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The Committee's Inquiry

I Functions of the Federal-State Relations Committee

The Federal-State Relations Committee was established in May 1996. The Committee is a Specific Purpose Committee appointed by resolution of the Council and of the Assembly. The Committee functions as a Joint Investigatory Committee and has the statutory power to conduct investigations into the matters listed below.

That:

a)				pursuant to section 4A of the Parliamentary Committees Act 1968 , a Specific Purpose Committee, to be called the Federal-State Relations Committee, be appointed; and
b)				the functions of the Federal-State Relations Committee be to inquire into, consider and report to the Parliament on any proposal, matter or thing connected with relations between the Commonwealth Government and State and Territory Governments, if the Committee is required or permitted so to do by or under the Parliamentary Committees Act 1968 .

II Appointments to the Committee

The Federal-State Relations Committee consists of nine Members of the Parliament of Victoria, drawn from both Houses and all parties.

No 3 - Tuesday, 28 May 1996

5			FEDERAL-STATE RELATIONS COMMITTEE - The Honourable R I Knowles moved, by leave, That, contingent upon the Legislative Assembly concurring with the Resolution to appoint the Federal-State Relations Committee, the Honourables G B Ashman, B T Pullen and W I Smith be members of that Committee.

Question - put and resolved in the affirmative.

No 42 - Thursday, 3 April 1997

5			FEDERAL-STATE RELATIONS COMMITTEE - MEMBERSHIP - Motion made, by leave, and question - That Mr Mildenhall be discharged from attendance on the Federal-State Relations Committee and that Mr Dollis be appointed in his stead (Mr Gude) - put and agreed to.

III Terms of Reference of the Federal-State Relations Committee

The Committee received its Terms of Reference on June 25 ^th 1996 ( Victorian Government Gazette, G 26, 4 July, 1996, pp 1706-7):

The Governor-in-Council, acting under section 4F (1) of the Parliamentary Committees Act 1968 , by this Order requires the Federal-State Relations Committee to inquire into, consider and report to Parliament on overlap and duplication of roles and responsibilities between the Commonwealth and the State; and areas of responsibility for which the States should have an enhanced role for the benefit of the Federation, and in particular to:

1. To inquire into and make recommendations about the specific nature and extent of problems associated with overlap and duplication of roles and responsibilities between the Commonwealth and the State, including:

i) the desirability of developing general principles for assigning roles and responsibilities, and what such principles might be;
ii) if different principles should apply to different functional areas, recommend which should apply to what areas; and
iii) identify reform opportunities for Commonwealth-State financial relations to give the States a secure revenue base; and to

2. Identify areas of responsibility for which the State should have an enhanced role for the benefit of the Federation, with particular reference, but not necessarily limited to:

i) the role of the Senate;
ii) examining the use and operation of federal decision-making institutions with a view to recommending improvements.

3. Examine options for improved technological links between the Federal and State Governments and related organisations.

In addressing the terms of reference, the Committee should take account of initiatives of the Leaders' Forum and the Council of Australian Governments (COAG), and of individual Australian governments.

The Minister responsible for the Inquiry Terms of Reference is The Honourable J G Kennett, Premier.

IV Introduction to the Report

This is the Second Report of the Federal-State Relations Committee arising out of its Inquiry into overlap and duplication of roles and responsibilities between the Commonwealth and the State; and areas of responsibility for which the States should have an enhanced role for the benefit of the Federation. Given the extremely broad nature of the Committee's Terms of Reference, the Committee decided early on to divide its Inquiry into separate subject areas and to report on each of these. The Committee's Second Report deals with the subject of intergovernmental relations, and the role of the States in the Australian federation. The Committee's Third Report will consider these same matters from a comparative perspective.

The intention of the founders of the Australian federation was to preserve a strongly regional form of government, in which the States would be free to pursue their own policies, with the Commonwealth acting only in those areas where the national interest requires national uniformity. It is the great virtue of a federal system that it permits diversity and unity to flourish side by side.

Since 1901, the role of the Commonwealth has expanded in ways that the founders could never have foreseen. Much of this expansion has been a legitimate response to the demands of nationhood. But there has also been a great deal of encroachment on the activities of the States, which serves no national purpose, and undermines the virtues of federalism. Nowhere is this more evident than in the growth of Commonwealth fiscal dominance of the federation.

In 1990 relations between the Commonwealth and the States began to undergo major change. The developing perception that Australia must increase its international economic competitiveness had already led Australian governments to pursue microeconomic liberalisation and more efficient public-sector management. In 1990 it became clear that to achieve greater economic union in Australia, through the creation of a single Australian market, would require intergovernmental co-operation on a scale hitherto untested in Australia.

The vehicle for this co-operation was the Special Premiers Conference convened by Prime Minister Bob Hawke, which later evolved into the Council of Australian Governments. The agenda included issues of regulatory harmonisation, National Competition Policy and reform of Government Business Enterprises. It also included reform of Commonwealth-State roles and responsibilities, and of federal financial relations, which would reduce wasteful overlap and duplication, and permit the States greater policy autonomy, as was envisaged at the time of federation.

This intergovernmental agenda has produced an impressive array of intergovernmental agreements and schemes of uniform legislation aimed at reducing impediments to a single national market. Some of these arrangements have handed what were State powers to the Commonwealth. Others have created joint Commonwealth-State decision-making bodies. All have reduced the range of policy choices open to State Governments.

However, there has been little agreement in the areas of roles and responsibilities and federal finance. Overlap and duplication continues, and the States remain subject to Commonwealth fiscal dominance. It is therefore imperative that the States continue to address these issues in intergovernmental forums, and continue to pursue intergovernmental arrangements that will enable federalism to flourish in Australia.

This is, of course, a difficult task. The Commonwealth, which has the greatest capacity to enhance Australian federalism, has the least interest in doing so. Nevertheless, some change is possible, and some options remain open to the States whatever the position of the Commonwealth.

To determine fully what those options are, it is necessary to consider both the development of Australian intergovernmental relations, and the alternative models that have been put to work in other federal systems. The Committee's Third Report will include a comparative study of a number of advanced federal systems. This Second Report contributes to the documentation and analysis of important developments in Australian federalism from the late 1980s to the present time.

The Committee hopes that the findings of this report will stimulate further public debate on the possibility of changing Commonwealth-State relations in ways that will enhance Australia's federal system. The Committee's Third Report will contain recommendations which build upon these findings, and the findings of a comparative analysis of federal arrangements. When taken together the two reports, while maintaining a realistic perspective on the matters with which they deal, will identify some of those opportunities for change that the Committee believes to be achievable and in the interests of the Australian federation.