The third and final part of the volume turns toward options for structural reform of Australian federalism to meet these challenges. It takes as its starting point a view from each existing tier or ‘sphere’ of government, and concludes with more detailed analysis of how the task of reform should be approached, taking into account how the potential costs and benefits of change might best be estimated, as well as more general principles.

In Chapter 10, ‘Taking subsidiarity seriously: what role for state government?’, Brian Head commences with a general review of major recent arguments for structural reform of Australian federalism, highlighting the difference between radical and incremental reform options. As a former senior State official, he argues against radical reform – assuming this is even possible – but emphasises this provides no excuse for a ‘do nothing’ approach, or a reversion to archaic notions of ‘states’ rights’. On the contrary, the conclusion reached is that state and federal governments alike must take principles of subsidiarity and devolution far more seriously within agreed national policy frameworks, which may still require a commitment to long-term institutional reform and new forms of local and regional power-sharing. By implication, if state governments are unprepared to do this, they may face the prospect of continuing encroachments on their power and yet more pressure for radical reform.

Chapter 11, Paul Bell’s paper on ‘How local government can save Australia’s federal system’, demonstrates the importance of the local government sector in the response to contemporary governance challenges. Adding bite to Head’s analysis, this chapter argues that, notwithstanding substantial reform over the last 20 years, there has indeed been a failure in national arrangements to enable local government to play its full role in the design and delivery of public programs, compounded by structural problems in the national system of public finance, and inappropriate ‘piecemeal’ approaches to local government reform itself. The extent of necessary reform is dramatic, even limiting institutional reform to the future of the existing three tiers, requiring a revised national approach to the roles and resources of local government, supported if necessary by federal constitutional recognition. Whether pursued in tandem with more coordinated approaches to region-level institution-building, or as a stand alone program, the imperative for major devolution to the local and regional levels is clear.

Presenting a general, national perspective, in Chapter 12 ‘Reforming Australian governance: old states, no states or new states?’, Ken Wiltshire argues that whatever is done in the short and medium term to streamline and redistribute roles and responsibilities, can and should also be reinforced by Australia’s federal constitutional arrangements. In other words, a new phase of cooperative federalism incorporating stronger elements of devolution, and action to address the present under-capacity and under-utilisation of local government, do not obviate the need to look at more general, permanent reform. Reviewing the history of Australian federalism and recent trends towards centralism, the chapter outlines basic principles for reform and examines the constitutional paths to achieving it, concluding in favour of not simply the desirability, but the inevitability of major reform within Australia’s existing federal traditions.

Together these chapters emphasise the importance of better research into new options for governance, in particular into the economic and financial costs and benefits of meaningful reform. Christine Smith accepts this challenge in Chapter 13, ‘Quantifying the costs and benefits of change: towards a methodology’. Taking a detailed look at existing attempts to estimate the costs of existing federal arrangements and those of alternative approaches, the chapter notes that estimates of potential public finance savings from reform vary wildly, from as low as $1-2 billion per annum, to up to $20-30 billion. The result is a proposal for a new approach to the quantification of the costs and benefits of change in structural and/or financial arrangements of the current Australian federal system, building on existing lessons but taking a more comprehensive and functional approach than so far attempted.

In Chapter 14, ‘Where to from here: common ground in the new federal reform debate’, we draw on all chapters and key elements of discussion from the floor of the symposium to present a new analysis of the growing points of consensus around the need for reform of Australian federalism. The chapter briefly summarises key next steps for a more robust debate about institutional reform to deliver better long-term public policy outcomes at national and regional levels. In addition, the Appendix to the volume includes an abridged version of the discussion paper, ‘Reform of the Australian Federal System: Identifying the Benefits’, which was launched at the symposium, and which contains a suggested evaluation framework for all options for institutional restructuring.

Previously, debate about reform of Australia’s federal system has tended to be sharply divided between the immediately practicable and long-term ‘dreams’; between those with a deep sense of federalism’s dynamic history and those who presume nothing can substantially change; between institutional actors presumed only to be concerned with preserving the status-quo and protecting their own immediate self-interest; and between different assessments of the challenges of federalism, with no relationships drawn between the centralising drift in federal-state relations and the growing pressures for improved governance capacity at the local and regional levels. The analyses in this volume bridge all of these gaps, setting out with new clarity some of the unifying imperatives for institutional reform and basic principles for new institutional design, without prescription as to the result. Federal systems of governance are meant, in theory, to be all about delivering quality governance at the regional level of political community, as well as achieving national goals – how this is to be achieved in practice in contemporary Australia is now a vital question of public administration and political development, underscored by community preferences and public demand. The pursuit of improved institutional arrangements is an increasingly necessary task, and one for which this volume will help equip a wide range of decision-makers from all professional disciplines and all walks of life.