It used to be called the Premiers’ Conference, and it was all about money. The Premiers attended, determined to screw as much cash out of the federal government as possible. When the Commonwealth took over income tax in 1942, they had no other real source of income.

Cartoon: Peter Nicholson

The meetings were essentially a theatre. The Premiers left their states with a farewell press conference, promising to extract a great deal out of Canberra. On the night before the meeting, the Commonwealth would slide its offer under the hotel door.

In the morning, another series of press conferences, with each Premier deriding the meagre amount offered. When the meeting broke up, each Premier held yet another press conference, praising his or her magnificent effort in extracting a reasonable offer from the feds. End of another annual money carve-up.

In 1992, the Council of Australian Governments was inaugurated. It was enlarged from the old Conference to include the Prime Minister, six Premiers, two Chief Ministers, and one representative from Local Government. It was a sensible recognition that the federal structure had enlarged.

Since then, COAG has developed beyond the cash grab mentality. It is actually trying to reform the federal system. The process is exceedingly and frustratingly slow, but there has been some forward movement.

At least it is based on a realistic understanding of the problem. In 2007, when Kevin Rudd promised to “fix federalism”, the common reaction was to giggle. Getting Premiers to agree on anything is, as one bureaucrat told me, like herding snakes: they will not stay together, and they bite.

This tendency is on display over the Murray-Darling non-agreement. Different Premiers going in very different directions, based on the self-interest of each State. That kaleidoscope of views will probably have to be solved by the High Court, and no-one will be happy with the result.

Meanwhile, COAG goes quietly on, actually doing some positive things. Out of the meeting last week came agreement on skills training and funding for vocational education. A national disability insurance scheme has reached the level of agreement “in principle”, with promises of commonwealth funding.

There was a compact to cut red tape. But cutting green tape, the nine sets of environmental regulations which bedevil everyone, was blocked when Queensland and NSW decided they wanted to keep control. Back to the drawing board.

There was progress on an issue which is becoming more important as jobs move from some States to others. Industrial and employment regulations are still fragmented. COAG agreed to work towards a “seamless” system.

A related issue, producing uniform occupation health and safety laws ran into opposition from Victoria and NSW. Another try has been put off until 2014.

On the other hand, in a hang-over from the old Premiers’ Conferences, shares of money are still the biggest and most divisive issue. COAG ducked the question of who gets what share of the GST at this meeting, but the question will remain intensely divisive.

Some States are demanding that the billions of GST dollars, collected by the Commonwealth but belonging to the States, should be divided on a per capita basis. That sounds fair. The resource state of WA is emphatic about that, as it gets only a small proportion back of the GST extracted from its population back.

The Northern Territory nearly had a fit at the suggestion: it depends on a very high proportion of GST income, many times the proportion received by the States.

There has been progress in reforming federalism, but very slowly. Maybe COAG will be able to achieve the Rudd dream by the end of the century.

Most commented


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    • Sony B Goode says:

      07:44am | 18/04/12

      The states should receive no federal money accept for cross border projects. We need to abolish the income and capital gains taxes and increase GST. The states are quite capable of raising money without going to the feds. The problem is they refuse to live within their means and are deliberately moving to a Greek like result.

    • Fiddler says:

      08:13am | 18/04/12

      do you have even a single clue what you are on about?

      The state pays for the following:
      And many more

      The Fed pays mostly for
      Defence (plus assorted more)

      The Fed currently receives - all income tax, company tax, GST plus a crap load more. The states receive only minor taxes such as stamp duty on properties, a few cents per litre on fuel and things such as car rego, nowhere near enough to pay for what it provides.

    • Sony B Goode says:

      09:15am | 18/04/12

      Most of these “state” services should move to user pays.

      On the road to abolishing income taxes and capital gains taxes, we need to make then truly progressive by lowering the rate the higher the income, with a rate of zero at say $.5m, the amount of tax paid by an individual should be capped. Ultimately though income and capital gains taxes should be abolished. Government has shown repeatedly it can’t be trusted with our money, one only has to look at the catastrophic squandering of the current alp/green partnership. $200b of spending and nothing to show for it. A debt that will drag on the economy for a generation. Gillard and Brown should be charged with treason and sent to jail.

    • cellist says:

      09:34am | 18/04/12

      Sorry fiddler you forgot to tell us who gets the royalties from mining. Would that be state or feds?
      You neglected to tell us that the feds pay for medicare and subsidise your prescriptions. Where do you think the states get their money to pay for health and education? Plenty more mistakes in your rant.

      You have a very misguided view of where the money comes from. Perhaps next time you could do a little research? In particular, you might invest some time figuring out what those elusive “plus assorted more"s are.

    • Big Jay says:

      09:41am | 18/04/12

      @ Fiddler - Good comment

      I would like to add the Fed also receive MAJOR revenues from Fringe Benefits Tax, and Excises (on fuels, alcohol and cigs).

      The States also have MAJOR revenue streams from mining royalties (even NSW has a massive coal mining industry), land taxes and payroll tax.

      States are also responsible for power and water supply.

      I agree the States don’t get anywhere near enough money from the Fed to carry those responsibilites to the expected standard.

      @ Sony B Goode - What you described is a truly REGRESSIVE system. I hate government waste as much as anybody but the Federal tax collection systems are vastly more efficient (largely due to scale). Having no income taxes might work well for banking and tax havens like Cayman Islands or Monaco, but civilised countries have (hopefully progressive) income tax.

    • Fiddler says:

      09:49am | 18/04/12

      Sonny, what our roads should move to user pays? You are in favour of privatising our hospitals? All our schools, police and fire departments?

      @cellist, yes the states do get mining royalties, however WA gets an awful lot more than say Vic, and no I am very aware they get their funding to pay for these services from the Fed, they do however have to go cap in hand each year. The state pays for the services and gets an allocation from the fed each year. That was kind of the whole point of the article, the states meeting up each year and fighting, rather like seagulls over the last chip. Medicare is not the whole health budget, running hospitals cots a lot more.

    • Sony B Goode says:

      09:58am | 18/04/12

      Socialism must be purged from our democracies. The idea of egalitarians is a failing system of negative incentives and promotes government waste.

      The current system is catastrophically regressive, a truly progressive system would mean the abolition of income and capital gains taxes to prevent the inevitable debt overhang used to buy votes from the gullible like acotrel who want a free lunch.

      There is no such thing as a free lunch.

      How well is that government squandering working for Europe? How many times do we need to repeat the same mistakes? Socialism must be purged from our democracies once and for all.

    • Borderer says:

      10:05am | 18/04/12

      Well thought out there….
      User pays…. how do you plan on driving outside a major city? Or take your child to a rural hospital? It’s so well thought out on your part you could be a sitting member of the federal government.

    • Ben says:

      12:13pm | 18/04/12

      @Sony - there is ‘socialism’ and then there is a little bit of ‘humanism’.  The idea of 100% user pays does not work in a democracy because you vote for some people to represent you and they decide what is good for everyone.

      What you should actually be harping on about is responsible decision-making - if you want to talk about user pays, then remove support for having children and raising families.  If you can’t afford to have kids, don’t have them.  If you are stupid enough to adhere to your religious beliefs as an excuse for not taking care and have an accident, then it is still your own fault.

      I don’t mind paying my taxes when some part goes towards helping provide services for a disabled individual - and that is why we do not want 100% user pays - I do mind that they go towards supporting young parents who were too careless and could not afford to have children.

    • Economist says:

      12:19pm | 18/04/12

      I can’t take comments like this seriously. We replace government with private enterprise that will most likely have monopolies or oligopolies in the areas described if privatised. What accountability are you going to have then?

      It’s also such BS to say the private sector does waste money, again absolute nonsense.

      Suggestions to return funding to the states will result in a US styled approach where you’ll have states competing for business that won’t benefit the population at large just a few indvidual’s. It’s such crap. I live in a functioning society not just an economy.

    • Rick says:

      01:34pm | 18/04/12

      Can anyone tell us a country like Australia with so many commodities is in debt and struggling to have a better infrastructures ???????

      While Saudi Arabia and its neighbour countries with only one commodities ” oil” have so much money and still manage to buy our fertile lands to feed their people.

      Where is our bloody money ???????

      It’s only happenning in a mafiacracy….

    • SPR says:

      02:54pm | 18/04/12

      Rick says:

      Can anyone tell us a country like Australia with so many commodities While Saudi Arabia and its neighbour countries with only one commodities ” oil” have so much money and still manage to buy our fertile lands to feed their people.s in debt and struggling to have a better infrastructures ???????
      Answer - The Saudi royal government owns the revenue stream from the oil. 2012 expected earning from oil 296 billion dollars. And oh, do you by any chance remember the GFC? If you don’t, then there is your supplementary answer.

      Where is our bloody money ???????
      Answer - This question is best directed to Twiggy, Clive, Gina and the clowns that oppose the MRRT.

    • maria says:

      04:06pm | 18/04/12

      GFC = Govern For Contempt
      MRRT= More Rotten Refute Turmoil

      Where is our bloody money???????

      Do you know how many taxes we all have and must pay?

      and again where is the money?

    • Sony B Goode says:

      04:31pm | 18/04/12

      ben, nothing stops you or anyone else from voluntarily paying more taxes.

      Roads are already user pays, through registration and petrol taxes. Large projects are generally funded by the private sector. Government too busy squandering money on rubbish projects with no economic returns.

      Good question, why is Australia in debt with all these resources.

      why? because lefties want to drive everyone towards universal mediocrity, it’s called egalitarianism. A system of negative incentives which are in reality a chimera, a fraud and a lie.

    • DOB says:

      05:09pm | 18/04/12

      Siny B Goode - love your views, they give me the biggest laughs. User pays - that’d be like the US health system for example? The world’s most disastrous, most expensive, most malfunctioning and least effective health system? How about user pays for. lets see, the army, navy, and airforce? Then the Greens can opt out of taxes for those. Border control? Yeah, I dont like paying for detention centres so I’ll take that deduction. Police? Yep, dont need them.


    • RyaN says:

      05:53pm | 18/04/12

      @Sony B Goode: Based on your comment then the states would be better off removing themselves from the federation.

    • Rose says:

      09:29pm | 18/04/12

      RyaN, based on his comments I think it would be best if Sony removed himself from the Federation! His comments make no sense at all,  he clearly has no concept of the notion of the provision of infrastructure and services as a public good. The kind of society he appears to be endorsing is not only non-sustainable, it is down right dangerous.

    • The Blue Solution says:

      08:26am | 18/04/12

      It is always going to be a blame game if Labor is involved. Why do you think Gillard/Roxon ditched the idea of a Federal take over of health care? Blaming deflects from responsiblility and we all know Gillard is as responsible as a teenager with a credit card (or is that Craig Thompson?). Get rid of Labor and we will see change. Federal Labor didn’t learn any lessons from 11 years of political isolation maybe 25 years in that naughty corner may teach them a lesson. As for Gillard, Australians need to see if this person is actually collecting a pay and pension for doing nothing but screw ups.

    • Chris L says:

      09:02am | 18/04/12

      So now federal takeover of health would have been a good idea and you’re criticising them for not doing it? I guess they can’t win.

      Funny how only one party plays the blame game. The states were never held responsible for crumbling infrastructure and decaying healthcare during the Howard years, were they?

    • Starla says:

      09:24am | 18/04/12

      Chris L listen up, 2 points:
      Point 1: The current government needs to face up to its responsibility, ALP in Federal level since 2007, talking about Howard makes you look like a dill or worse Tchong. The States were mostly run by Labor not anymore for a reason.
      Point 2: Federal take over means 1 entity is responsible. If something is wrong they have to fix it. No excuses like cost or it isn’t within our scope blah, blah, blah. If they achieve something they get the credit.

      Gillard/Rudd/ALP are to be blamed. They wanted to play this game now they have to face the consequences of losing.

    • AdamC says:

      09:48am | 18/04/12

      Starla, Victoria’s last, unlamented Labor government was still blaming Jeff Kennett for stuff a decade after they won government from him. It seems to be something of a Labor bad habit.

      Actually, the states played a lot of brinkmanship with the feds over infrastructure during the Howard years. I seem to recall there being a framework in place for the federal government to help fund infrastructure projects that were sufficiently significant. I assume that system is still in place. Ultimately, the Labor states’ great error was jacking up recurrent spending while their revenue increased, rather than spending the money on infrastructure projects that flew under the national radar.

    • Tim says:

      10:40am | 18/04/12

      and Libs are still talking about Keating 16years after he left office.
      It seems to be something of a Political party bad habit.

    • AdamC says:

      11:19am | 18/04/12

      Tim, are we? When?

    • Ciely says:

      12:05pm | 18/04/12

      There was a time when almost all the States and Federal government were Labor controlled and they never bothered to communicate with each other to work things out. Yet they collected a pay check.

      Labor at the Federal level under Gillard was never going to take over health unlike Rudd because it would mean her Royal Highness would actually be expected to do work and get a result. Rememer bad health equals death! Yet these Labor doonies have collected a pay check.

      Blue Solution is right. All Labor does is blame, get no results, waste money, collect a pay check for themselves and repeat the same shit on a different day.

      Looks like supporting the ALP means supporting the destruction of Australia.

    • Chris L says:

      12:07pm | 18/04/12

      Nice one Starla. I pointed out that the blame game isn’t confined to one party, then you managed to claim it was Labor’s fault when the Coalition indulged. Very tricky, my congrats.

      AdamC, how good is your memory? If the Punch had a search engine that could look for the phrase “Keating’s 96 billion dollar*.*” there wouldn’t be enough hard drive space to store the listing. Oh, and how many times has the Whitlam government been mentioned this year?

    • Hope Floats says:

      12:51pm | 18/04/12

      It is about the current government stoopid! Who cares about Howard or Abbott or Bob Katter! If the current decision makers can’t get it right who can? Any excuse to excuse Labor tells me we are dealing with a bad bunch of do-nothing politicians!

    • AdamC says:

      01:14pm | 18/04/12

      Chris L, Whitlam is mentioned as being a bad PM who led a worse government, but nobody is blaming him for problems in the here and now. That is the difference.

    • Chris L says:

      02:49pm | 18/04/12

      @AdamC - The point I was making was that laying blame is a tactic used by more than one party, and I pointed to where the Howard government would do this. Then I’m told that I can’t mention the Howard government because it is no longer in power, and so it was pointed out where people keep mentioning the Keating and Whitlam governments.

      Now it seems that’s not the point because nobody blames the Whitlam government for today’s problems, but I never said they did.

      We seem to be working on different premises.

    • SimonFromLakemba says:

      04:09pm | 18/04/12

      Chris L

      “We seem to be working on different premises”

      Yes, AdamC never admits he is wrong, that’s the difference.

    • AdamC says:

      04:37pm | 18/04/12

      Chris L, actually, I think we were commenting at cross purposes. I was really responding to Starla and Tim, rather than your original comment. On reflection, I see you were making a somewhat different point, which is a valid one.

      Simon, I admit that I am wrong, but only when I actually am.

    • Against the Man says:

      05:25pm | 18/04/12

      Yes Starla I agree whole heartedly. The ALP machine is on its last breath. Game over I win!

    • KimL says:

      08:45am | 18/04/12

      She blames Rudd for everything..what more can you expect from an untruthful backstabber

    • Inky says:

      09:16am | 18/04/12

      Did you read the article? Because the picture seems to have very little to do with the article. I don’t think Julia’s actually mentioned at all, and Rudd is only once at the end.

    • Plantman says:

      10:02am | 18/04/12

      You would think the Liberals could afford to pay someone who could actually read an article before commenting. Especially seeing as how they are getting all those nioce donations from big tobacco.

    • subotic says:

      10:33am | 18/04/12

      I foretell that Mr Jaensch has a great future in fried chicken commercials.

    • J.T says:

      10:55am | 18/04/12

      You started by stating the problem:

      “When the Commonwealth took over income tax in 1942, they had no other real source of income.”

      Only it was stolen from then using emergency war powers…and never returned.

      The only way to “fix” Federalism is to return it how it was by design. Give back the income tax revenue to the states, in full, add to that company Tax. You can collect it in Canberra, that may be easier as the ATO is already set up, but the revenue needs to go straight back to the indivual states, according to where the income or company tax was earned.

      Next the Federal Government needs to KO the Federal Departments for the environment, Health, Education and Infrastructure, Social Services and Pensions.

      Let states decide what level to fund these things and how to do it.

      The Federal Government can have the GST, this will tie it down to do a very small amount of work.

      COAG can be used to do things like Harmonise regulations and agree on joint measures, with no money or funding up for grabs they might be far more willing to co-operate.

      For Federalism to be fixed the Federal Government needs to shrink considerably. at the turn of the 1900’s Federal Government spending made up 5% of GDP, it probably needs to get back to these levels. The Federal Government only needs to do things the States can’t. Once you return their full funding to the states, this won’t be much.

      This joint funding model was always going to produce to many mixed outcomes. Lets shrink the Federal Government, have strong, well funded state governments and a more direct democracy.

    • Catching up says:

      11:35am | 18/04/12

      States need to be able to raised and be responsible for the money they spend.

      This can only be bought about by restoring state taxation power.  Taxes such as GST are all regressive. 

      There is no need for the Federal government to concern themselves with state responsibilities.

      If this is not possible, the whole federal and state systems need to be reviewed .

      What we have now in my opinion is not working, is expensive and inefficient.

      Either go back to how the system was originally planned to work or recreated a new system altogether.

      The overlapping and transferring blame is not productive.  It does not make for good governance.

    • Dieter Moeckel says:

      11:29am | 18/04/12

      Two issues here.
      1. Most people want socialist benefits from a capitalist system. Don’t work. To give most of the Taxes back to the people means absolute user pays; schools, health, infrastructure, roads, protection (policing and defence) etc. To get the socialist benefits means high taxation. We live in a hybrid of sorts, with vague twitches as the edges.
      And yes I have private health and resent public health ...
      2. Centralist government tend to fail e.g. Russia (you can’t compare with the UK simply because of the size of the country and infrastructure necessities) and the Feds have been subsuming states’ responsibilities for years, e.g. Federal highways on state land - illogical. The other option is to return all state responsibilities to the states, education, health, policing, etc and have the Feds only involved in national issues. Back to the constitution. I cannot see why the feds have an education minister, and health minister and a plethora of others representing state responsibilities.
      But were there no Federal road there’d be no highway across the Nulabor, the Nt would only have roads in Alice, Katherine and Darwin, no national railway etc.

    • Dave C says:

      11:31am | 18/04/12

      I say abolish the states. We have too many levels of Governments. Have 1 federal government in charge of education, health, police justice, prisons, child protection etc. While we are at it instead of local government we have regional governments in charge of what local councils do now. 

      This would stop the duplication of red tape and competition between “states” and would also save money in the long term.

      While we are there we fixed 4 year terms with the house of reps and the senate. With the senate and the regional elections held in the alternative 2 years between federal elections. For example 2012 fed election 2014 regional and senate elections 2016 federal election etc. Or 1/3 of senate elected every 2 years with the senators serving a fixed 6 year term.

      Why oh why wont the major parties get together and try and get this done.

    • RyaN says:

      05:58pm | 18/04/12

      I say the opposite, abolish Federation!

    • RonaldR says:

      11:37am | 18/04/12

      When you read the comments in articles like this between the poor quality Government provided by Liberal and Labor and the attitudes of many that comment no wonder Australia is no longer the best place in the world to live ,It was the lucky country but now the greedy country overrun with selfish people.

    • Rick says:

      01:22pm | 18/04/12

      We a true MAFIACRACY which is ;
      Government of the MOB, by the MOB, for the MOB and theirs cronies.

    • Rick says:

      01:09pm | 18/04/12

      Money money and money than more money
      Once you understand that the main goal in a mafiacracy is “MONEY” at any costs regardless of the ramifications than you will understand why lies and frauds are the core policies of our system.

      And the only way to stop the lies and frauds is to have a true system of democracy a la Switzerland or DIRECT DEMOCRACY in which only the people are sovereign with the same legal democratic right as the swiss citizen has , a right enshrines in the constitution which is to call a referedum via a petition 50 000 to modify or repeal any crooked laws imposed by stealth or 100 000 petitions to modify or repeal any sections of the constitution or nothing will change and the mafiacracy will only grow and grow ....

      Just waiting for a new political party with the same point of view…. WHO?

    • Daylight robbery says:

      09:26pm | 18/04/12

      The one noticeable about living in WA the mining state has been the rapid increase in people and traffic on the roads over the past decade which has lead to more gridlocks and stress on services.
      Although the state government has been active here is a very evident need for infrastructure injection and cash from the Gillard government to service the mining states that are making the money.
      Not only that many Western Australians paid up towards the $100000 more for their house due to the shortage of developed land partly from the rapid ingress of net immigrant workers.  There’s no shortage of earth here, yet they have not seen the benefits of the so called mining boom. 
      The federal government needs to ensure they feed the business states making the money to cope with the expansion.

    • Michelle says:

      09:40pm | 18/04/12
      ...JULIA Gillard has challenged West Australian Treasurer Christian Porter to step down if he can’t balance his state’s books with $800 million less GST revenue…

      That’s the PM of Australia giving WA the bird. Any wonder we want as little to do with the ALP as possible? Our treasurer has responded by pointing out he has a better record than Swan(0/4) when it comes to delivering budget surpluses, therefore on the PMs reasoning Swan needs to be sacked. I agree.

      I’d like to hear if the WA ALP leader agrees with the PM that WA should smile and suck it up as she f*cks us over, or if he’s going to go her for the funds due our state.

      Does the ALP leader Mcwhatshisface represent WA or Gillard? angry


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