Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

FEDERAL FINANCIAL RELATIONS BILL 2009

The Federal Financial Relations Bill 2009 appropriates funds to provide financial assistance to the States and Territories and implements this Government’s reforms to modernise federal financial relations in accordance with the new financial framework agreed by COAG in the Intergovernmental Agreement on Federal Financial Relations.

COAG has agreed to a new architecture of cooperative funding arrangements that will replace the inefficient, complex and dysfunctional system of grants that has plagued areas of joint Commonwealth and State involvement in the delivery of services for decades. The old ways of the past are behind us—we are now heading in a new direction with modern federalism.

In agreeing the new framework for federal financial relations, the Commonwealth committed to the provision of on-going financial support for the States’ service delivery efforts through:

• general revenue assistance, including the on-going provision of GST payments, to be used by the States for any purpose;
• National Specific Purpose Payments (National SPPs) to be spent in the key service delivery sectors; and
• National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.

GST payments

The bill provides an appropriation for the Commonwealth to make GST payments to the States equivalent to the revenue received from the GST in respect of financial years starting from 1 July 2009, and for these payments to be distributed in accordance with the principle of horizontal fiscal equalization.

These provisions are equivalent to the current GST payment provisions.

Each State will continue to receive its adjusted population share of the GST revenue. The adjusted population of each State will be calculated by multiplying the State’s population, determined by the Australian Statistician, by a GST revenue sharing relativity, determined by the Treasurer.

Other general revenue assistance

The Government has a range of revenue sharing and other general purpose payments in place with the States, other than the GST arrangements. Payments under these arrangements will be provided for in this bill in order to bring all payments to the States under one piece of legislation. Monthly payments of general revenue assistance will be determined by the Treasurer and paid through the COAG Reform Fund. These payment arrangements will be set out in the Intergovernmental Agreement.

National SPPS

The bill provides appropriations for the Commonwealth to make an on-going financial contribution from 1 July 2009 to support State and Territory service delivery in the form of five National SPPs covering the key human service sectors of:

• healthcare;
• schools;
• skills and workforce development;
• disability services; and
• affordable housing.

The bill also provides a facility for me, as Treasurer, to determine the appropriate amount of National SPPs for this financial year. This transitional arrangement for 2008-09 is necessary to allow the Government to reconcile the total amount to be paid for the year, with the amount already paid under existing arrangements, in order to determine the correct payment for the remainder of the year.

The States are required to spend each National SPP in the sector for which it is provided. This is the only condition imposed on the States in respect of the National SPPs. This will give the States the budget flexibility they need to allocate resources where they will produce the best results for the community.

In the past, onerous Commonwealth conditions on funding arrangements have tended to stifle innovation and flexibility, resulting in duplication, overlap, cost-shifting and unnecessary administration costs.

In establishing these new National SPPs, the Commonwealth will provide the States with more funding certainty. The bill specifies the amount of funding for each National SPP for 2009-10 and for the base funding to be indexed annually by a growth factor. There will be no more five year agreements with take it or leave it offers, as occurred under the previous arrangements. These National SPPs are on-going payments, with regular funding adequacy reviews.

The Treasurer of the day will determine the annual growth factor and each State’s or Territory’s share of the National SPPs in a financial year. These determinations will be in accordance with the principles provided in the Intergovernmental Agreement and detailed in a methodology paper to be agreed in March by the Ministerial Council on Federal Financial Relations.

These five National SPPs are associated with six National Agreements, which are schedules to the new Intergovernmental Agreement. While the States now have greatly improved budget flexibility in respect of these payments, they are also now subject to substantially improved public performance reporting against clearly specified performance indicators and benchmarks. Roles and responsibilities have also been clarified, and the performance of each jurisdiction —against mutually-agreed objectives and outcomes set out in the National Agreements —will be independently assessed by the COAG Reform Council.

National Partnership payments

The Commonwealth will also enter into new incentive arrangements with the States —through National Partnership payments—to drive key economic and social reforms. It has already started this process, with around twenty National Partnerships agreed by COAG.

Continuing payments which conform to the new arrangements will be deemed to be National Partnerships.

The bill provides for the Treasurer to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of National Partnership payments.

These payments will reward those States which best deliver the services and outcomes to their citizens, and not reward those that don’t. In so doing, they will drive a new microeconomic reform agenda in this country. Most importantly, they will improve the quality of services available to the Australian community—in particular, for hospitals and schools.

National Partnership payments through the COAG Reform Fund may be made to the States as:

• project payments—where they support the delivery of new projects of national importance, including funding new infrastructure projects;
• facilitation payments—where they may assist a State to lift its standards of service delivery or give recognition to a State which agrees to implement reforms; or
• reward payments—where States are rewarded for their progress in a way that encourages the achievement of ambitious performance benchmarks.

Parliamentary scrutiny

For the first time in a very long time, the complexity of all the Commonwealth’s financial relations with the States and Territories will come under the umbrella of just one piece of legislation. That will be a significant achievement for the Government, but it will also greatly improve the public transparency of these payments and the ability of the Parliament to scrutinize the payment arrangements.

I would like to spend a few moments outlining the ways in which these bills improve Parliamentary scrutiny of payments to the States, while at the same time providing more flexible payment arrangements.

National Partnerships and general purpose financial assistance

The payment arrangements for the new National Partnership payments are unashamedly performance oriented. That requires some flexibility, which is provided for by the Treasurer of the day determining the monthly amount to be paid, based on advice from the COAG Reform Council or the relevant Minister. Similar provisions apply to the payment of general purpose financial assistance.

The determination of those amounts, within a global limit provided for by the Parliament, will be tabled in Parliament each month. Consequently, Parliament will receive a detailed, consolidated, monthly running tally of payments to the States, including information about which States are performing in respect of particular performance benchmarks.

Parliamentary approval will be required to set the maximum amount that may be credited by the Treasurer to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of National Partnerships or general purpose financial assistance in a particular financial year. That global limit is provided for in the bill in respect of 2008-09, and must be specified in an annual Appropriation Act for subsequent financial years. The 2009-10 global limits will be specified in the forthcoming 2009-10 Budget night appropriation bills.

That means that the Parliament will have the opportunity to consider the global limit on these payments, in much the same way that it does at present where these payments are appropriated through the annual Appropriation Acts. If no global limit is legislated by Parliament, then the Commonwealth will not be able to make any National Partnership payments or grants of general purpose financial assistance to the States.

National SPPs

Parliamentary approval will also be required to increase the amount of National SPPs payable each financial year. Determinations by the Treasurer of the growth factors and distribution of the National SPPs will be legislative instruments and thereby disallowable.

Conclusion

Full details of these measures are contained in the explanatory memorandum. This bill provides for a very substantial improvement in the framework for federal financial relations.

I commend the bill to the Senate.

FEDERAL FINANCIAL RELATIONS (CONSEQUENTIAL AMENDMENTS AND TRANSITIONAL PROVISIONS) BILL 2009

The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill 2009 provides for the relevant consequential amendments arising from the measures in the Federal Financial Relations Bill 2009, including the repeal or amendment of inconsistent legislation.

GST payments

The bills provide for the repeal of parts of the A New Tax System (Commonwealth State Financial Relations) Act, with effect from 1 July 2009.  Once amended, the on-going provisions of the current Act will be limited to the procedures for managing the rate and base of the GST.

National SPPs

As part of the rationalisation of specific purpose payments, the bill provides for the repeal of the Health Care (Appropriation) Act 1998, with effect from 1 July 2009.  The payments to the States appropriated through this Act will be rationalised into the new National Healthcare SPP from 1 July 2009.

National Partnership payments and general purpose financial assistance

The bill provides for the Offshore Petroleum and Greenhouse Gas Act 2006 to be amended to remove the appropriation for royalty payments to Western Australia.  The royalty payments will be made using provisions in the Federal Financial Relations Act.

The bill also provides for the Interstate Road Transport Act 1985 to be amended to allow payments from the Interstate Road Transport Account to be made through the COAG Reform Fund, as these payments are National Partnership payments under the new federal financial framework.

Conclusion

Full details of these measures are contained in the explanatory memorandum. 

Together with the Federal Financial Relations Bill 2009, the measures in this bill provide for a very substantial improvement in the framework for federal financial relations.

I commend the bill to the Senate.

Debate (on motion by Senator Ludwig) adjourned.

Ordered that the resumption of the debate be an order of the day for a later hour.