The case for competitive federalism

Big Gov Australia? The Case for Competitive Federalism

According to the latest polling, it is likely a Shorten government will happen.

Meanwhile, let us not forget that it was Scott Morrison who gave us the latest tax-and-spend budget.

There has never been a better opportunity to make the case for genuine competitive federalism.

Federalism is the idea that the federal government should share its duties for governing with the states.

It stands in contrast to the increasing push towards big government solutions.

The competitive part of the phrase refers to how states must compete to provide taxpayers with the best solutions.

There is a strong link between debt and Australia’s move away from federalism.

The numbers don’t lie.

Between 2008 and 2017, the debt-to-GDP ratio has ballooned from 11.7 to 41.9%. That is a near fourfold increase.

The tax burden on Australians has grown by leaps and bounds in our lifetime, and shows little sign of reversing. But if you think you know who’s responsible, you may be surprised by the information in our new free report, ‘What you could do to stop Australia’s Tax Freedom Day from blowing out even further in 2018’. Click here for more.

Australia's Debt to GDP ratio 2008-2017

Source: Australian Bureau of Statistics

There are two underlying questions that this raises. Firstly, does debt matter?

The answer is yes. Regardless of what other countries do, Australians will needlessly pay for this in the future.

The big government types who are pulling the strings in Canberra seem to think that debt doesn’t matter.

The answer is that it actually does matter.

Secondly, there is the matter of revenue distribution.

Last year the Commonwealth government pulled in $389 billion.

State governments pulled in $82 billion and local governments just $17 billion.

Below we see how this works out in percentages.

Source: Australian Bureau of Statistics

The upshot of this is that the money flows up to the top. It then gets doled out to the states.

The whole time, it is the layer cake of Canberra bureaucrats who determine winners and losers at the state and local level.

Why Australia needs genuine competitive federalism

Let the states be their own winners or losers.

If a state is not to your liking, you can book a flight to your preferred state for as little as $50.

Victoria was a major winner in the most recent budget, with major infrastructure programs announced.

Victorians can celebrate because the state has been traditionally robbed.

But this celebration may be short lived.

A Shorten Government will likely come to power with a new raft of pork-barreling schemes.

These schemes are always designed to win marginal seats.

This pattern of behavior is in no way competitive.

Imagine for example, the AFL having complete control of over 80% player trades.

Federalism, as the famed economist James M Buchanan notes:

‘…serves the dual purposes of allowing the range or scope for central government activity to be curtailed and, at the same time, limiting the potential for citizen exploitation by state-provincial units.

Blame for the exploitation of taxpayers sits squarely in the Commonwealth’s lap.

Australia must act soon or we will continue to see absurd budget after absurd budget.

The bloated federal bureaucracy will continue to expand.

With each new hire, it takes more money out of the hands of a hard-working Australian.

The recent by-election for the Batman seat is case in point. The Greens attempted to make it a referendum on the proposed Adani mine.

Let us be clear. Adani should be a matter for Queenslanders to decide on.

The same goes for the countless infrastructure appropriations in the new budget.

These problems are fixable.

The answer is competitive federalism.

By Lachlann Tierney

PS: Tired of paying more tax, year after year and decade after decade? Find out what you could do to help stop Australia’s already-crushing tax burden blowing out even further this year. Click here to download our latest research report for free.

The Australian Tribune Editorial

The Australian Tribune Editorial

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