Australia’s biggest political problem, Tony Abbott wrote in Battlelines, is the “dog’s breakfast of divided responsibilities” between Commonwealth and State:
Tackling the dysfunctional federation turned out to be a lost opportunity for the Howard Government… Certainly, it would have been a political objective worthy of a great prime minister. It could have been the principal element in the fifth-term agenda that people ultimately concluded the government lacked.
It is clear from Tuesday’s budget that the Prime Minister intends to take up the challenge, though not by extending the Commonwealth’s reach, the option he once considered .
The emphasis Joe Hockey put on the possessive determiner in his interview with Alison Carabine on ABC Radio National Breakfast this morning is instructive:
If they (the states) want to maintain that level of funding for their schools and their hospitals, which is well in excess of what the base funding has been over previous times, then they have to get it from the taxpayer as we would have to get it from the very same taxpayer.
Carabine concludes that Hockey is signifying changes to the GST when he says:
We will sit down with the states and work out a way that the people who actually run the schools and run the hospitals can be more efficient and actually raise the money that needs to be raised to run them
But there is another option, canvassed by the Commission of Audit: state income tax. As I wrote last week:
If Rudd accomplished nothing else in office he did at least perform a useful service in disabusing us of the notion that Canberra knows best…
The lines of overlapping responsibility must be disentangled, but Canberra should be doing less, not more…
Fiscal decentralisation is an idea worth reconsidering. Federal income tax would be slashed, since Canberra would have to send fewer cheques to the states. States could set rates as they pleased, allowing them to compete with one another.