Power politics dominates the international scene and the US as the most powerful nation on the planet plays power politics hard. Power politics is also how the vertical power balance in a federal system is conducted. For instance in the US California tends to be very independent of the US national government. This is due to a mix of size, economic power and ability to raise revenue to support independent policy. So much so that Californian policy ends up influencing federal policies.

Australia has a far more centralised federal system which despite NSW's dominance of GDP at 33% has not translated into independent policy and political power since WWII. The main imbalance is tax, but a nationalist high court has helped as has a national government selective in its fights.

Three recent incidents are indicative of the power politics balance in Australia. The national emergency over Indigenous issues was between the National government and the Northern Territory. This is despite the Aboriginal people being well represented electorally wise in the NT as 25% of the population. The failure is the representatives in this system. In NSW, Qld and Western Australia the indigenous people are a much smaller percentage, under 2%.

The national government muscled in on the Northern Territory and not the other states because it could. NSW, Qld and Western Australia are big enough to tell the national government to bugger off, in polite words, but they can resist the take overs unless they agree to them. The federalist response for the Northern Territory should have been; thank you for your concern, it is a territory matter which the assembly will handle.

The next incident was the funding of a Tasmanian Hospital which centralising intensive care operations between two local hospitals. Would this happen in NSW or Victoria? Not without precedents being set in smaller states that have less ability to resist the national government and its dollars.

The third one is the Queensland Premier demanding results and explanations from the federal handling of the Haneef issue. There are electoral politics in play here, however, Queensland is powerful enough that it can go toe to toe with the national government and make administrative demands.

Power in politics comes from the ability to (or not) raise tax revenue and then redistribute it. Often in a democracy this is basis for electoral success as well. It is hard to see the funding of the Tasmanian hospital in any other light. Currently the national government does approximately 80-85% of all taxation in Australia.

The dirty little secret in Australian federalism is that the national government has income tax by agreement from the states. If the states truly wanted to assert themselves they would cancel that agreement, leave the national government with the GST and then raise the taxes to support their own government through income tax.

A basic component of republican government is that a government raises enough tax to support itself and nothing more. The states are dependent for 50% of their budgets on the national government redistributing GST and tied grants.

This is the vertical tax imbalance. However this can be rectified by the states re-asserting their sovereignty over their constitutional right to tax income.

More Reading on Federalism

• Federalism
• Centralism
• States
• Vertical Tax Imbalance
• Power politics
• Tasmania Joining IR Court Challenge
• Federal Government Inhibiting State Tax Policy Innovation
• Federalism, Federalism, Federalism
• Copernican paradigm
• Trood's Regionalism
• The Quick Breakdown of Fiscal Separation
• Pushing the Hardest
• Balancing Stability and Fluidity
• Best Response to Commoditisation is Decentralisation
• Competing Policies