Australia needs a fiscal State of Origin clash, not failed cooperative federalism

Because Queensland have won 11 of the last 12 State of Origin rugby league series, until NSW achieves parity, some Maroons players will be forced to change sides until NSW achieves parity. Next year, it will be two of Queensland’s best players. If NSW doesn’t win the year after, it will be three players and the coach. It doesn’t matter if Queensland trained hard all year or if half the NSW team was drunk when they took the field.

If that seems like an absurdity – and, Kempsey-born Queenslander Greg Inglis aside, it is – one may ask why our country is run that way.

While some states have worked hard on economic reform, generating growth and jobs, others have lived on sit-down money. Worse still, our federation punishes the first group and rewards the second.

In its recent report Shifting the Dial, the Productivity Commission said that “while not broken, the system of cooperative exchange at the apex of Australia’s federation – COAG – is in need of renewal”.

On the contrary, federalism in Australia has long since ceased to function as intended, and exists primarily as a vehicle for some of the smaller states to avoid responsibility for their poor performance and chisel taxpayers’ funds out of the federal government.

Cooperative federalism – the idea that all levels of government share responsibility to solve problems in the country – is one of the root causes of the problem. It attenuates the incentive to deal with problems at the local level, and instead encourages states to shift their problems on to the Commonwealth.

One reason states can get away with this is that the Commonwealth raises just under 80 per cent of the revenue raised by all three levels of government. Yet, once transfers to the states are accounted for, the Commonwealth and the states spend a similar amount of money.

Moreover, much of the spending at the Commonwealth level is simply transfer payments (particularly welfare). It is at state level that most services are provided, especially in the important areas of health and education.

Simon Cowan is the CIS Research Manager and TARGET30 Director.