Give COAG power to set a reform agenda

In the early 1990’s the Council of Australian Governments (COAG) was established to replace the Premier’s Conference and expand the state/commonwealth engagement beyond fights over money to a detailed agenda of reform to improve the federation, reduce waste and duplication, enhance productivity and grow the economy.

This article appeared in the Australian Financial Review on 3 April 2016 (subscription may be required).

In the early 1990’s the Council of Australian Governments (COAG) was established to replace the Premier’s Conference and expand the state/commonwealth engagement beyond fights over money to a detailed agenda of reform to improve the federation, reduce waste and duplication, enhance productivity and grow the economy.

Friday’s COAG meeting was, after years of drifting to irrelevancy, its natural expiration in its current incarnation. It marked an unfortunate chapter in the poor governance of the nation.

With the quick death of Malcolm Turnbull’s plan to revive state income taxes and devolve responsibilities and funding for public schools to the states and territories, the meeting reverted to a fight over health funding. And COAG yet again produced little more than a lengthy press conference in Canberra on a Friday afternoon.

Australian’s should be angry over the failure of their governments to work together. It is protecting waste, blocking productivity gains and the promise of continued economic growth.

Australian’s want their governments to govern with clear lines of responsibility as efficiently as possible. We care less and less about which level of government provides or funds services – we just want it done properly in the most cost effective manner. Premiers and Chief Ministers should not delude themselves that their people are passionate about state’s rights.

Over the last 10 years state/commonwealth relations have gone backwards. The commonwealth under Howard weighed heavily into schools funding and under Rudd into direct health funding.

But unfortunately this old style funding approach made the problem worse. It sidelined a structural solution to the delineation of service provision, taxing and funding between Canberra and the states and territories for the long term.

The consequences of the breakdown of our federation cannot be underestimated. The system has become a confused, duplicated and irresponsible mess of public administration that needs urgent repair to address issues that are vitally important to our community.

In fairness Malcom Turnbull tried this last week. What he lacked in consultation he made up for in boldness. However taking the Premiers and Chief Ministers by surprise two days before the meeting won’t cut it.

COAG delivered a short-term solution of $2.9 billion in hospital funding and an in-principle agreement to “consider proposals” about sharing income tax as the sum total of a tax reform agenda.

This cannot be used as an excuse to retreat from real reform. There is some appetite for reform. Colin Barnett likes Malcom Turnbull’s idea of state income tax. Jay Wetherill and Mike Baird are willing to back GST reform.

COAG has worked in the past and it can work again. For it to work it needs clear and long term agenda for structural reform of government and microeconomic reform for Australia. There are big issues confronting our nation and our federation requires co-operation between governments if we are to sustain our long period of economic growth.

The Australian Institute of Company Directors, as the voice of excellence in governance, is uniquely placed to offer insights on the quality of governance of our nation.

Last month the AICD released Governance of the Nation – A Blueprint for Growth. This two-year agenda for national reform positions Australia to face challenges ahead, including actions that will strengthen the governance of the nation.

Our reform blueprint proposes to reinvigorate COAG with a 15-year reform agenda that is accompanied by full and independent reporting of COAG’s priorities and performance against hard-wired reform targets.

Such an agenda would prioritise reform of health and education funding as goals over the next 5 – 10 years. These goals would be accompanied by specific actions to deliver them, a timeframe for delivery and key performance indicators to measure the reforms progress.

And given the paralysis at COAG it’s time to think about appointing an independent chair and secretariat to oversee the reform process.

A robust COAG with the wherewithal to engage in real debate and compromise would go a long way to resolving important issues which are now caught in a continuous loop of debate with little hope of resolution.

COAG needs to address the funding confusion and blame shifting on schools and hospitals with clear lines of responsibility. It must confront the failure of the GST to be growth tax for the states and territories we all thought it would be when it was adopted at the beginning of the century. It must eliminate the raft of remaining horrendously inefficient but mostly forgotten state and territory taxes. It must aggressively reengage on the elimination or harmonisation of duplicative regulatory regimes. And it must adopt a national infrastructure plan.