- Intergovernmental relations affect Australia’s investment climate, with competing priorities on issues such as greenhouse policy causing uncertainty and affecting business decisions to invest.
- Duplication/waste exists between different levels of Government, costing the Australian economy closed to $20 billion per annum, according to a recent House of Representatives Committee report.
- National Competition Policy related reforms have been an economic success, delivering, according to the Productivity Commission, a permanent increase in GDP of $20 billion.
- NCP payments to States were a key factor in encouraging them to undertake the reform task.
- A new version of NCP is needed so that Australia can properly face the challenges and opportunities of intense competition in international markets from the fast-growing economies of China and India and difficult challenges on the home front, such as our ageing population.
- Although competition is a key factor in driving economic reform, it is a subset of the greater goal of boosting productivity, which can also be achieved via greater co-operation between different levels of Government.
- Commonwealth Grants Commission funding methodologies reward poor performance on the part of State Governments and should be reformed.
“Improved intergovernmental relationships are vital if we are to:
- Deliver a new version of National Competition Policy that encourages competition, productivity, co-operation and growth in the Australian economy; and
- Cut the significant costs of duplication and overlap between levels of government and apply the savings to reducing inefficient State taxes, such as payroll and land taxes and stamp duties, and improving infrastructure.
“After the positive June 2005 COAG meeting we are at the crossroads in terms of intergovernmental relations – with the COAG review into National Competition Policy, we are also at a critical juncture in terms of economic reform.
The following set of recommendations crafted by the TaskForce, if implemented, have the capacity to modernise Australia’s system of intergovernmental relations and boost Australia’s economic growth.
- A New Productivity Agenda should be developed that:
§ Moderates the tendency towards government duplication and waste by setting realistic benchmarks and standards for all jurisdictions to follow;
§ Expands to include new areas such as health and the environment;
§ Provides financial rewards to States that implement reforms.
- A new National Productivity Council should be created under COAG and made responsible for driving productivity and competition throughout the Australian economy. This Council should replace the current National Competition Council (NCC), with the Productivity Commission continuing in a role where it provides technical support and independently reports on reform progress to Government.
- Productivity ministerial portfolios should be created at Federal and State levels.
- The Commonwealth Grants Commission should be reformed to
§ Ensure Commonwealth/State financial arrangements meet the test of equity, efficiency, simplicity and transparency
§ Reward States for good performance.
“These recommendations will drive Australia’s economic reform agenda, promote more harmonious and efficient intergovernmental relations, and build a stronger, more outward looking Australian economy with higher living standards for all”, says Mr Coulson.
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