An excellent article, John and Klaas. It's amazing to see that the writing has been on the wall for 65 years! I loved your quote from Gordon Greenwood (1942) who wrote:

“Despite its achievements, the evidence points decisively to the conclusion that the federal system has outlived its usefulness, that the conditions which made federation a necessary stage in the evolution of Australian nationhood have largely passed away, and that the retention of the system now operates only as an obstacle to effective government and to a further advance.”

Greenwood's words ring as true today. You show that his views have been echoed by eminent civic leaders throughout Australian history.

Would it not be wise to engage the Productivity Commission to impartially examine the alternative models proposed for the future of Australian government?

Shoudn't policy on such a crucial decision be best informed by the Productivity Commission's definative report on the net benefits of unitary government versus the Premiers' 'new federalism'?

The wake-up call to Australia is sure to be the massive cost of maintaining the status quo of our hopelessly, dysfunctional federalism.

I have been postulating for some time that the establishment within Labor have been secretly 'building' a two-tiered socialist system. It is also quite apparent to me, that Labors 120yr beleif that Australia should be a Republic modelled in their image, is near to completion.
I have a discussion piece on it here: http://polanimal.it.net.au/viewtopic.php?t=6620

I disagree that the Federalist system is more broke than what common wisdom would have it. Considering that Labor has a vast state bureaucracy at its command, it is easily assumed that they are using this systemic problem as a weapon against their political enemy, the Liberal party. The public is to be ignored in this battle.

A Stealth Republic is imminent, in my view, as Labor has been working pretty hard behind the scenes to prepare for the upcoming elections, by dismantling the old regional government system and replacing it with Laborised mass-government structure.

What ROT, If the Libs where in power in all the states and not in the Fed government then federalism would be the greatest idea man has ever had. It's really sad to see Sydney siders believing that a government dominated by Sydney siders would do the right thing for a country town like Broome. No I say we need more states not less we need less centralise power.

A federalism with a number of new states, as already provided for in the Federal Constitution, would be far more practical and achievable than a complete rewrite of the the entire system, which has buckleys chance.

Those who would abolish the states have not considered what to do with the existing metropolitan centres. The costings of new states have applied the economics of Tasmania's half million population to an assumed replication into 40 such entities covering our 20 million population and concluded that there would be major duplication costs amounting to 40 times the Tasmanian budget variances (without adjusting for the impact of Bass Straight or purchasing power)

But there is neither need nor desire for dividing the four million residents of Sydney into 8 regional governments. There is just as little need for 7 regional governments in Melbourne, 5 in SEQld or 2 each in Perth and Adelaide. This majority (60%) of the population is best served by the existing defacto city states that continue to represent their own distinct community of interest.

The abolishion of states would impose major inefficiencies on the existing metropolises, on top of their existing diseconomies of scale.

The other 40% of the population is disadvantaged most by the current duplication of unitary, urban dominated, governments at state and federal level. The regions primary lack is a government engine of growth. Unless the full suite of state powers are transferred to regional governments those regions will merely replace one distant bureaucracy with another distant federal one.

Regional voters deserve the same state powers that urban voters already enjoy. And it would then be up to each new state to decide whether to absorb local government, as ACT has done, or modify it to suit their own circumstances.

Frankly, it is the height of metrocentric arrogance for the authors or any other parties to be proposing a single "one size fits all" solution on the diverse communities of this country. It is their choice to make, not the prerogative of the majority to impose its will on everyone else. That is the problem to date.

quite right, perseus- that's why i push democracy as a cure-all, decentralization on the swiss model would fix many problems, if australia had citizens.

alas, we are mere subjects, people to whom things are done. ozzies are chock full of ideas about the current failings of society, but it never crosses their mind that the problems are the natural result of centralized power.

pollie rule is what we have had since federation. they have had ample time to fix any problems, if they were going to. every problem of internal cause is all their own work. if you want better performance, you need a better system.

Perseus, could we recommend that you read the article carefully? We do believe that metropolitan/large city governments should be part of the second tier. We aim at a better system of decentralisation. The current federal system has clearly failed in that respect.

Some other commentators also tend to see federation as a kind of insurance against centralism. They approach the subject from an (old) anti-labour perspective thinking somehow that the current APL Premiers are forging a dangerous plot that'll surprise us all. The reality looks very different to us! The parties are look-alikes more than ever!

We also say look at other unitary states. Most of them are not highly centralised as claimed or feared. Why would that be?

Klaas

Perseus, could we recommend that you read the article carefully. We do believe that metropolitan/large city governments should be part of the second tier. We aim at a better system of decentralisation. The current federal system has clearly failed in that respect.

Some other commentators also tend to see federation as a kind of insurance against centralism. They approach the subject from an anti-labour perspective thinking somehow that the current APL Premiers are forging a dangerous plot that'll surprise us all. The reraality looks very different to us! The parties are look-alikes more than ever!

We also say look at other unitary states. Most of them are not highly centralised as claimed or feared. Why would that be?

Klaas

Not a persuasive article

It claims that Greg Craven was unsuccessful in his defence of Federalism, but this is simply asserted, the authors make to attempt to actually refute his arguments.

It claims that the Productivity Commission Inquiry into Competition Policy (1999) demonstrated that National Competition Policy had damaged rural and regional sectors. This is flat wrong - in fact, the report concluded that regional areas had benefited from NCP, though not as much as metropolitan areas. This is important, because it was a successful example of cooperative federalism, with the States and the Commonwealth working together to share the costs and benefits of a reform program.

“The decision of exactly what is to replace the Australian federation, however, while very important, is a second order issue.” Hardly. It is the responsibility of those who would dismantle our federal system to demonstrate that they have a better alternative.

Throwing adjectives at the constitution – failing, atrophied, dysfunctional …. – doesn’t constitute convincing reasoning.

This notion of "decentralised unity" government has a stench of Orwellian newspeak about it. Effective decentralisation is only possible when the area being governed is small enough to ensure that the "head office" costs of governement can still circulate in the entire region.

But if the region is more than two hours travel from the capital there will be minimal "trickle back" of these funds to the outer regions. So in both NSW and Queensland, as well as WA, the head office portion (20%) of the 15% of GDP devoted to state governance remains in the capital.

And this means the regional economies must grow by 3% a year just to overcome the leakage from their circular flow while the capital region can actually mark time, in productivity terms, and still grow by 1% a year due to the inflow of funds from the regions.

The notion that there are additional economic savings to be had by shifting already oversized state head office functions to Canberra is bunkum. You cannot divorce political science from economics. If the decision makers are located in a regional capital then the investment and jobs will follow and the regional economy will stop leaking funds to the already overcongested metropolis'.

The main "inhouse" benefits of new states are in the improved quality of government. Any increased costs from duplication will be more than offset by reduced diseconomies of scale and enhanced local economic activity.

The simple fact is that the vision for federation held by most of the founders included a number of new states. And the constitution they drew up would have worked quite well if new states had eventuated.

But it was the Brisbane elite who threatened to oppose federation altogether if the constitution was not ammended to make new states subject to the (unlikely) approval of the existing state. Prior to this, every region could petition the British Crown for self determination in the wider interests of the "peace, order and good governance" of all subjects. As Victoria, SA and Qld had done themselves to gain independence from a very obstructive NSW.

Well said Rhian. The authors make a lot of innuendo about the failing federal system, give one example of how it allegedly costs $30 billion per year, without actually refuting the claim that federalism actually makes 86 billion per annum, and then go on to suggest alternate systems.
But what ARE the problems with federalism?
There are a lot of duplication in services and regulations but then that is only a manifestation of how the federalist concept has been botched by the High Court over the last 100 years. If there was a clear delineation of what specific powers the states and federal government respectively had, then this problem would soon disappear.
The authors touch on a meaningful aspect of the issue; to wit: “The appropriateness of continued federalism, … requires that the diversities in society should be territorially grouped” but then fail to expand.
Its true that diversities in Australia are currently not territorially grouped to any significant extent (although there is or has been some grouping: religious and anti gambling types in SA; One Nation types in Qld; pro business types in NSW; the politically correct vanguard in Victoria; the tree huggers in Tasmania; the more reactionary minimum sentencing law and order types in WA and the NT) but any serious disparate Diaspora has failed to materialize mainly because entities like Gough Whitlam, leftist political parties and movements and now even John Howard, have done their best to crush states’ rights and the resultant forging of separate identities.
Sixty years ago there MIGHT have been some reason to claim that Australia was a homogenous society but to entertain that thought in today’s multicultural multi-faceted society would be simply ridiculous.

It was actually Mark Drummond who used the assumed 40 states the size of Tasmania to come up with a total cost of regional governance in the order of $20-30 Billion. And my above post on maintaining existing metropolitan city states demonstrates that 60% of that estimate has no basis in reality.

It is also informative to look at the actual size of the 14 unitary states that are supposed to provide some sort of best practice model for Australia and our 7.8 million km2 territory. For the record;

No part of Denmark is more than 300km from the capital, Copenhagen.
Most of Finland is less than 300km from Helsinki.
In France both Lyon and Nantes are 350km from Paris, Toulouse and Marseille are only 600km away.
In Greece, Thesaloniki is only 300km from Athens.
In Ireland, Cork is only 200km from Dublin.
In Italy, Milan is only 400km from Rome.
No part of the Netherlands is more than 200km from Amsterdam.
In Japan, Osaka is only 450km from Tokyo.
In New Zealand, Auckland is 450km from Wellington.
In Norway, Trondheim is only 300km from Oslo.
In Portugal, Porto is only 250km from Lisbon.
In Spain, Barcelona is only 500km from Madrid, but recently has been given close to independent autonomy.
In Sweden, Goteborg is only 400km from Stockholm.
and in the UK, Manchester is only 200km from London.

And how anyone can seriously suggest that one could improve the quality of governance in Cairns or Port Headland by shifting power from Perth and Brisbane to Canberra leaves one completely gobsmacked.

The Austrians, Swiss and Belgians feel the need for a federation when thair entire country is about 200km long. The CzechoSlovakians felt the need for complete independence from each other with regions less than 300km long. The Germans felt the need for a federation because Munich and Cologne are more than 500km from Berlin.

And the proponents of the virtues of unitary governance should explain what, exactly, the EEC is, if it is not a FEDERATION, and a very successful one that most europeans have aspired to join.

It is interesting to note Drummonds criticism of the Federal/unitary study as being biased by the poorer OECD nations like Greece, Portugal etc. As this link shows, there was an original 20 OECD members which has now expanded to 30. http://www.oecd.org/document/58/0,2340,en_2649_201185_1889402_1_1_1_1,00.html

The study examined 14 unitary states and 6 federations leaving out 8 members, including Australia. Of the states left out, the Czech republic, Hungary, Poland, Mexico and Korea only joined from 1994-96 and the Slovak republic joined in 2000. The remaining three were Iceland, Luxembourg and Turkey.

Luxembourg and Iceland are of a spatial, economic and population scale that is of no relevance to the Australian situation. The rest are comparatively new to democratic practices and their economic performance can hardly be assessed in relation to their political structure, with any clear lessons for Australia.

So the 14 unitary states in the study are simply those nations that joined the OECD in the 1960's and have the greatest degree of relevance to the Australian situation. There is no inherent bias in the study as Drummond has claimed. Even the most rudimentary check on the actual membership of the OECD would have revealed that his assertion is not supported by the facts.

Indeed, this begs the question as to which nations would be more appropriate to study, given that the non-OECD nations have been either struggling third world democracies, dictatorships, or a sequence of both.

This article is absolutely spot on! Our so-called federal system is just a collection of centralist unitary states with a centralising national government. The state governments will take over local government’s responsibilities if they can see political mileage in it, and the feds do the same with state functions. At the moment, the principle of subsidiarity – that government functions should be exercised by the lowest level that is feasible and efficient – is operating in reverse in this country!

The authors advocate a power of citizen initiative to amend the constitution, and this power should also be applied to the State constitutions. A federal referendum probably can’t abolish the States, but it CAN give the people of the States this democratic power.

In the previous feedback, however, I couldn’t understand Gadget’s accusation that Labor is “dismantling the old regional government system”. I’ve been around for more than half a century, and unfortunately I’ve never seen any sign of a regional government system in this country!

Rhian, on lst May, comments that I am flat wrong on the 1999 findings in the Inquiry into National Competition Policy (Friend or Foe?). The Report (August, 1999) on page 79 refers to the findings of the Productivity Commission specifically relating to Regional and Rural Australia. This is not favourable, with some exceptions. In particular, the quality of service delivery in relation to electricity supply and telecommunications "was raised frequently" in submissions.In the submission by Professor John Quiggin (6.44), decline of especially rural towns is highlighted. The whole of Chapter 3 is one long list of concerns expressed about Competition Policy generally. I have serious doubts about the rationale of Competition Policy which is that competition is good and more competition is better. Furthermore, Public Services have to comply with the public interest test. Essentially that means that it must show that it can perform a service better than the private sector. Private sectors operators are not subject to such a test. Apparently that is taken for granted. This is sheer sophistry which finds its origin in the neo liberal ideas of Fred Hilmer & associates. The philosophy that certain services are better tackled by governments than by private enterprises has been rubbished by its supporters. Regional and Rural Australia have suffered as a consequence although obviously not just for that reason.

I agree with you, Klaas, on Competition Policy at least. Indeed, the big limitation of that policy is that the public benefit test was essentially an "urban benefit test". It was never extended to consider all forms of competition or all methods of delivering government services.

It seems that urban services (like new bridges, motorways etc) can be delivered without any serious consideration of value for money while investment in regional services face serious economic performance threshholds.

An interesting example was the kind of moronic tripe deliverd by Fred Argy in his advice to the Qld government that any infrastructure investment outside the SE corner could not be justified on economic grounds because the regions did not have the same population growth rates of SEQ. This lower growth rate automatically leads to a lower rate of return on funds with the implied obligation to always opt for the highest return.

Clearly, he did not consider any of the diseconomies of scale that are now apparent to every SEQ resident. But more importantly, he appears to believe that there is no obligation to ensure that the major portion of state revenue, the refunded GST money from the Feds, was subsequently redistributed fairly to all Queenslanders.

This mindset, that the legitimate entitlements of regional Queenslanders to their proper share of their own GST payments, is subject to some sort of self proclaimed higher economic good, is widespread in the urban bureaucracy. It is undemocratic, unAustralian and ultimately unsustainable

It seems to me that many of the people that have posted comments regarding this article hold the false belief that somehow federalism will bring us closer to decentralization. I simply disagree, the situation that states create is not decentralization but rather duplicated centralization.