Costing constitutional change: estimates of the financial benefits of new states, regional governments, unification and related reforms

  • Mark Lea Drummond

    Student thesis: Doctoral Thesis


    There have been numerous proposals to reform Australia's government structures, both prior to and since Federation in 1901,including calls for New Colonies and New States, Unification plans, Regional Government models spanning across the federal-unitary continuum, and proposals to transfer functions between Commonwealth and State governments, such as the modern day attempts by the Commonwealth government to establish a national Industrial Relations system. But while several functions have been transferred from the States to the Commonwealth since Federation, major changes sought by supporters of New States, Regional Governments and Unification have never been achieved. The financial benefits possible through various reformed government structures are first examined in terms of claims and estimates that have accompanied past reform proposals. Financial benefits are then estimated for the four years from 1998-99 to 2001-02 using population and expenditure data, per capita expenditure comparisons, and various linear and non-linear regression techniques. New States appear likely to cost in the order of $1 billion per annum per New State, and possibly more if costs associated with State-Territory borders are taken into account, but their financial viability could be vastly improved if New State formation follows or is accompanied by functional transfers to achieve national systems in areas such as health and education. It is estimated that Unification and some Regional Government models could achieve financial benefits in the order of five to ten per cent in both public and private sectors and the economy as a whole, which, in June 2002 dollar terms, would amount to some $15 billion to $30 billion per annum in the public sector,$25 billion to $50 billion in the private sector, and hence $40 billion to $80 billion per annum across both public and private sectors and the entire Australian economy. It is also estimated that for several functions, including education and health, unitary national systems under Commonwealth control could generate significant financial benefits, whereas for other functions, notably transport and communications, national systems could prove more costly. Additional research could clarify estimates, but ultimately the only way to fully check estimates is to observe and measure actual reforms in action. If all State-Territory level health care functions, for example, were transferred to the Commonwealth government to achieve a fully national health system, then the benefits and costs of such reform could be assessed with much more certainty than is possible through pre-reform empirical estimates. The establishment of a national health system could also diminish concerns that New States or Regional Governments might exacerbate problems associated with separate State laws, regulations and systems - problems likely to be tolerated least in health care given its life-and-death gravity. And for Unification advocates, a national health system would represent a significant step towards complete Unification across all functions. Estimates appear to be robust when assessed in light of Commonwealth Grants Commission methodologies, differential levels of tax expenditures and privatisation across the current States and Territories, and Australia's economic and industrial geography, and on balance suggest that intelligent government structure reforms have the potential to significantly enhance Australia's financial and economic strength, and hence provide the financial capacity to achieve significantly improved social and environmental outcomes as well.
    Date of Award2007
    Original languageEnglish
    SupervisorJohn Halligan (Supervisor)

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