2013 Young Writers’s Prize: A New Fiscal Federalism?

By Richard Plumridge

A federal structure, when implemented correctly, can be an extremely effective method of governance, more so than a unitary system.  Although far from the only federation in the world, Australia has the highest degree of vertical fiscal imbalance between the state and federal governments of any comparable federation. While the states are responsible for delivering the majority of the nation’s services, it is the Commonwealth that raises the majority of the revenue, then distributes these funds to the states in the form of grants. This disparity in fiscal capacity often leaves the primary services providers- the states – in disputes with the federal government over the funding for services and major projects4. Popularly known as the ‘blame game’, states are routinely denounced as “obstructionist” by media commentators and likened – by federal politicians – to “beggars” and “leeches”. Some commentators, such as former federal MP Lindsay Tanner have called for the abolition of the states6, seemingly oblivious to the constitutional and political impossibility of such an undertaking.