The Australian Executive Federalism Model – National Competition Policy Returneth

The increased likelihood of a Labor win at the next Federal election heightens the need to examine their policies.

One important area is the way in which the executive federalism model that is COAG will operate.

In a recent speech Shadow Treasurer Chris Bowen foreshadowed a full reversion to the National Competition Policy of the 1990s.

As he said in his speech:

That’s why we are announcing today that we will establish a new independent COAG Economic Reform Council that will be given more autonomy in its remit to examine, track, and report to COAG on long-term reform priorities.

We believe a new independent COAG Economic Reform Council will get more buy in from the states and create a greater shared sense of responsibility than the current arrangements.


In this regard, the COAG Economic Reform Council could be tasked by the Prime Minister to look at ways in which the Commonwealth could better influence and support the states making changes to their planning laws which would lower the cost of housing and increase housing supply.

But it doesn’t stop at housing affordability.

Given policy areas like health and education are expanding their share of the Australian economy, delivering these services as efficiently and as productively as possible will deliver even bigger economic benefits than former more traditional areas of reform.

Labor’s substantial new investments at the Commonwealth level particularly in health and education will necessitate the need for reform goals to be met by the states.

This is why new COAG Economic Reform Council might examine restructuring payments to the states to include incentive or reward payments, which helped drive reform in the 1990s and were used successfully until mid-last decade.

I say to the states and territories – a future Labor Government will work with you, not against you.

There will always be a need of course for difficult conversations between a Federal Treasurer and their state counterparts. But the spirit of goodwill, cooperation and shared endeavour must be at the heart of the Federation.

As luck would have it, a mudmap is available to bring this policy to instant fruition.

During the December 2016 the Commonwealth and the States and Territories (except Queensland and Victoria) signed the Intergovernmental Agreement on Competition and Productivity – Enhancing Reforms, which

…..builds on the achievements of previous Council of Australian Governments (COAG) agreements that supported the National Competition Policy and subsequent reforms, including the Competition Principles Agreement and the Conduct Code Agreement

with pre-designed areas for reform identified:

Regulatory reforms – to remove unnecessary regulatory barriers to competition

Human services reforms – to enable innovative ways to deliver high quality, efficient human services

Infrastructure reforms – to promote efficient investment in and use of infrastructure in areas such as road transport, water and energy and updated principles for the National Access Regime

Additional productivity reforms – to grow the economy and improve living standards, which may include reforms identified by the Productivity Commission in its five-yearly reviews into Australia’s productivity performance

and a pre-developed model for tying Federal Government funding to reform:

The Commonwealth will provide payments to the States for the delivery of reforms that drive Australia’s economic performance and living standards. The Commonwealth and the States will work collaboratively to develop funding agreements in the priority areas at Part 4, in accordance with this Agreement and the Intergovernmental Agreement on Federal Financial Relations.

Jurisdictions may become parties to relevant funding agreements at their discretion. To qualify for payments, the States will deliver reforms consistent with the terms and conditions of this Agreement and the relevant funding agreement. Development of funding agreements in the priority areas at Part 4 will be informed by the appendices to this Agreement. Reforms implemented since the publication of the Competition Policy Review final report on 31 March 2015 will be eligible for consideration under this Part.

The IGA proposes that regulatory areas due for reform ranges from occupational and professional licencing to commercial planning and zoning to media regulation.

During the height of National Competition Policy, it became clear that all relevant aspects of policy had to be approved by treasury officers.

If (as is likely) this will happen again, people with an interest in policy areas subject to reform will need to frame ideas in a manner that appeals to an economist……and only an economist.

It will finally be interesting to see if the Labor Queensland and (should they win the coming election) Victorian governments sign an IGA of this nature with a kindred federal Labor Government.

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We look forward to hear from you.