-em-up’, gun nut you move south to Texas, a dope-smoking, organ selling libertarian you move west to California or Washington and if a bleeding-heart liberal to Massachusetts. Everybody wins.

Ludwig: Yes, wealth differences between states will develop. If it is due to natural resources such as oil or minerals then it might be unfair for those state residents who happen to there to solely benefit and in such cases, taxes derived should go to federal coffers. However if some states become rich due to the sweat and enterprise of its residents then that is a different story. If you are the type of person who hates the rate race, pollution, rush hour traffic and who retreats to Tasmania to enjoy a more laid back lifestyle hugging trees whatever, then it’s a bit hypercritical to expect the mugs you left behind still suffering in the big smoke to help maintain your lifestyle that you had become accustomed to.
Posted by Edward Carson, Tuesday, 7 March 2006 1:18:27 PM
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Excuse me, folks, if you haven't already guessed, Ludwig is my blogstalker, and as per norm, he opens with defamatory material. He is actually employed by the Qld government and hence, the familiar lack of evidence behind his opinions. He thinks it is all as it should be, not a single case of official denial anywhere.

The simple facts are that every government department has a head office. The functions in these head offices account for at least 20% of departmental outlays. And these outlays are all made in the SE corner because that is where all of the head offices are located.

Consequently, the GST revenue that is collected from regional businesses is not all spent in those regions. And this represents a leakage of GDP from the regions to the SE Corner. And the only way to ensure that this leakage is plugged is to locate a new set of head office functions in the regions so that the funds will remain in circulation in that region.

Fred Argy's calculations on the comparatively poor returns on regional infrastructure must be based on the assumption that this leakage remains in place. And in such circumstances of reverse multiplier effect, no infrastructure investment could possibly pass a comparative return analysis.

And Mr Argy can do all the analysis he wants but he has obviously never asked the people of the regions whether they think spending their GST money in the SE Corner is a "better return" when their Hospital's Accident and Emergency Unit has just closed down and a guy they'd gone to school with has just died while waiting for the fire brigade to fill in for the missing ambulance.
Posted by Perseus, Tuesday, 7 March 2006 1:18:52 PM
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