Helen Coonan (NSW, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

I must say, with respect to the previous bill, which we supported and were very pleased to support, that it had a gestation going back to 1992. The mischievous side of me was inclined to vote against it just to liven it up a bit! However, I restrained myself.

With great pleasure, I now address the Federal Financial Relations Bill 2009 and the Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009. We will be supporting these bills. The Federal Financial Relations Bill 2009 appropriates funds to provide financial assistance to the states by implementing COAG’s Intergovernmental Agreement on Federal Financial Relations through general revenue assistance, including GST payments, national specific purpose payments and national partnership payments. The Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009 makes amendments and repeals parts of five acts, consequent on the first bill, and also repeals the Health Care (Appropriation) Act 1998.

The stated objectives of the bills are simplicity, accountability, certainty and improved service provision. The Treasurer has proclaimed the bills as ‘a new direction’ for federalism, but the changes are less radical than claimed. The coalition, for example, can point to the introduction of the GST as a far more significant event in securing a funding base for the states.

The Commonwealth committed to provide financial support to the states through having GST payments distributed in accordance with the principle of horizontal fiscal equalisation, which always sounds painful to those who might not otherwise understand its meaning; through other general revenue assistance, to be paid monthly; through national specific purpose payments to service delivery in health care, schools, skills and workplace development, disability and affordable housing; and through national partnership payments to reward those states which best deliver services and outcomes. These four means of funding are provided for in the bills. Their financial impact is $6.3 billion over the five years from 2008-09 to 2012-13.

In relation to the national partnership payments, this is a departure from the needs based principle of horizontal fiscal equalisation, which is, however, retained for GST payments. The bills promise greater simplicity by collapsing more than 90 existing specific purpose payments into five national specific purpose payments. These payments will also be subject to reporting against performance indicators. The national partnership payments, which will include project, facilitation and reward payments, may well become quite complicated and offset the simplicity arising from reducing the number of specific purpose payments.

The states have agreed to the proposed arrangements, and the new arrangements are to commence on 1 April 2009. Whilst the coalition will support these two bills and we do understand the policy intent behind them, we do want to place on record and make it very clear that we will be watching and monitoring the implementation and effectiveness of the new system to ensure it actually works as the government claims it will and as it is intended to. I do not propose to go into a long speech about it. I think we will just have to see how it goes. We will be supporting the legislation on the basis that we will be monitoring its effectiveness. I commend the bills to the Senate.

David Feeney (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

It is also my pleasure to rise this afternoon in support of the Federal Financial Relations Bill 2009 and the Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009. The Federal Financial Relations Bill 2009 is not one of those bills which is likely to gain enormous press coverage or indeed the forensic and excited analysis of our newspapers. But, notwithstanding that dreadful oversight, this is in fact a very important piece of legislation indeed. The Federal Financial Relations Bill 2009 is a bill that essentially keeps faith with Labor’s commitment to work hand in hand with our states and territories to end the blame game and to give legislative reality to the new architecture of the relationship between the Commonwealth government and the state and territory governments.

The bill appropriates funds to provide financial assistance to the states and implements this government’s reforms to modernise federal financial relations in accordance with the new financial framework agreed at the COAG in the Intergovernmental Agreement on Federal Financial Relations. On 29 November 2008 the Council of Australian Governments agreed to this new framework for federal financial relations. I might say that that it is matter of great pride to this government as well as those governments at COAG who welcomed and agreed to this important reform. It is a reform which provides a robust foundation for collaboration on policy development and service delivery—those two crucial ingredients—and facilitates the implementation of economic and social reforms in areas of national importance.

In agreeing to the new framework for federal financial relations, the Commonwealth committed to the provision of ongoing financial support for the states’ service delivery efforts and to do that in three particular ways. The first of those is general revenue assistance—that is, the ongoing provision of GST payments to be used by the states for any purpose. The second is the national specific purpose payments, the SPPs as they are known, which are to be spent in the key service delivery sectors. The third is the national partnership payments to support the delivery of specified outputs or projects to facilitate particular reforms or to reward those jurisdictions that have delivered on nationally significant reforms. The new federal financial framework commenced on 1 January 2009, with transitional arrangements for the period to 30 June 2009.

I want to say some brief words about each of the three particular parts of the framework, beginning with GST payments. The bills provide 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 equalisation. That is a phrase which, as the previous speaker warned all of us, is an intimidating one, but it is nonetheless a critical principle for how the GST is distributed between the Commonwealth and state and territory governments.

Each state will receive its adjusted population share of the GST revenue. The adjusted population for each state will be calculated by multiplying the state’s population as determined by the Australian Statistician by a GST revenue-sharing relativity as determined by the minister. That, of course, is a formula which, from time to time, becomes very prominent in Australian politics as a source of disputation and rhetoric between the states and the Commonwealth but in fact, of course, is something that has had a longstanding importance in Commonwealth-state relations.

These provisions are equivalent to the current GST payment provisions in the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999. So it is important to note that there has been no disadvantage bestowed on any of the jurisdictions through these arrangements. The bills provide for the repeal of parts of A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 with effect from 1 July 2009 and for the act to be renamed A New Tax System (Managing the GST Rate and Base) Act 1999. This, of course, is housekeeping but it makes sure that those pieces of legislation are clearer to legislators and citizens alike in terms of their function.

Going to the second mechanism for payments here—the national specific purpose payments—the bills provide for an appropriation by the Commonwealth to make an ongoing financial contribution from 1 January 2009 to support state service delivery in the critical areas of health care, with those payments commencing with effect from 1 July 2009; schools; skills and workforce development; disability services; and, lastly, affordable housing.

Turning to the national partnership payments and general purpose financial assistance, the bills provide for the minister to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the states in the form of a national partnership payment and general purpose financial assistance. While the annual appropriation acts will not appropriate amounts to be paid as national partnership payments and general purpose financial assistance, the maximum amount that the minister may credit to the COAG Reform Fund in a particular financial year will be specified in an annual appropriation act related to that particular year. The COAG Reform Fund will be used to disburse national partnership payments and general purpose financial assistance to the states, and it will do that under the new federal financial framework.

I think it is important to relate to the Senate that these bills, needless to say, have a very significant financial impact. Senator Coonan has outlined that financial impact in her remarks. Very briefly, we are talking here about a funding package agreed by COAG with additional appropriations totalling some $6.3 billion over five years—those five years, of course, being 2008-09 through to 2012-13. What these bills in fact do is provide reality to the government’s commitment—the commitment made in 2007—that we would give new form to our federal-state relations, and that new form would keep faith with our commitment that our relationship with the states would not be a relationship marked by conflict or overbearing conduct between one set of lawmakers and another but rather would be marked by cooperation and a search for common solutions to common problems.

During the 2007 election campaign Kevin Rudd committed a Labor government to a new approach to federal-state relations—what he termed ‘ending the blame game’. Of course, he was referring to the way federal-state relations were conducted under the Howard government—a government made up of parties that were all historically committed to the concept of states’ rights. It is somewhat ironic when one considers the record of the Howard government. The Liberals came to power committed to something called ‘new federalism’ but instead what Australians received over 11 years was a new centralism. John Howard embraced centralism with an enthusiasm that put all of his forebears to shame. Under Mr Howard, everything was to be decided in Canberra—in fact, everything was to be decided by him. I recall in that marvellous ABC series The Howard Years the then Treasurer, Peter Costello, regaling the audience with tales of how in fact he himself was not aware the Prime Minister was about to announce the GST. So centralism had reached the point under John Howard where not only all decisions were being made in Canberra but indeed all decisions were being made by him without regard to cabinet. Schools, universities health funding, transport, wages and conditions, the environment, Indigenous affairs—John Howard knew best about everything and the states could take what was offered to them or they would go without.

As the states, one by one, elected Labor governments over the course of those 11 years, you will recall, Acting Deputy President Troeth, that the Prime Minister increasingly treated these states of the Australian Commonwealth as enemies and as political punching bags at election time. Mr Howard took the credit for everything good that happened but of course blamed the states for everything bad that happened. This reached the heights of absurdity during the election campaign in 2007, by which time Australia had six state Labor governments and two Labor territory governments. Mr Howard campaigned as if those the states were hostile foreign powers. Despite the fact that Mr Howard had been Prime Minister for 11 years and despite the fact that he had centralised virtually all important decisions into his own office, suddenly he was now not responsible for anything. No, it was all the fault of the states. If the states borrowed for vital infrastructure projects, as the states have always done, they were reckless spenders and responsible for our national debt. Yet if they did not borrow moneys for vital infrastructure projects, they were responsible for whatever went wrong with every road, bridge, port, airport, pipe and hole in the ground. What Saddam Hussein and the hapless refugees on the Tampa did for John Howard in earlier elections, he hoped the states might do for him in 2007. Of course, that is all a matter of history now, and we all know how that story ended. All that blaming and shifting of responsibility between the Commonwealth and the states was in vain. When Victorians were asked to choose between the record of the Bracks-Brumby state Labor governments and the record of John Howard, I am delighted to report that they chose to reject Mr Howard. Of course, that story was repeated outside Victoria and throughout Australia.

Mr Howard’s blame the states campaign fell as flat as his scare campaign about union bosses. Faced with the choice between Mr Howard’s scaremongering and blame shifting and Kevin Rudd’s positive, constructive, concrete proposals for fixing our federal system and getting federal-state relations back on a constructive and cooperative footing—the kind of footing that those relations enjoyed under the Hawke and Keating governments—the voters rejected Mr Howard and supported Kevin Rudd. This bill is the realisation of Kevin Rudd’s campaign promise to end the blame game and to fix the problem, whereas Mr Howard had core and non-core promises—those promises he intended to honour and those promises he did not intend to honour, that he intended to discard. Kevin Rudd has come to office as a Prime Minister determined to keep all of his commitments that he made to the Australian people. This bill is another example of that determination.

That is why, as I said at the outset, this is not a bill that we will see splashed across the pages of the Herald Sun tomorrow, it is not a bill that will attract great public controversy, but it is a bill of very enormous importance. It is a bill that gives flesh to the very important agreement reached at COAG, the very important changed arrangements between the Commonwealth government and COAG, and I guess one might say a new approach whereby the Prime Minister and the Treasurer will not have annual slugfests with state governments about how moneys are to be disbursed; rather, there will be the capacity for long-term planning against real and rational targets.

The Treasurer in his second reading speech in the House of Representatives made the point:

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.

We not only have the issue of relations between state and federal governments being previously marked by the bitter politics and blame shifting that occurred but also have some important principles of public policy that we must keep in mind here too. Those important matters of public policy are about how those previous arrangements operated to stifle the kind of innovation and evolution in public policy that was so very necessary.

Having made the claim that this is a very important piece of legislation and having made the claim that this is a bill that gives truth and reality to Labor’s commitment to end the blame game and work cooperatively between the different tiers of government, you might very well ask the questions, ‘How is the opposition considering these important matters? How has this bill figured in the thinking of those on the other side?’ We had the example of that yesterday in the House of Representatives. This matter came before the House yesterday afternoon—to be forensic, at 12.46 pm—and I can assure you that on that occasion the Treasurer and the Labor government were listening with bated breath for how the opposition was going to consider the important questions here. The answer, I am afraid to report, is that the opposition in the House proved itself, yet again, to be incapable of coming to grips with significant questions of public policy. We discovered yesterday in the House that Joe Hockey, the shadow Treasurer, was unable to be found. Mr Abbott manfully stepped into the breach and for three minutes did his level best to try to articulate an opposition position on this very important bill. Over those three manful minutes, Mr Abbott did his very best to try to present the opposition as a force in Australian politics—not an easy task. Over those three minutes he said a few words, and some of them have caught my eye. He said:

That is why a significant number of frontbenchers from the opposition will be forensically analysing the legislation in the course of this debate. I have had great pleasure in trying to at least contextualise the position of the opposition in the debate that we now intend to proceed with.

A fine and upstanding set of words. I guess none of us are going to pontificate about occasionally being sent into the breach to speak about matters that perhaps do not sit at the heart of our political activism. But what we have there is Tony Abbott desperately covering, as best he may, for an absent shadow Treasurer and promising us forensic analysis. Well, CSI Abbott was completely unable to make any comments of any weight about this very important legislation. I guess that just brings into sharp resonance for all of us the fact that when there are significant issues of substance going through the legislative process in this country what we have right now is an opposition that is completely unable to come to terms with it.

Unfortunately, the afterglow of Tony Abbott’s manful efforts in the lower house found a bit of an echo here earlier today when the Senator Coonan, in trying to give some substance to the opposition’s response to this bill, made the point that she was ‘watching and monitoring’ how this bill would operate and said ‘let’s see how it goes’. Let us see how state and Commonwealth relations go—that is not the sort of laissez-faire attitude that has marked the approach of those of us on this side. That is not the kind of let it rip, see how it goes attitude that would of course be proper for a Treasurer or for a government that is completely resolved to bring new shape and new maturity to state and federal relations. But it is the kind of attitude, unfortunately, which marks the Turnbull three-step—

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator, you should refer to members of the parliament, in either this chamber or the other, by their name—Mr Turnbull or Leader of the Opposition.

David Feeney (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I understand, and thank you. Perhaps I will refer to it as the Leader of the Opposition’s three-step. The Leader of the Opposition’s three-step has become a methodology for how those opposite approach every single issue of substance in this parliament. It does not matter whether it is the global stimulus package, it does not matter if it is increases for pensioners, it does not matter if it is the IR debate and it does not matter if it is this—that is to say, if it is a bill that is bringing new shape and new substance to Commonwealth-state relations. It does not matter what the public policy challenge is as the methodology of the Leader of the Opposition remains unchanged. In fact, the only consistent thing about an inconsistent opposition is the Leader of the Opposition’s three-step. On day 1, under phase 1, we had the opposition announce itself as offering bipartisan support for Labor initiatives and there was a brief flash of statesmanlike conduct on the other side, which from time to time does have members of the media enraptured. But, unfortunately, phase 2 of the Leader of the Opposition’s three-step is doubt; it is about casting doubt. I guess, when we see Senator Coonan saying things like ‘let’s see how it all goes’ and ‘we’ll be watching and monitoring’ in respect of bills of this substance, we do see those opposite establishing yet again the out-clause so that they can address themselves to issues of importance later, because they have been unable to do it today.

Finally, phase 3 of the Leader of the Opposition’s three-step is of course— (Time expired)

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

I would like to thank my colleague Senator Feeney, for a very fine contribution and a very incisive analysis of the issues that arise from the bills before us, and thank Senator Coonan. I think Senator Feeney was just about to touch on the third phase. I suspect the third phase would relate to that attempted secret dinner that Mr Hockey and Mr Costello were caught at in Kingston, and probably on this occasion Mr Hockey’s absence is explained by a further secret lunch to discuss the future of the interim leadership of the Leader of the Opposition, Mr Turnbull.

I would like to thank members for their contribution to the debate on the Federal Financial Relations Bill 2009 and the Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009. These are important bills to reform financial relations with the states and territories, although, as was noted by my colleague, they are hardly going to draw great media interest or commentary. The Federal Financial Relations Bill 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 the Council of Australian Governments in the Intergovernmental Agreement on Federal Financial Relations. We are bringing this aspect, as indeed we are bringing many other aspects of public policy, into the 21st century. The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill provides for the relevant consequential amendments arising from the measures in the Federal Financial Relations Bill, including the repeal or amendment of inconsistent legislation.

As I said in my second reading speech, COAG has agreed to a new architecture of cooperative funding arrangements that will replace the inefficient, complex and frankly dysfunctional system of grants that has plagued areas of joint Commonwealth and state involvement in the delivery of services for decades. With these bills the ineffective methods of the past will be behind us and we will be heading in a new direction and will be in a new era of modern federalism. Following COAG’s agreement to the new federal framework in November last year, I have been pleased to note the comments of the Business Council of Australia. The Business Council has consistently argued for reform of federal financial relations and for governments to focus on outcomes in health and education. The Business Council congratulated COAG for ‘reshaping federal-state finances in ways that can improve the accountability and efficiency of government services and make it easier for businesses to invest and grow’. This is a strong endorsement of this government’s reforms to Australia’s federal financial relations—reforms that are long overdue. The comments highlight the fundamental objectives of these reforms of improving the public accountability of both levels of government and of improving public sector efficiency. A more productive public sector means that better services can be delivered with the same level of resources.

In agreeing to the new framework for financial relations, the Commonwealth committed to the provision of ongoing financial support for the states’ service delivery efforts through general revenue assistance, including the ongoing provision of GST payments, to be used by the states for any purpose; through national specific purpose payments, known as national SPPs, to be spent in the key service delivery sectors; and through 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.

In terms of 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.

The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill provides 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 ongoing provisions of the current act will be limited to the procedures for managing the rate and base of the GST.

I turn to 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 the Federal Financial Relations 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.

The bill provides appropriations for the Commonwealth to make an ongoing 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 health care, schools, skills and workforce development, disability services and affordable housing.

The bill also provides a facility for the Treasurer to determine the appropriate amount of national SPPs for this financial year. The 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.

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 ongoing payments with regular funding adequacy reviews. The Treasurer of the day will determine the annual growth factor and each state 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. There is provision for national partnership payments, new incentive arrangements with the states, to drive key economic and social reforms. The government has already started this process with around 20 national partnerships agreed by COAG.

The bill provides for the Treasurer to credit amounts to the COAG reform fund. For the first time in a very long time the complexity of the Commonwealth’s financial relations with states and territories will come under the umbrella of just one piece of legislation. That will be a significant achievement for the government and it will also greatly improve public transparency of these payments and the ability of the parliament to scrutinise the payment arrangements. It improves parliamentary scrutiny for payments to the states while at the same time providing more flexible payment arrangements.

That is a summary of the legislation. I have not wanted to overly outline, in this conclusion to the debate, the obviously impressive detail of this new set of very important arrangements. I would like to conclude by thanking Senator Coonan and Senator Feeney for their contributions and commend the bills to the Senate.

Question agreed to.

Bills read a second time.