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27 October 2014

Tony Abbott pushes for reform of 'dog's breakfast' of federalism

PM suggests states’ fiscal responsibilities go down to match revenues or their revenues go up

Tony Abbott surrounded by state and territory leaders at the 10 October Council of Australian Governments (Coag) meeting.

Tony Abbott has urged the commonwealth and states to work together to to fix the “dog’s breakfast” of federalism.

The prime minister wants reform but has stepped away from his earlier calls for the states to cede control to the commonwealth.

At a speech to commemorate Sir Henry Parkes in the historic town of Tenterfield, Abbott called for cooperation on reforming the often fraught relationship between the commonwealth and the states and territories.

“We would be failing in our duty not to consider better management of the ‘dog’s breakfast of divided responsibilities’ – as I have previously called it – that characterises the Australian federation today,” he said.

“I remain a pragmatic nationalist – but the states exist, they have wide powers under the constitution and they can hardly be abolished – so, rather than pursue giving the commonwealth more authority over the states, as I proposed in my 2009 book, Battlelines, better harmonising revenue and spending responsibilities is well worth another try.”

Abbott said there was a “mismatch” between what the states can afford and the services they offer, but stopped short of proposing changes to the goods and services tax (GST).

“To address vertical fiscal imbalance we could either adjust the states’ spending responsibilities down to match their revenues, or we could adjust their revenues up.”

The treasurer, Joe Hockey, said earlier this year that the government would take the case for broadening the GST to the public at the next election, but only if the states and territories agreed.

“We promised the Australian people we would not introduce, increase or widen or broaden or change the GST in this term of government. We’re honouring our promise,” Hockey said in May.

“If there is to be a change to the GST, or substantial changes in taxation, we will take that to the next election. The process at the moment is to sit down with the states and work through all the issues and also be up-front with the Australian people.”

Two white papers – one on federalism and another on tax reform – are under way.

Abbott plans to meet the premiers and chief ministers in the middle of next year, after elections in Victoria, Queensland and New South Wales, to nut out a plan for reform.

He announced the formation of a steering group comprising eminent Australians to help guide the work of the white papers.

The group is made up of: the former South Australian Labor premier John Bannon; the former Victorian Liberal treasurer Alan Stockdale; the vice-chancellor of the Australian Catholic University, Greg Craven; the chief executive of the Business Council, Jennifer Westacott; the former West Australian attorney general Cheryl Edwards; the chairman of the Queensland Public Service Commission, Doug McTaggart.

The federalism white paper will be released before the 2016 federal election.