“Never let facts get in the way of a good
story” is the first law of tabloid journalism – and Pete Costello’s Federalism
pronouncements.

The funny thing is that the states and Federal Opposition have allowed him to get away with it.

Since the last Budget, Macquarie Bank
economist Rory Robertson has strayed into the fiscal arena from his usual
concentration on monetary affairs. Regular readers of his work can perhaps
sense a certain growing frustration on his part that no-one seems to notice Canberra’s PR con
job.

Aside from Lateline having a chat with him,
and a piece published in the Oz, his summations have largely gone through to
the keeper. According to Robertson’s latest “Federalism Watch”, the following
are the four key facts missing from the debate:

  • First, the
    “massive revenue windfall” the States are said to have gained as
    a result of the shift to the GST actually is tiny in the general scheme of
    things: $1.2b in 2005-06, or 0.1% of GDP, almost a rounding error in the
    Federal Budget.
  • Second, Canberra’s “tax
    take” as a share of GDP is at multi-decade highs on several measures,
    in part reflecting its own massive revenue windfalls in recent
    years. Indeed, the latest ABS data suggests Canberra’s tax/GDP
    ratio is at an all-time high.
  • Third, Canberra’s
    earmarking of the GST as a “State tax” has not produced any
    profound shift in Federal/State funding arrangements. With total
    (net) transfers to the Statessteady as a share of
    GDP
    ,
    it is yet to be revealed why Treasurer Costello reckons the post-2000
    funding arrangements have delivered to the States “the largest
    financial free kick since the Second World War”.
  • Finally, Canberra sets
    immigration policy while the lower tiers of government bear most of the
    responsibility for managing and funding the extra demands for housing,
    hospitals, schools, police, roads, public transport, etc. Any
    immigration programme will bring
    with it a range of benefits and costs. With Australian immigration
    in 2006 set to exceed 100,000 for a record eighth straight year (twice the
    run of the late 1980s) it should be easy to understand
    that State and local governments are struggling with more than just a
    simple lack of competence.

It looks like it’s not just a
question of power, but Canberra having too much money and the States not
enough.

Peter Fray

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