Federal finances to be overhauled

The Rudd government is planning to overhaul Australia’s Federal finances today, to put  their focus directly on service delivery.

The Federal Treasurer, Wayne Swan, will explain the plan when he meets his State counterparts in Adelaide, for a meeting of the Council of Australian governments.

In a statement before the meeting, Mr Swan said that, if accepted, the Federal government’s plan would “substantially advance the modern federalism agenda.”

And modernisation Federal-State relations would underpin future growth and prosperity.

“After more than a hundred years, the governments of Australia are finally getting it right,” Mr Swan said.

“Today’s meeting in Adelaide will lay crucial new foundations for reform in key areas of federal-state financial relations in particular.”

Mr Swan said he expected the States to agree to a new architecture of cooperative funding arrangements that would replace the inefficient and complex system of grants that has plagued key areas of service delivery for decades.

“The new financial architecture will make roles and responsibilities much clearer – so that
Australians receive the level of service delivery they expect and deserve,” Mr Swan said.

Federal State relations in Australia have been in a mess, for years. The consequences have been serious. Many country hospitals, throughout Australia, for example, are operating well below acceptable levels.

Mr Swan’s task today might be made easier by the fact that Labor now controls all State governments in Australia, as well as the Federal government. However, that is not guaranteed. State and Federal interests can still differ.

However, the States are likely to find Mr Swan’s plan to simplify Federal State financial relations attractive.

Mr Swan said that under it, the terms on which the Commonwealth and the States engage with one another would change in several important ways:

First, the Commonwealth will dramatically reduce the number of specific purpose payments
to “just a handful.”

“Almost 90 existing agreements will be collapsed into just five,” Mr Swan said.

These would cover health, childhood education and schools, vocational education, disabilities and housing.

“Second, the States will get the flexibility they need to allocate resources to those areas where
they will produce the best results,” he said.

“The Commonwealth will move away from the cumbersome prescriptions of the past, and remove the input controls which inhibit State service delivery and priority-setting.

“Instead, the focus will be on the achievement of outcomes – that is, what the States and Territories deliver to the people of Australia – rather than how they deliver it.

“Third, the Commonwealth will provide greater funding certainty to the States.

There will be no more five-year agreements with take-it-or-leave-it offers when they expire,” Mr Swan said.

“The new Special Purpose Payments will be on-going payments, with the Commonwealth and the States meeting periodically to review funding levels to ensure they remain adequate into the future.

“This will mean policy objectives and service delivery — not money — will be front and centre of Commonwealth-State relations – just as it should be,” Mr Swan said.
He said the aims would be to:-

• deliver better services to working families wherever they live
• develop human capital;
• build national productivity;
• increase our international competitiveness;
• create more effective markets for resources; and
• end costly waste and duplication.

for more see www.treasurer.gov.au