Mary Ann O’Loughlin: consider the federation in a more global context

By Mary Ann O'Loughlin

Friday September 12, 2014

The Abbott government, with the states and territories, are having another crack at improving Commonwealth-state relations through a white paper that:

“… will seek to clarify roles and responsibilities to ensure that, as far as possible, the States and Territories are sovereign in their own sphere.”

The Prime Minister released the first issues paper last Friday, “A Federation for Our Future”. It raises for consideration the practicalities of limiting Commonwealth policies and funding to core national interest matters, as typified by the matters in section 51 of the constitution. For those not intimate with the constitution, section 51 includes matters such as trade, taxation, communications, marriage, coinage, pensions and allowances, medical services, defence, immigration, and external affairs.

But I question whether in 2014 we can neatly divide roles and responsibilities as originally laid out in the constitution in 1901.

Because while I agree that there is much to be said for the aim of states being sovereign in their own sphere, reflecting the important principle of subsidiarity (which states that matters should be dealt with by the lowest level of government practicable), however, I am struck by the fact that in many areas the impacts of a state or territory’s decisions, policy or program are not contained within their own sphere.

Education is a case in point: this is not included in the Commonwealth’s responsibilities under section 51 of the constitution, but poor educational outcomes in a state don’t just have implications for that state. Poor educational outcomes are related to higher unemployment, less tax and higher welfare payments -– all federal issues. Furthermore, in our globalised world, Australia’s fortunes depend upon our collective productivity and competitiveness — both significantly influenced by our nation’s human capital.

The terms of reference for the white paper do have a provision for the “national interest” where it is considered appropriate to take a national approach rather than have diversity between jurisdictions. But this is alongside the stated view that there should be less Commonwealth intervention in areas where states have primary responsibility, suggesting less rather than more areas of national interest.

But the way the world is moving suggests otherwise to me.

Because it’s not just that the world has been transformed since 1901; the world has been transformed since 2001 — through smartphones, and Twitter, and the economic rise of China, and the GFC and digitalisation. As the Business Council of Australia said in a discussion paper recently:

“The pace of technological development and change is accelerating, particularly digital technology. This has made almost everything tradeable — goods, services, skills and labour. Competition is now global. Businesses and increasingly individuals offering their labour and services must measure their competitiveness against the world’s best, or risk being undercut.”

When medical diagnosis and treatment are being delivered for patients all over the world by advanced analytics in the United States; when people are increasingly taking advantage of Massive Open Online Courses from around the world; when world trade, investment and production are increasingly organised around global value chains; when, in short, the world is ever more connected, with freer movement of goods, services and ideas across geographic and industry boundaries … in this world do strict divisions between the responsibilities of the Commonwealth and state governments make sense for many areas?

Which is not to say that I think the Commonwealth should interfere in, or muscle in on, or micro manage areas of state responsibility. Patently, service delivery has not been a strong point for the Commonwealth. But it is to say that both the Commonwealth and states have strengths — and through respectful collaboration these strengths work to Australia’s advantage.

My own position is that I agree with Professor Greg Craven, the former deputy chair of the Council of Australian Governments Reform Council, who said:

“We need to aim for a system of leadership federalism, where the states are realistic enough to let the Commonwealth set broad policy directions — I would add, in collaboration with the states — but Canberra has the common sense to accord the states serious latitude in adapting that vision to local circumstances.”

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