One of the arguments in Australia against federalism today is that it was politically necessary in 1901 in order to get the colonies to come under one government - and today that is no longer a political need. Federalism is a form of political organisation that has positive benefits beyond the historical reasons for Australian federation. These include; decentralisation, geographical balance of powers, policy diversity and local autonomy and representation.

This isn't nostalgia for some mythical Australian past; a federalist system is a superior form of constitutional and political organisation.

Benefits

A Unitary Government which sits in Canberra would make policy for the whole country. Someone in Perth would be under the same policy as someone in Sydney. Since they are highly different cities, with one economy getting rich of a resource economy, while the other is prosperous of a services economy, this just does not make sense policy wise. Unitary policy would mean that bad policy affects all at the same time.

A decentralised system where each state has a different policy response is far more robust, and able to route around failure. It also allows policy to be made for local conditions and concerns. Another example here is that Queensland pursues development-state economic programs similar to Asian countries. Where New South Wales, Victoria and Western Australia do not.

This has led Queensland to have a mix of a resource and services based economy, which is more balance than the western and eastern economies. A unitary policy from a central government would not have this level of provincialism or local interest.

Another argument for decentralisation is that the form of asymmetric warfare that has appeared with globalisation feeds on centralised structures in order to disrupt and paralyse a political system. A decentralised structure, such as federalism, can limit the damage that a successful and sustained asymmetric attack can have. It is far more resilient a system in this respect than a unitary one.

The Long Path To Centralism

If the benefits of federalism are so obvious, why has the Australian federal government fallen into chronic centralism? Several reasons, the federal government is openly hostile to the states, the constitution is poorly written and doesn't limit federal taxing power or responsibilities; and thirdly, the High Court has aided and abetted the federal government in its hostility toward the states. Greg Craven writes;

For all the constitution's triumphs, the founding fathers were not good accountants. They produced a document which, like a sloppily drawn will, quite unintentionally left the Commonwealth flush with funds and the states destitute.

The federal government brings in nearly seventy five percent of all tax receipts in Australia. Over half the NSW budget is made up of Commonwealth grants and GST revenues where the federal government has written the checks to the states. This is known as a vertical fiscal imbalance. Richard Webb describes this in Australia as;

... the States have relatively large constitutionally-assigned spending responsibilities but few own-revenue sources whilst the reverse is true at the Commonwealth level. The difference between the relative revenue and spending responsibilities of the Commonwealth and States is known as vertical fiscal imbalance (VFI).

On the High Court, Gary Sauer-Thompson writes;

The history of federalism, cooperative or otherwise, has been a history of continual intrusions by a central government in the affairs of the states. That intrusion has been legitimated by the High Court--that keystone of the federal arch. Simply put, the High Court failed to protect the states through the long centralist march.

During World War II the federal government claimed authority over income tax which had previously been the sole domain of the states. This was challenged constitutionally by the states, but the High Court ruled in the federal government's favour. What was an emergency tax at the federal level to pay for WWII, has become the norm. The federal government had no intention of giving up such an important source of revenue once it got its hands on it.

Craven concludes that these have contributed to making sure, "that the states are skint, friendless and without recourse to law."

What to do?

Unfortunately, no original link to the article, but Ken Parish writes of a possible political solution;

The States should all agree to set up a Joint State Tax Office that would levy a uniform state income tax on all Australian individuals and companies. The rate should be set so that it covers all state spending needs, so that the States can afford to tell the Commonwealth to shove its GST revenue and section 96 tied grants where the sun don't shine. The Commonwealth would then be under intolerable pressure to reduce its own tax take back to the level required to fund only it own spending needs. It should be fairly easy for people to see which polity was guilty of greed and duplicity in that situation, and it wouldn't be the States.

The main problem is constitutional. A republic would take care of the constitutional issues by being more explicit where the federal government can tax, just what an excise is, where tied grants can be applied, and duplication of responsibilities (and services) at the federal and state level. Also limit the High Court's ability to decide it is their position to make the constitution a living and breathing document.

Additionally, since it is a federalist system, the states should be more involved, maybe something as simple as the states nominating judges for the high court. This may serve to have the High Court serve their interests rather than the Commonwealths.

Federalism is superior and important. It is being broken through the gaps in a poorly written constitution, an activist High Court and a power drunk federal government who is openly hostile to the states. The fixes are constitutional and political.

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