Twenty-seven years ago, another prime-minister-in-waiting told us that
our federal system was dysfunctional and needed radical change.
Delivering the first of his Boyer lectures in 1979, Bob Hawke came up
with the same answer that Peter Costello has this year, but he was more
explicit about it:

“Australians would be better served by the elimination of the second
tier of government – that is the States – which no longer serve their
original purpose and act as a positive impediment to achieving good
government …”

Costello does not describe his proposal as abolition of the states, but
that is what it amounts to. The hallmark of a government is the power
to tax; without that, it becomes just an agent of whichever authority
controls its income. When Costello calls for Canberra to take “full responsibility for the national economy” he must know where that would lead.

So it is interesting to recall that in government, Hawke did not
actually become the centralist warrior one might have expected. On the
contrary, in the late 1980s his government made the most constructive
moves for a generation towards rebalancing the federal-state
relationship. Working in conjunction with the premiers, especially
NSW’s Nick Greiner, Hawke planned to attack the problem of vertical
fiscal imbalance by letting the states take more responsibility for
taxation – plans that came to nothing when the centralist Paul Keating
took over in 1991.

Yesterday Greiner re-entered the debate, pouring cold water on
the Costello project: “If it’s simply a one-way move of everything to
Canberra, the sheer political reality, regardless of merit, is that
that will never, ever, ever happen.” But he acknowledged that the
system still needs fixing. John Howard’s centralism has just made the
states more irresponsible
than ever, spending money that they don’t
have to worry about raising.

So might Costello, if he gets the top job, undergo a conversion similar
to Hawke’s, and be the leader who finally takes the states into a
serious partnership? It’s hard to imagine. But who could have thought
in 1979 that the ALP would come to embrace federalism, and in the hands
of the man who was then calling for the “elimination” of the states?

Peter Fray

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