Pro. Williams has raised the lid on a 'pandoras box'. One which any politician worth his super will not touch.

The idea of a summit certainly has merit, but who will be invited? Politicians, leaders of business, sporting heros, women, acedemics or journalists?

Although the 'founding fathers' gave us a constitution currect to the period, as Williams points out they could not forsee the future.

Ask anyone if they consider we are over-governed, my response would be a firm YES.

Here's an idea, lets have "Regional Entities", based on regional populations and geographic locations and do away with the states.

Unfortunatley that would mean the end of 'State of Origin' football!
Still we cant have everything, can we?

I entirely agree that the system needs a major overhaul. If we sat down now to design one that responded to current needs de novo we would end up with a completely different model.

Some principles we need to look at:

* We should only have one set of laws for this country - in an age where laws are being harmonised the length and breadth of Europe, it is crazy to have different laws in different parts of the same country. Individuals & organisations need to know that the rules are the same wherever they operate. Organisations that operate across state lines should not have to comply with 7 different privacy laws, for example. Laws are the fundamental groundrules of a society, and should be generic enough to be common to all parts of the Commonwealth.

* The Commonwealth Government has the bird's eye view and can see the big picture, but is remote from local communities. It is best suited to passing laws, devising policy frameworks, and running foreign affairs and defence.

* State governments are closer to local communities and may be best placed to supervise delivery of services, provided that they are given the funding.

The principles above imply that State governments should no longer be governments, of course. There would only be one Parliament, in Canberra, although there could be regional authorities, with elected assemblies.

Michael

The differential distribution of GST to the states has two elements. The first is the already mentioned wealth transfer function in response to the higher cost of delivering services to regional areas. And this would be fine if the city state that runs Queensland is actually forwarding those funds to the regions. They are clearly not doing so because the growth of the SE Corner places higher profile demands for greater intrastructure in that corner.

It is also clear, from the continuous complaints from the Sydney and Melbourne city states, that regional Victoria and Regional NSW are not getting any such funds because the urban elite are of the view that they have already paid enough to Qld, WA, SA & Tas.

The other element of this differential payment system was to compensate for the reverse multiplier effect on regional economies caused by the concentration of the head office portion of government outlays in the capital. It is the operation of this reverse multiplier from both federal and state outlays that is both the primary driver of rural decline and the primary driver of urban diseconomies like congestion and the multiplying complexity and cost of solutions.

These two major socio-economic issues will not be solved by an increase in centralisation. Indeed, it will exacerbate both.

The complaints from Sydney and Melbourne are well founded. They are funding the kind of new infrastructure projects in Brisbane that they are in urgent need of themselves.

The only effective solution to both problems is to create new regional states so both the contributors and the beneficiaries can be certain of both the integrity of the calculations and that the regional economies that actually suffer the reverse multiplier effect will receive the compensatory funds.

And with fully sovereign regional states, much of the other half of the differential funding requirement, the need to compensate for the tyranny of distance from the centre of governance, will be eliminated. And they will be free to merge their local government functions into the smaller state chamber along the lines of the ACT model.

The NSW, & VIC economies have been supported for over 60 years by Import duties paid by all the states to subsidies their manufacturing industries. Diminished as it may be, it is still critical for their survival.
They are still totally dependant on the foreign exchange earned by our export industries. Cut them adrift from the support of the other states, & they would sink like a stone.
They have to make some payment to us, for the continued use of us, as water wings.
Hasbeen

“Australia needs a summit on federalism.”

George, I absolutely agree.

There are strong indications that the near future of society as we know it is in real jeopardy, with peak oil approaching followed by other manifestations of a continuously increasing population living off a continuously less healthy resource base.

A major change in governance is needed. One of the biggest changes needs to be the divorcing of government from big business, so that government again reflects the feelings of the people, not the power and financial support of big corporations. It is essential that we develop a system of governance that actually looks out for our medium and long-term future instead of pandering to the profit motive, within three or six year timeframes.

We need a system whereby scientists and environmentalists can win political office, instead of almost entirely economists and lawyers.

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I agree with Michael T; “We should only have one set of laws for this country”.

I support the notion of a 2-tiered governmental system, with the lower tier being somewhere in between the current state and local government level. I reckon it should be based loosely on population, as per electorates, but with each ‘province’ having perhaps in the order of 300 000 residents. This would give us nearly 70 provinces.

I don’t have a problem with the differential distribution of GST. The larger states should be contributing to the smaller ones, in a somewhat uneven manner. Anyway, how much national wealth has WA provided via iron ore and Qld via coal? We can’t possibly have completely even distribution of wealth / taxes anyway.

As for Perseus’ notion of “fully sovereign states” – sounds like an oxymoron. If they were fully sovereign, they’d be countries.

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A summit of federalism has got to be one of the most important undertakings in our history. But how can we get it to happen. No political leader will touch it. And even if it did happen, what is there to stop those that hold the power now – big business and manic pro-expansionist politicians – from consolidating their positions?

Perseus, you wrote that "this would be fine if the city state that runs Queensland is actually forwarding those funds to the regions. They are clearly not doing so because the growth of the SE Corner places higher profile demands for greater intrastructure in that corner." In fact, the reverse is true. While perhaps 60-65% of Queensland's population live in SEQ, generally around two-thirds of infrastructure spending goes to non-SEQ regions. Most of this spending is not viable - the highest returns to infrastructure spending are in SEQ, and the present distribution is wealth-destroying.

In addition, Fred Argy - whose concern for the less well-off is well known - has argued that the economic linkages between Queensland regions and SEQ are such that building high-return infrastructure in SEQ (e.g. urban arterial roads, a second road from Brisbane to the Gold Coast) to help the SEQ economy would have a more positive effect on regional economies than giving them non-viable infrastructure projects. (By non-viable, I mean that the returns on the projects are less than their opportunity cost; in practice, e.g. Paradise Dam, the returns are often, probably mostly, negative.)

Reference: Fred Argy, P Hollingworth, M Lindfield & R Stimson, "Infrastructure and Economic Development," paper prepared for and ignored by Queensland's Department of State Development

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?

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?

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.

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.

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.

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.

Strongly agree with the Prof's ideas - we do have pressing need to revamp our Constitution, but it wiull take time - indeed it has been left far too long, even now.

Many seem more concerned with the Republic-Monarchy debate, which is really more of an emotional issue. Whereas the Constitutional flaws have been showing up for a while now; in transport, health, roads to name but 3. These are the issues that effect our daily lives most, not whether we are a republic or a monarchy.

However, it took years to frame our Consitiution, back when technology and change were a lot slower and more predictable. None the less, we need to push this into the public arena ASAP, as we will not see any great improvement for a decade or more - even that may be optimistic.

Transport is a very important issue, with the disparity between states and their laws, causing absolutely ludricous inefficiencies and costs across our country. These effect each & everyone of us - food, clothing, consumer goods, industrial & commercial goods, health, medicine, newspapers, computers, timber, building materials, glass, aluminium, steel, plumbing, electrical wiring, hardware, machinery, tools & utensils, you name it - it has to travel from the forest/mine etc to the factory by truck, from the factory to the warehouse or wholesaler by truck, then to the store where we buy it.

Transport is probably the single greatest sphere in need of immediate and radical re-structure. Like in health, each state is guarding its territory possesively, and this is increasing in-efficiencies right across the board- intra-state, interstate and overseas trade - exports and imports are being crippled by the disparity among State Road laws, Safety laws and fuel prices.

In saying this I am not just speaking about Economics, but Road Safety and uniform conditions of employment in the Transport Industry also.

Maybe the Prof's posting and our responses might be good material for an Insight Program. I sincerely believe the issue George has raised is SO IMPORTANT to our future, and our childrens' -we need to ACT now!

Edward, I have no disagreement at all. There will always be wealth differentials to some extent.

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Haaaaa. Ludwig the “blog-stalker” strikes again. That is entertaining!!

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Flezzey, I couldn’t agree more regarding the uniformity of transport and road rules across the country.

I reckon George Williams’ article would serve as an excellent basis for an Insight program. Insight couldn’t cover a more important subject, except perhaps sustainability. But then that is intimately connected to this issue

Flip Top, the WA Treasurer is right. Federal tax collections also have some major leakages from regional areas. Health, Welfare and Pension expenditure usually flows back to the regions but other portfolios don't do as well. Defence is a major leakage of funds from the country itself but we all must acept that situation if we don't want to send our servicemen into dangerous places with second rate equipment. Defence also appears to make an effort at spreading bases around the country so the money flows evenly.

But the fact that there are 330,000 people in what was once a cow paddock, later called Canberra, is proof that funds have flowed from other parts of the country. The extent of this flow is disguised somewhat by the fact that much of the federal "overhead" type expenditure is actually made in Sydney and Melbourne. So next time they squeal like stuck pigs, just remember that they have by far the biggest snouts in the trough.

And next time you hear some ignorant urban punter complaining about the the drough aid given to farmers, just take the dopey prick out and shoot him.