George Williams has an op-ed in the Sydney Morning Herald warning against not only the vertical tax imbalance present in our system of government, but also the unrestrained anti-federalism. His recommendation is to have another series of constitutional conventions, as we did in 1890, toward solving the problem of federal/state authority and rejuvenating our system of government. While Williams did not state that his recommendation would be part of a Republican convention, this is what maximalist Republicans would desire. Australian Republicans are democrats too and demand good government above all. Republicans are more than aware of the weaknesses in our system of government.

Tax

The vertical tax imbalance has been a constant topic of discussion on SSR. Prior to World War II, the states collected income tax for themselves. This changed with the Curtin government taking over that role due to the exception that was the second world war. That state of exception became a state of permanence, and federal government never again dropped their collection of income tax. John Gorton went a step further and saw the federal government as the collectors of revenue and the policy makers. The state were reduced to disbursing federal funds in support of federal policy. Whitlam accelerated this process. This is the power of federal tax collection. We saw it again recently when Peter Costello demanded the states drop stamp duty charges in return for receiving GST.

Williams writes;

NSW, for example, depends on the Commonwealth for about 40 per cent of its revenue. This was predicted by Alfred Deakin, Australia's second prime minister, who said soon after Federation that the states would find themselves legally free, but financially bound to the chariot wheels of the central government.

I had a look at the NSW state budget in April last year . According to the 2004-2005 NSW budget, state taxation raised 15.52 billion dollars while GST and Commonwealth grants combined to 15.76 billion. GST revenue and deferral was 9.74 billion. So nearly half of the state money comes from the federal government. The point of federalism is that each level of government is responsible to raise revenues to meet its obligations. This is not happening in Australia - the system is broken.

Westminster

The Westminster system of government has poor separation of powers, this conspires to make the political process weak in warding off centralisation. Until recently British government was totally dominated by London, with the next layer of government being councils. They have actually federated to an extent with the addition of parliaments in Scotland and Wales. At the last Australian federal election, all the major parties and the larger third parties had explicit policies of dissolving the states and leaving nothing between the federal government and the local councils. Federalism is a forgotten political methodology in Australia.

In reality it is the federal government that should be the smallest. It should only be taking care of issues that require a response internationally, and to inhibit arbitrary punishment, political or economic, between the states. The states should be the point of greatest diversity. This strengthens the system, allowing for Australians to move between states when one state fails, and encouraging policy competition between states. It also ensures that the state governments respond to local needs. One big, fat, stinking federal government providing policy for us all is a weakness. In a systems world unitary outcomes are single points of failure and to be avoided - if not routed around as damage. Anti-federalism is not a viable policy for the public health or prosperity of the country.

Williams' proposes;

While Australia has achieved important reforms in other areas, it has a poor record of retaining the structural weaknesses in our system of government. This is especially a concern given that Australia now has one of the oldest systems of government in the world. To get this process off the ground we should, like the conventions of the 1890s, hold a summit that will focus national attention and create space for new thinking. We need to fix our federal problems and in doing so ask ourselves what should be the role of the states in the second century of our Federation.

I would add to this, if we are to fix the weaknesses in our system, including poor separation of powers, poor federalism and a weak as dishwater constitution which does not protect minorities and individuals from political discrimination, retribution and violence - then make it a constitutional convention for a republic. The Bearded Men did a second rate job in 1901, there is no reason why we should do the same in the twenty first century. Fix the whole shebang.

This requires; Small federal government which is constitutionally limited (so the High Court can't slyly increase federal powers), a bill of rights to limit legislative authority, better separation of powers between executive, legislative and judicial, improved checks and balances, and finally a republic where the people are the sole authority for the government's legitimacy and have a more active role in its upkeep, processes, outcomes and integrity.

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