Water, infrastructure…WHERE DOES our money go?

“Parochialism and an aversion to markets will never deliver an efficient national electricity market, national markets for labour, a national market for water, or efficient road and rail freight networks”
– Secretary of the Federal Treasury in The Costs of Federalism Report.

Aren’t we all sick of the blame game played by the state and federal governments? No matter what your political leaning, isn’t Kevin Rudd’s suggestion of a 3 month political truce a breath of fresh air? Wasn’t the water summit held on Melbourne Cup Day just a bit TOO cynical? It DID make sense to do ‘something’ with the five overlapping commonwealth bodies responsible for water and the PM has now done it, with the new Department for Environment and Water Resources.

FYI currently we have:

• the National Water Commission (within the Department of Prime Minister and Cabinet);
• the Office of Water Resources (within the Department of Prime Minister and Cabinet);
• the Department of Agriculture, Fisheries and Forestry;
• Land and Water Australia;
• the Department of Environment and Heritage.

Programs currently administered by the various commonwealth agencies include:

• the National Water Initiative;
• the National Action Plan for Salinity and Water Quality;
• the Natural Heritage Trust;
• the National Landcare/Rivercare Program;
• the Murray-Darling Basin Initiative;
• the Great Artesian Basin Sustainability Initiative.

Maria Tarrant of the Business Council of Australia (BCA) highlighted the problem in September and Kevin Rudd makes the point now that little progress had been made under the National Water Initiative, saying “The states have been submitting dozens of projects to the National Water Commission but most have not been approved…..we need to get the projects under way” (The Australian 20-21 Jan 06).

The Australian’s editorial, ‘Money for Nothing’ also commented on the recent report released by the BCA and Access Economics, noting that while there are benefits in devolving power from a central government to state and local authorities, it really only works when if these bodies are prepared to think beyond the next election!

Some findings from ‘The Costs of Federalism’ report:

• The cost of federal-state logjams represents a $9 billion annual drag on the economy;
• this amount translates into $450 per person or $1100 per household annually;
• the newly formed Energy Reform Implementation Group is apparently suggesting that Australia’s electricity grid is ‘biased’ towards individual states and that the development of a truly national system with uniform reliability standards could cut power bills by 2-3 per cent and add $400 million to the national economy;
• there is a cost in human life – the National Road Safety Strategy last year found that improving roads could save hundreds of lives a year!
• In a small economy like Australia’s we have to learn to cooperate. ‘Harmonising’ rules and regulations – across state and federal jurisdictions – can help businesses, families and individuals overcome the inefficiencies and high costs and uncertainties flowing from too many governments making too many rules.

According to the report there are four main problems

1) The blame game
Though the large losers in the reform process may be obvious, the small wins that come to many may not be apparent for some time, and voters don’t always see the connection between wins and reforms. SO, state and federal bureaucrats who may be losers in the process, can ward off reform by blaming each other for problems and inactivity. The Federal Government has a finger in most State Government ‘pies’ – typically through special purpose payments – which of course further complicates matters.

2) The weakest link
The committees that are typically set up to oversee cooperative reforms effectively allow members a veto. With nine governments as members there is usually one government close to an election and given that reforms typically create big losers – often vocal interest groups – and many small winners, this means interest groups go to work on ‘the weakest link/the government closest to an election.

3) Fuzzy logic
The more complex modern living gets, the fuzzier becomes the line between federal and state responsibilities. It seems Australia’s constitution lends itself to rather more overlap in functions than most other federations.

4)Globalisation

• Because people and money are becoming more mobile it makes sense to raise taxes at the federal level – as taxes are easier to avoid or get ‘competed away’ at the state level, BUT
• this keeps increasing the gap between what the states raise for themselves and what they spend, WHICH
• keeps increasing federal transfers, WHICH
• keeps increasing federal demands for control and accountability, WHICH
• keeps undermining the rationale for having different state governments anyway;
• ALSO, in a ‘globalised world’, businesses are likely to have to deal with state-level rules and regulations that cover a myriad of areas.

The cost of this mess
1) too much overlap
2) too big a mismatch between what the states get via taxes and their spending;
3) too heavy a federal hand in areas of state responsibility;
4) too much ‘destructive competition’ across jurisdictions;
5) too little cooperation across states and between states and the Australian Government,

The end result is that it costs Australians lower living standards. A simple rule of economics is that somebody pays.

There has been talk around for decades about how we are ‘over governed’…I can’t help feeling that if people KNEW a bit more about what ‘goes on’, such as the above, there would be a bit more common sense applied. Why is it mainstream media doesn’t have a regular watchdog section for this sort of thing…perhaps an internet forum….in the same way that The Age is now running a regular greenhouse gas emissions report? It might even attract sponsorship.