The Council of Australian Government has always been a tool of politics.
It was Paul Keating’s weapon to use against Bob Hawke from the backbench, white-anting Hawke on revenue-sharing. When John Howard was faced with a full slate of state and territory Labor governments, he virtually shut COAG down as a mechanism for achieving anything. Even agreed programs shuddered to a halt. And Kevin Rudd promised a new era of co-operative federalism, only to realise that parochialism comes in red and blue. John Brumby, in particular, insisted on being bribed with billions of dollars to give even passing heed to the national interest.
Now the Howard-era halt looks like returning with conservative state premiers lining up to take potshots at COAG. And Campbell Newman went further today in attacking co-operative federalism and urging competitive federalism.
When Nick Greiner went to his first premiers’ conference he made the mistake of criticising the normal format. Hawke slapped him down hard as “the new boy”. There’s been no rebuke forthcoming so far for the new boy from the north, but then there’s no one in the current federal government with a fraction of the authority of Hawke.
Competitive federalism sounds muscular and individualistic, the logic of the marketplace applied to government. But governments aren’t a market. Competitive federalism is simply a domestic form of protectionism.
Instead of nations bidding against each other to offer handouts to businesses to locate there, states do it, offering tax holidays, rebates, regulatory concessions and even cut-price infrastructure. Eventually it can turn into outright corruption among regulators, bureaucrats and politicians doing deals with business. Remember Alan Bond’s $400,000 “defamation” payment to Joh Bjelke-Petersen was for Bond to continue “to do business successfully in Queensland”.
It undermines state revenue collections, shifting the burden to other sectors of the economy that can’t easily shift out of the state, or prompting government borrowing, or the running down of infrastructure and services.
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Most of all, it doesn’t work. Different state regulations impose significant costs on businesses. Harmonising occupational health and safety regulations alone was estimated to save businesses and governments $250 million a year and generate about $1.5 billion in productivity benefits per year across the economy. The numbers sound significant, but not when you consider that, as the Productivity Commission found, businesses operating Australia-wide face 282 separate codes of practice for OH&S.
Competitive federalism is a tax on any company operating in more than one state. It’s a tax that benefits no one, not even governments; it’s simply a deadweight loss. And it’s parochialism in action. You can only advocate competitive federalism if your idea of the economy is from the 1970s, when air travel was a rarity, you paid through the noses to make a phone call to another city and state governments barely even recognised drivers’ licences from other states.
In a 21st century nation of just 22 million people, having seven different legal systems and regulatory frameworks is absurd. But that’s apparently what Newman wants.
How will Newman fare under a Tony Abbott government? Well, in Battlelines, the opposition leader devotes an entire chapter to what he calls “Australia’s biggest political problem” — its dysfunctional federalist structure. In it, Abbott savages the states, correctly notes that voters will always pressure the federal government to “fix things” regardless of actual constitutional responsibility and says Rudd’s idea of “co-operative federalism” assumed “a level of magnanimity that politicians don’t normally have”. His solution was to give full power to the Commonwealth to legislate in any area it liked, automatically overriding state laws. He even proposed a draft bill for a referendum on the issue in an appendix:
“It wouldn’t abolish the states but, because Commonwealth law prevails over state law to the extent of any inconsistency, it would mean that they could not jeopardise policy in areas where the national government was determined to intervene.”
Not so much co-operative federalism or competitive federalism as “cop this” federalism. In comparison, the agony of COAG might not look so bad to conservative premiers.