Ensuring that the right institutional arrangements exist to provide the right incentives to deliver against agreed outcomes is the critical success factor for the NRA. Having an effective independent body to monitor the reform agenda is part of this. COAG in July 2006 went some way towards achieving this, in agreeing to establish the COAG Reform Council (CRC). The Productivity Commission has also recognised the importance of incentives. Gary Banks, Chairman of the Productivity Commission in a 2006 speech to the ‘Making the Boom Pay’ conference in Melbourne succinctly described this issue in the context of regulation:
While many regulatory reforms will be clearly beneficial to the jurisdictions implementing them, reforms directed at achieving national consistency may not yield benefits to individual jurisdictions commensurate with national gains. In such circumstances, there may be a case for the Australian Government to provide financial incentives for jurisdictions to take a broader view.[2]
The case is even more stark in the area of human capital reform, where the States and Territories will do the bulk of the ‘heavy lifting’. Modelling suggests that the Commonwealth will receive the majority of the benefits. While COAG has agreed in principle to the fair sharing of the costs and benefits of reform, it remains to be seen how this agreement will be implemented.