Federalism

1. Federalism POLS 2103 Australian Democracy

2. Types of federal systems

4. Federal structure weakened by: • government perspectives have often worked to boost national government power • the national government has increasingly controlled the national purse-strings • states have become increasingly dependent on grants from the Commonwealth • international events have tended to give more power to the national government • the Australian community has tended to look increasingly to the national government for assistance in many matters formerly the sole preserve of the states • High Court decisions have tended to increase Commonwealth power, and • Commonwealth governments have tended to focus on their own needs, policies and preferences before those of the states or territories, with an implicit assumption that the national view is the one that should be preferred in times of debate and argument.

5. Two rationales for federalism • Pragmatic federalism • Democratic federalism

6. Pragmatic federalism • an administrative – and short-term - solution to a political problem. • Its prime purpose is to persuade a number of hitherto self-governing polities, each reluctant to surrender their sovereignty, to unite into a larger, coordinating structure (the federal system) in order to achieve certain ends that are judged to be desirable.

7. Democratic federalism • arises from more idealistic motives. It is first and foremost about dispersing power away from a dominant central government, simultaneously broadening representation. • It seeks to ensure that the voices of smaller or less powerful members will not be swamped by the larger ones.

8. Australia’s pragmatic federalism • The system did not arise from a search for a political compact that would guarantee the moral and communitarian integrity of such diversities within a democratic constitutional framework. Far from it. • It amounts to little more than a set of pragmatic, legalistic and administrative compromises intended to shore up parochial interests imagined by men of influence in the Australian colonies at the end of the nineteenth century.

9. Changes in society • Australians have raised their expectations of what they can gain from government • the Commonwealth is increasingly seen as most likely to see that people’s needs are met • internal migration has created a frustration with different laws and regulations in each state • the development of large national businesses has been affected by the lack of a true common market, and • the great increase in the size of cities has shown weaknesses in the system.

10. Criticisms of existing arrangements • they help create and maintain inequality among citizens • they create difficulties for people living on state borders • they are heavily encrusted with bureaucracy • they hinder infrastructure development • they maintain a disappointing weakness in local government, and • they produce a large cost associated with duplication and overlap of services.

11. What might be done? • Some call for the abolition of the federal system • others speak of re-allocating government powers, • while another view is that the Commonwealth should take over all policy-making, with the states as service-deliverers.

12. Key questions • Was Federation really necessary? • Was Federation foisted on us by concealed self-interest? • And was there really such popular support as we are led to believe?

13. Sir Edward Deas Thomson Founding Father?

14. “Their interest suffers, and must continue to suffer, while competing tariffs, naturalization laws, and land systems, rival schemes of immigration, and of ocean postage, a clumsy and inefficient method of communicating with each other, and with the Home Government on public business and a distant and expensive system of judicial appeal exist…” - Select Committee, Parliament of Victoria, 1857

15. “Looking to the state of affairs in Europe, and to the fact that it is the unforseen which happens in war, the defence forces should at once be placed on a proper footing; but this is, however, quite impossible without a federation of the forces of the different colonies”. - Report of Major-General James Bevan Edwards, 1889

17. Henry Parkes Federation Father or Great Opportunist? Or both?

18. Sir Robert Garran Federation “left for dead by the politicians”…but “brought to life by the people”.

19. “I have seen Mr Barton and I have urged the necessity of making this movement a citizens’ movement”. - Sir William McMillan

20. To Barton, June 1894: “All we want is an Organisation and a Program. At present we are running about looking for an enemy, like a lot of new recruits, and tumbling over each other: we want a General to map out a plan of campaign”. Two weeks later… “Tell uswhat we are to do in order to bring about the desired result”.

21. “The politician, having impugned his calling, has to call forth a voice that can restore its legitimacy. He instates the people as a disembodied presence capable of an altruism that he and his colleagues can never achieve. The people are inscribed as citizens, owning no class distinction or party loyalty. They speak at his command and then fall silent as the business of government is subsumed into the Commonwealth that the politicians bring into being”. - Stuart Macintyre, 1998, “Corowa and the Voice of the People” Edmund Barton

22. Turnout on Commonwealth of Australia Constitution Bill Referendum 1899 % eligible voters NSW 63.39 VICTORIA 56.29 QUEENSLAND 64.78 SOUTH AUSTRALIA 54.44 TASMANIA 36.48 WESTERN AUSTRALIA 67.13 Nearest general election NSW 60.6 VIC 62.5 QLD 79.1 SA 62.9 TAS 64.8 WA 46.1

23. ‘Yes’ voters as Percentages of Electors Qualified to vote Colony 1898 Ref. 1899 Ref. 1900 Ref. NSW 23.2 35.8 - VIC 38.8 52.9 - SA 26.3 43.3 - TAS - 34.5 - QLD - 35.9 - WA - - 46.6 All Colonies 30.1 42.9 Source: L. F. Crisp, Federation Fathers, p. 149

24. ‘Yes’, ‘No’ & ‘Don’t care’ Colony Yes No Don’t care NSW 35.8 27.6 36.6 VIC 52.9 3.4 43.7 SA 43.3 11.2 45.5 TAS 34.5 2.0 63.5 QLD 35.9 28.9 35.2 WA 46.6 20.5 32.9 Source: C. M. H. Clark, Select Documents, p. 517.

25. 1891 Federal Convention 42 delegates 17 Australian born 24 born in the British isles 1 on the Isle of Man

26. Sole Labor voice (but elected on a liberal ticket) Billy Trenwith

27. NSW delegates elected to the 1897 Convention • 9 were politicians • 6 of those were lawyers • 1 was a banker

28. Central Federation League Class A (53) Professional men, medical and legal Class B breakdown: Merchants (13) Manufacturers (13) Shipping interests (5) Land, building and investment (18) Insurance and banking (24) Class B (73) Business interests

29. “The Australian banks do not possess, as those in this country do, a great central institution from which sources of supply in the form of legal-tender may be obtained…the advantage of a central bank, equipped as the Bank of England is, is of great service in time of pressure”. - Bankers’ Magazine, London, 1893

31. “The Federal question is nothing but a commercial movement from beginning to end”. -Tom Price

32. A critical assessment • The negotiation of federal compacts typically provides guarantees of political representation that contradict the principle of one vote one value. • The smaller component units are characteristically over-represented, as is the case in Australia. In 2007, a Tasmanian Senate vote was worth almost 13 times a NSW Senate vote. • In principle, this prevents government from ignoring the interests of the smaller federal units. In practice, party loyalties generally trump territorial representation.

33. “…the federation of the Australian colonies would meet, and finally settle, the difference of opinion that now exists between us and the English capitalist”. - Sydney banker, Barton Lodge, 1899

34. Vertical Fiscal Imbalance A feature of Australia’s federal system is that power over spending and policy-making is being increasingly concentrated in the Commonwealth. This follows from the fact that the states have relatively large spending responsibilities but relatively few own-revenue sources whereas the Commonwealth has substantial power to raise revenue but relatively few Constitutionally-assigned spending responsibilities. The difference between the expenditure responsibilities of each tier of government and the own-source revenues available to that tier is called vertical fiscal imbalance. Australia is characterised by a relatively high degree of vertical fiscal imbalance compared with other federations. A consequence is that the states depend heavily on Commonwealth grants for revenue.

35. Forms of assistance The Commonwealth provides financial assistance to the states and territories in the forms of general revenue assistance, mainly GST revenue and specific purpose payments (SPPs). The distribution of GST revenue is governed by the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations. This provides, among other things, that: • the states and territories can spend the GST revenue as they wish • revenue from the GST is to be distributed among the states and territories based on horizontal fiscal equalisation principles, and • the Commonwealth Grants Commission (CGC) is responsible for calculating the relativities used to determine the distributions.

36. Horizontal fiscal equalization State governments should receive funding from the pool of Goods and Services Tax revenue and health care grants such that, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency, each would have the same capacity to provide services at the same standard. The principle thus seeks to ensure that each state has the financial capacity to provide services at national average levels and at average levels of efficiency. There is, however, no obligation on the states to provide the services they are funded for.

37. Public deliberation • The “behind closed doors” character of the intergovernmental decision-making pre-empts proper processes of community consultation and may also pre-empt proper parliamentary deliberation, as nine governments present their respective parliaments with already agreed-upon template legislation. • Federalism is here serving to multiply the strengths of executive government vis à vis parliament.

38. How democratic? The Australian Audit has found democratic strengths in the areas of: • policy innovation, • political participation, • potential for regional responsiveness • fiscal equalisation.

39. How democratic? It has found deficits in: • the lack of transparency in intergovernmental decision-making, • the limited scope for community consultation and parliamentary deliberation • and the accountability issues arising from shared decision-making, blame-shifting and voter confusion.