1. Federalism and the engine room of prosperity^[1]

Australian legal scholar Professor Greg Craven once described federalism as the topic most likely to clear an Australian barbecue. In the past 50 years, he wrote, ‘Australian federalism has received more bad press than morbid obesity’. Whether you agree or disagree with Craven’s views on federalism itself, it is hard to argue with his description of it as our own constitutional ‘F’ word.

To most Australians, federalism is probably about as popular as a politician appearing onstage at a grand final. Yet while it might not so far have become the lead topic of conversation in the nation’s lounge rooms and pubs, Australians do care about making public services work better. And in a system such as ours, it’s hard to get better outcomes in areas such as housing, health and Indigenous affairs unless all governments work together.

I want to say something about the ambitious reforms we’re implementing through the Council of Australian Governments (COAG), to offer a sense of the new architecture we propose and why it represents a fundamental improvement over the way we’ve done things in the past. Reforming the architecture of Commonwealth–state relations can sound a little airy, so I also want to provide a practical example of how our new approach will affect the lives of Australians. I want to describe what we’re doing with school reform and how it exemplifies what we can achieve from modern federalism. There’s no better reason to get federalism right than the opportunity it provides to improve our schools.

My whole political life I have believed education is the engine room of prosperity and the key to overcoming social disadvantage. It’s why I devoted a big chunk of 2005 to writing Postcode: The splintering of a nation, my book on social disadvantage in Australia. Creating prosperity and spreading opportunity are why I entered politics. Education is what brings these two objectives together. I am relishing the opportunity we’ve been given to modernise the federation, so we can build a platform from which to reform Australia’s education system.

As the government goes about lifting national productivity and creating a more inclusive society, Commonwealth–state relations and education reform is the place where Julia Gillard’s policy agendas and mine frequently meet. Education reform—especially school reform—has been proposed in this country for a decade. Half-hearted attempts have been made, but they have not been backed up with the leadership and conviction needed to deliver structural change. Our predecessors never succeeded in navigating Australia’s future—and there is no better example of this than the former treasurer’s failure to invest in the education of our children.

In a number of developed countries, imaginative public policies have substantially improved the quality of school education and student outcomes. Greater transparency, along with new investment and greater flexibility, has been key to these improvements. By comparison, Australia’s reform effort has been lacklustre. And one of the key reasons why is they have foundered on the rock of unreformed federalism. It’s only now that we are creating a more flexible, market-driven set of Commonwealth–state relations that substantial education reforms can finally be realised. Ultimately, this is a major structural difference between the Rudd Government’s school reforms and those that have been floated before them—not only because we have the will to revolutionise Australia’s education system, but because we are modernising the federal structures to enable necessary education reforms and investments to be made.