Australia’s complex system of governance, characterized by overlapping jurisdictions and a labyrinth of regulations, is increasingly seen as a barrier to economic efficiency and societal well-being. With 198,000 federal public servants, including 35,200 in Services Australia and 21,400 at the Australian Taxation Office, the nation’s bureaucratic landscape is vast. Meanwhile, Defence employs 20,500 public servants alongside nearly 58,000 uniformed personnel, who are not included in the public service headcount.
This vast bureaucracy is overseen by an army of politicians, from federal to local levels, who navigate millions of laws and regulations, often conflicting between states. Businesses operating nationwide face up to 36 different versions of payroll tax, a situation Business Council of Australia CEO Bran Black compares to the complexity of the moon landings. He argues that this convoluted system is detrimental to both business and the everyday lives of Australians.
The Burden of Overlapping Regulations
NSW Premier Chris Minns acknowledges the economic strain caused by Australia’s federation, citing a persistent gridlock that transcends political changes. His Queensland counterpart, David Crisafulli, supports competitive federalism, where states act as economic experiments. However, he concedes that the current structure imposes a significant economic burden.
The challenges extend to infrastructure, as illustrated by the rail network. Despite the historic unification of NSW and Victoria by a single rail gauge in 1962, rail operators still face regulatory hurdles. According to Natalie Currey of the Australasian Railway Association, state-specific approvals for rolling stock and signalling systems add unnecessary costs and delays.
Research suggests that $104 million spent on harmonizing rail networks could yield $1.8 billion in benefits.
Complexities in Transport and Housing
The e-bike industry exemplifies regulatory confusion, with conflicting standards leading to market isolation in NSW. Peter Bourke of Bicycle Industries Australia highlights how the lack of a unified standard for e-bikes has resulted in increased battery fires and injuries. This regulatory inconsistency has driven major international brands out of the NSW market.
Housing, involving federal, state, and local governments, is another area mired in complexity. Despite federal initiatives to boost housing supply, states often find themselves financially constrained, unable to match federal funding promises. Former Treasury secretary Ken Henry warns that without environmental law reforms, housing targets remain unattainable.
Institute of Public Affairs’ Daniel Wild describes the intersection of migration, housing, and infrastructure as evidence of a broken federation.
Health and Fiscal Imbalances
Health care, a joint federal-state responsibility, epitomizes the inefficiencies of Australia’s federation. South Australian Premier Peter Malinauskas points to the costly overlap between hospital and aged care responsibilities, with federal and state governments often shirking accountability. The financial burden is significant, with Canberra contributing $91 billion to health, while states spend $136 billion.
Western Australia’s Treasurer Rita Saffioti emphasizes the need for a seamless service delivery, irrespective of jurisdictional boundaries. The fiscal imbalance, where states raise only a quarter of the $1 trillion in taxes, exacerbates these challenges. Economist Saul Eslake warns that state fiscal behavior poses a risk to the federal government’s credit rating.
The Need for Reform
Australia’s federation, designed over a century ago, struggles to meet contemporary demands. The GST, intended as a growth tax, has failed to deliver, with exemptions limiting revenue growth. The mining boom further distorted GST allocations, with Western Australia receiving disproportionate benefits.
Energy policy, another contentious area, highlights the limitations of federal-state relations. Former South Australian premier Jay Weatherill criticizes the lack of a national carbon pricing mechanism, which hampers investment and long-term planning.
Experts like Flavio Menezes of the University of Queensland argue that Australia’s fragmented economic landscape imposes hidden costs on consumers. Curtin University’s Alan Fenna suggests that without significant reform, living standards will stagnate, and government debt will continue to rise.
Federal Treasurer Jim Chalmers acknowledges the need for reform, indicating a shift in perspective towards addressing these systemic issues. As Australia grapples with these challenges, the call for federation reform grows louder, with the potential to enhance national productivity and quality of life.
