Ten years ago, Western Australian Mines Minister Norman Moore proposed that the state secede and rely on China for its defence needs. The then Liberal premier, Colin Barnett, distanced himself from his minister, saying he saw himself ‘an Australian first’ and that he thought West Australians considered themselves Australians first, too. Yet, just seven years on, the WA Liberal party passed a non-binding motion for the state to financially secede from the federation.
The reality is Western Australians have always been reluctant members of the Commonwealth although Premier Mark McGowan plays down the notion. Nevertheless, he finds it politically profitable to use Covid-19 as a reason for ‘turning Western Australia into an island within an island – our own country’, something he says, ‘the east coast just does not understand’.
For other states looking for a reason to distance themselves from Sir Henry Parkes’s vision of ‘sovereign British colonies united in a self-governing and democratic nation’, the pandemic is it.
Last year, an unborn baby died because its Covid-free mother living close to Queensland’s border was denied emergency treatment in a Brisbane hospital. Premier Annastasia Palaszczuk explained that ‘People living in NSW, they have NSW hospitals. In Queensland we have Queensland hospitals for our people’. Hardly what Parkes had in mind.
Similar parochialism saw Victorian Premier Daniel Andrews reject a Commonwealth offer of Australian Defence Force quarantine assistance. Vanity prevailed and factored largely in the state recording 90 per cent of all coronavirus deaths in Australia.
Like other premiers, Mr Andrews knows Canberra will largely compensate him for the enormous economic damage his erratic behaviour has inflicted. After all, Prime Minister Scott Morrison’s relationship with his National Cabinet colleagues borders on obsequious. He rarely criticises them when non-binding agreements, reached in meetings, are later ignored.
The Prime Minister also judges it politically less risky to leave quarantining to the states even though it is a federal responsibility. Nor does he challenge the constitutionality of states denying Australians their right to travel freely across borders for a mere handful of infections. As a consequence, capricious state leaders and artful chief medical celebrities behave pretty much as they wish, leaving behind a massive tab for future generations.
It is the federal Grants Commission, established in 1933, which perpetuates this ‘magic pudding’ mindset. Intended to herald an era of co-operative federalism which would ensure a uniform standard of government services across the nation, it has instead institutionalised bad behaviour and resource misallocation.
Nowhere is this more apparent than in Tasmania where 60 per cent of state revenue comes from federal grants and GST redistribution. Despite being richly endowed in nature’s gifts, Hobart has little incentive to reform crippling environmental policies which keep one-quarter of the Tasmanian population in poverty. Federal money also compensates for South Australia’s renewable energy follies which have bequeathed Australia’s highest unemployment rate and most expensive average household electricity prices.
Rather than attempt structural change, states and territories proceed as if the 1901 agreement to federate was never signed. For instance, Victoria’s secret agreement to join the Chinese $1.5 trillion Belt and Road Initiative, demonstrates complete disdain for Canberra’s primacy in foreign affairs and Australia’s national security. Likewise, the Northern Territory, which, without due notice to Canberra, leased the Port of Darwin to a Chinese entity for 99 years.
The reality is, as NSW Treasurer Dominic Perrottet, argues, ‘States that do nothing to strengthen their economies, reap windfall gains from other states that do’. So why change?
Indeed, rather than back Perrottet and push for crucial philosophical change, the federal government keeps both eyes fixed on the polls, knowing that mendicant states will strongly oppose a competitive system. In this permissive environment, regressive social and economic policies thrive.
But a day of reckoning is coming. Business as usual is not a sustainable option. Based on the old adage that governments spend all the money they receive and then borrow the rest, Victoria’s net debt is expected to hit $87 billion this financial year on its way to $155 billion plus by 2024-25. It is already the highest-taxing state and, at some point, its debt may become a national responsibility. Perhaps prophetically, Melbourne is suffering its highest net population loss on record, with Melburnians top of interstate applicants for Sydney jobs.
But it’s not just Victoria. Total Australian government debt is likely to more than double from pre-pandemic levels to a record $2 trillion by 2024-25. And, in an act of appeasement, Canberra has lifted WA’s GST share, adding to the federal deficit and potentially penalising NSW and Victoria.
Perhaps co-operative federalism was a good idea in Depression-weary 1933. But it is a system no longer fit for purpose. Introduced by the political class for the political class, it is designed to centralise power by trading off various competing interests. It is a system which encourages underperforming states to become more dependent on Canberra.
Inevitably, the demand for government services will outstrip the capacity to pay for them. That is when calls to abandon federation and to abolish state governments will grow louder.
Prima facie, given the dysfunctional nature of the current system, the notion of re-writing the constitution has appeal. The Left strongly supports abolishing the states. Centralised government is always its answer. The desire to control other people’s lives is insatiable. Some favour regional governments to a unitary state. But the fundamental problem is government itself.
Big government, whatever the arrangement, begets bigger government. It concentrates authority, imposes uniformity, misallocates resources and corrupts proper process. Microeconomic reform is anathema.
Unless and until Dominic Perrottet is joined by more leaders seized with the mission to urgently rehabilitate commonwealth/state arrangements under a framework which allows competition and regulatory flexibility between the states, Canberra’s power and influence will expand exponentially thus spelling the end of Henry Parkes’s splendid vision. Perhaps then Western Australians will finally secede and find happiness in a federation with New Zealand?
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