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We need strengthened national and local governments... not states!

By Mark Drummond - posted Wednesday, 15 May 2002

To determine 'Which level of government should do what and why?' we should establish appropriate design criteria and take stock of our present systems of government, mindful of the ongoing challenges we face as a country, and also of structures and systems employed in other countries.

Design Criteria

Our system should address a number of criteria. Foremost, the system should be;

  • democratic
  • understandable
  • accountable
  • just
  • equitable
  • affordable

Governments in particular need to be;

  • efficient;
  • stable, yet flexible;
  • socially, environmentally and economically sustainable.

Whilst ensuring they are;

  • outcome effective, in functional areas such as the environment, health, education and justice;
  • helpful to individuals and businesses [small and large];
  • centralised and decentralised in an appropriate balance;
  • close to and responsive to the diverse needs of individuals and communities across the country;
  • responsive also to the needs of the country as a whole;
  • responsive to global challenges and circumstances.

Taking stock of our present systems

In the year ending June 2001, Australian governments across all three levels took in a combined total of $257 billion in revenue from all sources, and spent a total of $275 billion including public corporations.


The Commonwealth government has constitutional responsibilities in areas such as Defence, Foreign Affairs, Taxation, Immigration, Trade and Commerce, Post and Telecommunications, and Social Security. These account for 55 per cent of all government spending in Australia, yet collects 82 per cent of all taxation revenue.

Powers and responsibilities not constitutionally assigned to the Commonwealth, default to state and territory governments. In practice however, many functions involve both Commonwealth and state/territory governments – for example in education, health and transport. These are state responsibilities constitutionally, but largely financed by Commonwealth grants.

State and territory governments account for about 39 per cent of all Australian government spending, but raise just 15 per cent of all government tax revenues. These are heavily dependent upon Commonwealth government grants, which give the Commonwealth considerable coercive bargaining power and somewhat centralised control over state and territory governments.

Of the $33 billion in taxation collected by the states and territories in the year ending June 2001, over $9.5 billion was payroll tax, nearly $5.3 billion was stamp duty, and over $3.5 billion was gambling tax. So state and territory governments rely heavily upon taxes which discourage employment, trade and commerce, and at least passively encourage gambling.

The year ending June 2001 saw local governments (excluding the ACT) account for just 6 per cent of all government spending in Australia and 3 per cent of all tax revenues collected. Local government responsibilities vary across the six states and the Northern Territory but typically include:

  • maintenance of roads, footpaths, parks and gardens;
  • town planning and building regulations;
  • garbage collection;
  • council rates collection;
  • infant welfare centres;
  • meals on wheels;
  • public libraries.

Excluding Australia itself, only eight countries in the world are larger in land area than Western Australia, and only 15 larger than Queensland. New South Wales has nearly the population of Switzerland spread across an area larger than Switzerland, Germany, Austria and Italy combined.

Furthermore, whereas Australia's population at the time of federation in 1901 was just 3.7 million, nearly 7 million Australians now live outside the capital cities alone, and nearly 4 million Australians live within 100 km of a state or territory boundary.

So our local governments – particularly outside the capitals – are especially heavily relied upon to address needs and provide services which state and Northern Territory governments are simply too large and too distant to provide. Yet Australian local governments are starved of constitutional and financial powers and resources to an extent unmatched in the democratic world, accounting for, as mentioned earlier, just 6 per cent of total government spending. The corresponding figures in other federations include 25 per cent in the United States, 21 per cent in Switzerland and 18 per cent in Canada.

A 1997 comparative study of 26 OECD countries, titled 'Managing Across Levels of Government' (refer, describes Australia's situation as follows:

The states are among the most powerful intermediate governments in the world because of the breadth of their functions and their substantial role in service delivery (in large part a function of the centralisation at the sub-national level, which occurs at the expense of local government).

So whereas advocates of federal systems of government say that federation is supposed to bring government close to the people, federation Australian style keeps government and democracy further from its people than in any other comparable federation.

Our system suffers from "duplicated centralism" because of the extent to which the eight State and Territory governments duplicate the work of one another and of the Commonwealth. Also, federal, state and the Northern Territory governments alike exercise centralised dominance over the tier of government beneath them (the ACT again being the exception here). Australian state governments in particular are almost certainly the most centralised sovereign governments in the democratic world.

So to what extent does duplicated centralism harm Australia?

Challenges and Costs

The salinity, Murray-Darling and rural crises; corporate and market failures in the health care, aviation, telecommunications and insurance industries ... these critical realities all draw urgent attention to the questions at hand.

Whereas at Federation we were about the wealthiest country in the world, the rigours of global competition have seen our wealth slip significantly relative to other first world democracies.

And whereas Western Europe and North America each have several hundred million relatively wealthy people to purchase goods and services produced by countries there, and help maintain economic stability as a foundation for social integrity and prosperity, Australia is surrounded by relatively poor Asia and Africa and uninhabited Antarctica, and has less than 20 million people.

Our far flung settlement patterns and isolated location no doubt partly explain our decline, but we have also suffered under the increasingly crippling weight of duplicated centralism and the enormous, relentlessly compounding costs hence imposed.

My own estimations (see are that our present system of government hosts wasteful inefficiencies, in terms of bureaucratic and regulatory duplication and coordination burdens, which amount to some $30 billion per annum.

We can do little to change our geographical circumstances and associated economic disadvantages, but, fortunately, our Constitution and democracy do allow us to change our system of government. So ...

Which level of government should do what and why?

A "best possible" system of government for Australia should involve two principal levels of democratic government. We need strong, effective close-to-the-people local or regional government and strong, effective national government.

Everything which the states and territories do at present could be done better, in respect of all relevant criteria, at either the national scale or a scale much closer to the people than the states and Northern Territory are.

We can achieve the system called for here by simply amalgamating, or coalescing, state, territory and federal governments into a reformed, rationalised national government, leaving local governments in more or less their present form.

We couldn't possibly satisfy the essential closeness-to-the-people criterion if we forced amalgamations on to local governments – especially in sparsely populated rural communities.

Local governments should be assigned powers and responsibilities generally held by local councils in their present form plus additional general community and regional development roles with industry, employment, labour market support and welfare elements. I emphasise the word general here to draw attention to the significant autonomy that such generality should necessarily provide.

The idea is that local government could put on a big town or suburban barbeque, or under-write the insurance or overall costs of the annual town show, or employ people experiencing hard times etc. etc.

Powers and responsibilities assigned to the national and local governments should be formalised in a new Constitution which should also provide local governments with equitable guaranteed revenue share entitlements. Much like those determined by the Commonwealth Grants Commission for the states and territories in the present system; such revenue guarantees are arguably the very substance of equitable decentralisation.

Regional governance can perhaps best be achieved through resource pooling and voluntary collaborations among neighbouring local communities through their local governments.

We already have about 50 voluntary regional organisations of councils (VROCs or ROCs) presently in place across most of Australia (refer, which provide an excellent model for such arrangements.

Like with local government generally, these ROCs survive on shoestring budgets in the present system and could be expected to thrive as never before once they emerge from beyond the shadows of state governments.

National government functions, such as health care, education, policing and so on, could be facilitated through regional bodies like those already in place at the state level in our present system, with service delivery regions, especially in areas of life and death gravity such as healthcare and policing, designed according to functional imperatives rather than arbitrary boundaries.

With healthcare, for example, service delivery regions would be designed on the basis of settlement patterns, hospital locations, ambulance travel times etc. There would be regional court, policing and educational districts, water and environmental districts based on catchments, and so on.

So the buck should stop at national and local governments in a system more or less as I have described.

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About the Author

Mark Drummond is a mathematics and statistics teacher at the Canberra Institute of Technology who completed a PhD thesis in 2007 at the University of Canberra titled Costing Constitutional Change: Estimates of the Financial Benefits of New States, Regional Governments, Unification and Related Reforms.

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