Why do states need bribes to act in their own interest?



The Australian

24th August 2007


George Megalogenis suggests  that  Australia's  federation is " bordering on farce " (23 August) .


As a former Treasury officer once heavily involved in  commonwealth-state relations, the policy of increased Federal interventionism raises two serious questions.


First, an increased centralisation of power creates considerable uncertainty as to the division of responsibilities in practice. Australia is surely not a country that should be moving to government solely  from Canberra.


Second, if that is agreed, what is to be done? Some advocate a more cooperative federalism, with Canberra  providing additional assistance on the basis that the states adopt more competitive policies in operating enterprises that provide infrastructure.


But why do the states have to be bribed to adopt policies that would be in their own interests?   This basic question extends well beyond infrastructure to services such as health and education, where the community is voting with its feet and moving to increasing  usage of higher quality private-sector services even though they have to pay.


Most blame for the current breakdown of the federal system rest with the states. If the services they provide are not up to scratch, it is inevitable that Canberra will intervene. Where are the reformist state governments or, for that matter,  state Oppositions that might save the federation?