There is a strong case for a substantial Commonwealth role in strategic coordination (or ‘steering’) in key policy areas (Head 1989). Since the 1990s there have been some impressive results from 15 years of attempting to improve policy outcomes on national issues through federal/state agreements. Negotiation of national policy frameworks is an economical and effective way of achieving benefits without structural redesign of federalism. The Special Premiers Conferences and the Council of Australian Governments (COAG) forum have a solid record of achievement, as noted below. The political leadership of ‘first Ministers’ has been important for reform – the track-record of portfolio-based ministerial councils has been much less impressive. The availability of financial incentives from central government has also been an important tool in inducing support and achieving a number of national agreements. The States for their part have demonstrated their willingness to cooperate to resolve interstate anomalies and inefficiencies, and to cooperate with the Commonwealth in achieving important national goals in the public interest. Each level of government has made considerable progress with the efficiency and effectiveness agendas inside their own jurisdictions.
Some national problems have been so large that cooperative solutions among the governments have been seen as essential. This was recognised in 1990 with a new decision-making forum for Heads of Government, the Special Premiers’ Conferences, to deal with overarching issues such as microeconomic reform, principles of environmental management, government roles in service delivery, and the efficiency of regulatory regimes. This was renamed the Council of Australian Governments in 1992. For those who doubt whether a cooperative approach can produce results, the achievements of the ‘golden’ period 1990-95 were considerable (Head 1994; Painter 1998):
national framework legislation for non-bank financial institutions;
mutual recognition of interstate standards for goods and occupational qualifications;
standardised data on the comparative efficiency of government business enterprises;
establishment of National Rail Corporation to manage interstate rail freight;
establishment of Australian National Training Authority to coordinate vocational training;
establishment of National Grid Management Council to coordinate electricity supply and distribution protocols;
agreement on uniform road transport regulations;
establishment of National Food Authority to coordinate food standards;
agreement on national approach for distribution and pricing in the gas and water industries;
agreement on balanced approach to ecologically sustainable development and a national approach to greenhouse issues;
inter-governmental Agreement on the Environment (IGAE) to establish a consultative approach on relevant national issues and agreement to establish a National Environmental Protection Council to determine quality standards for air, soil and water;
agreement on strategies for disability services;
rationalisation of structure and operation of ministerial councils;
agreement on a national approach to teaching Asian languages and cultures in our school curriculum;
principles for National Competition Policy following from the Hilmer Report;
a national approach to reform of legal services and the legal profession; and
national approach to performance indicators for benchmarking the provision of government services were considerable.
State leaders have insisted that if the federal system is run as a centralised hierarchy, there is little incentive for innovation and cooperative problem-solving. If the system is run as a team event, albeit with a special role for the central government, it is likely that better results will be produced. The states remain responsible for very substantial issues of service delivery and business efficiency. In some cases, it is appropriate that the States should compete for citizen support by offering attractive packages of social and economic policies, tailored to regional needs and preferences. Cooperative federalism can be successful with a degree of goodwill, even where the ‘first Ministers’ include leaders of different political parties. Difficulties remain in seeking to determine what system of government will best facilitate joint problem-solving for genuinely national challenges and encouraging innovation and diversity at each level of government while tackling the major issues of service quality and economic productivity. The Business Council (BCA 2006b) has argued that progress should not depend on the ‘accident’ of whether political leaders have sufficient goodwill to engage in constructive debate and reform. The BCA proposes a strengthening of national strategic capacity by establishing a Federal Commission to identify key issues requiring a collective response, and to report on progress in implementing previous COAG agreements. Despite the manifest failure of previous exercises to reduce duplication and overlap, the BCA also proposes a Federal Convention to examine re-assignment of roles and responsibilities on key policy arenas and to achieve a more uniform approach to national markets.
The States have been increasingly willing to enter into national agreements on many policy areas concerning the economy and cross-border issues: e.g. corporate business regulation, competition policy, trading enterprises, mutual recognition, energy, water, transport, environment, and benchmarking of service delivery. The States, it must be said, should continue to lift their game at a strategic level, as is being attempted through the second wave of productivity reforms and human capital reforms being considered by COAG with strong input from Victoria (Glover 2006; Wilkins 2006). For the States, the political necessity of developing a more coherent ‘collective’ position to balance the power of the Federal Government, has led (after many false dawns) to the establishment of a states-only forum, the Council for the Australian Federation, in mid-2006. Its key role, apart from information-sharing, is to discuss strategic issues without the presence of the Commonwealth. If it can focus on strategic long-term issues (e.g. the COAG productivity agenda) rather than tactical skirmishes with the Commonwealth, it may prove to be useful.
Intergovernmental agreements supported by tied grant programs have often been too rigid and overly focused on detailed operational controls. Agreements have often failed to reflect a genuinely cooperative national approach to policy development, let alone facilitate state or regional differences in policy settings. The States have argued for many years that the federation would be better managed if the following occurred:
National strategic objectives should be cooperatively negotiated with the States in policy areas genuinely requiring a national approach. COAG should be the ongoing forum for debate and decision on major strategic issues including regional policy frameworks;
However, except in Commonwealth-only service areas, program implementation should be essentially a matter for the States and regions, with financial accountability lying primarily through State Parliaments and State Auditors-General;
National agreements should increasingly focus on the goals and outcomes expected by governments, with less emphasis on detailing quantitative inputs. The availability of consistent and reliable performance information on the major areas of service delivery in the last decade has reinforced the strength of this position. However, it remains an educational challenge to convince the media, interest groups and federal politicians that an outcomes focus, anchored in published comparative performance information, is really a superior form of accountability;
Review the role of ‘tied grants’ in jointly-funded government programs. Commonwealth SPPs, which might be a minority of total program funds, are used as leverage to influence the goals and components of the whole program area. A significant proportion of tied grants could be converted into either block-funding for the agreed policy purpose (e.g. school education) or converted into general revenue grants, providing that agreed goals and performance measures are in place; and
Progress should be made in redefining the spheres of policy and service responsibility for each level of government. While there can never be precision in dividing roles in our federation, there has been insufficient effort to assign certain functions more clearly to one level of government (e.g. universities to the Commonwealth). Canberra has found it difficult to agree that school and vocational education should largely be a matter for the States, subject to broad national agreement on coordination, equity, and performance indicators. Healthcare, the other large-spending area of overlapping federal/state roles, remains a political and administrative minefield (see Podger this volume). The Commonwealth has recently backed away from radical plans for structural reform in favour of ‘incremental reforms’ (Abbott 2006).