Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

I would like to thank my colleague Senator Feeney, for a very fine contribution and a very incisive analysis of the issues that arise from the bills before us, and thank Senator Coonan. I think Senator Feeney was just about to touch on the third phase. I suspect the third phase would relate to that attempted secret dinner that Mr Hockey and Mr Costello were caught at in Kingston, and probably on this occasion Mr Hockey’s absence is explained by a further secret lunch to discuss the future of the interim leadership of the Leader of the Opposition, Mr Turnbull.

I would like to thank members for their contribution to the debate on the Federal Financial Relations Bill 2009 and the Federal Financial Relations (Consequential Amendments and Transitional Provisions) Bill 2009. These are important bills to reform financial relations with the states and territories, although, as was noted by my colleague, they are hardly going to draw great media interest or commentary. The Federal Financial Relations Bill appropriates funds to provide financial assistance to the states and territories and implements this government’s reforms to modernise federal financial relations in accordance with the new financial framework agreed by the Council of Australian Governments in the Intergovernmental Agreement on Federal Financial Relations. We are bringing this aspect, as indeed we are bringing many other aspects of public policy, into the 21st century. The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill provides for the relevant consequential amendments arising from the measures in the Federal Financial Relations Bill, including the repeal or amendment of inconsistent legislation.

As I said in my second reading speech, COAG has agreed to a new architecture of cooperative funding arrangements that will replace the inefficient, complex and frankly dysfunctional system of grants that has plagued areas of joint Commonwealth and state involvement in the delivery of services for decades. With these bills the ineffective methods of the past will be behind us and we will be heading in a new direction and will be in a new era of modern federalism. Following COAG’s agreement to the new federal framework in November last year, I have been pleased to note the comments of the Business Council of Australia. The Business Council has consistently argued for reform of federal financial relations and for governments to focus on outcomes in health and education. The Business Council congratulated COAG for ‘reshaping federal-state finances in ways that can improve the accountability and efficiency of government services and make it easier for businesses to invest and grow’. This is a strong endorsement of this government’s reforms to Australia’s federal financial relations—reforms that are long overdue. The comments highlight the fundamental objectives of these reforms of improving the public accountability of both levels of government and of improving public sector efficiency. A more productive public sector means that better services can be delivered with the same level of resources.

In agreeing to the new framework for financial relations, the Commonwealth committed to the provision of ongoing financial support for the states’ service delivery efforts through general revenue assistance, including the ongoing provision of GST payments, to be used by the states for any purpose; through national specific purpose payments, known as national SPPs, to be spent in the key service delivery sectors; and through national partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.

In terms of GST payments, the bill provides an appropriation for the Commonwealth to make GST payments to the states equivalent to the revenue received from the GST in respect of financial years starting from 1 July 2009 and for these payments to be distributed in accordance with the principle of horizontal fiscal equalization. These provisions are equivalent to the current GST payment provisions. Each state will continue to receive its adjusted population share of the GST revenue. The adjusted population of each state will be calculated by multiplying the state’s population, determined by the Australian Statistician, by a GST revenue-sharing relativity, determined by the Treasurer.

The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill provides for the repeal of parts of the A New Tax System (Commonwealth State Financial Relations) Act, with effect from 1 July 2009. Once amended, the ongoing provisions of the current act will be limited to the procedures for managing the rate and base of the GST.

I turn to other general revenue assistance. The government has a range of revenue-sharing and other general-purpose payments in place with the states other than the GST arrangements. Payments under these arrangements will be provided for in the Federal Financial Relations Bill in order to bring all payments to the states under one piece of legislation. Monthly payments of general revenue assistance will be determined by the Treasurer and paid through the COAG Reform Fund. These payment arrangements will be set out in the Intergovernmental Agreement.

The bill provides appropriations for the Commonwealth to make an ongoing financial contribution from 1 July 2009 to support state and territory service delivery in the form of five national SPPs covering the key human service sectors of health care, schools, skills and workforce development, disability services and affordable housing.

The bill also provides a facility for the Treasurer to determine the appropriate amount of national SPPs for this financial year. The transitional arrangement for 2008-09 is necessary to allow the government to reconcile the total amount to be paid for the year with the amount already paid under existing arrangements in order to determine the correct payment for the remainder of the year.

In the past, onerous Commonwealth conditions on funding arrangements have tended to stifle innovation and flexibility, resulting in duplication, overlap, cost shifting and unnecessary administration costs. In establishing these new national SPPs the Commonwealth will provide the states with more funding certainty. The bill specifies the amount of funding for each national SPP for 2009-10 and for the base funding to be indexed annually by a growth factor.

There will be no more five-year agreements with take-it-or-leave-it offers as occurred under the previous arrangements. These national SPPs are ongoing payments with regular funding adequacy reviews. The Treasurer of the day will determine the annual growth factor and each state or territory’s share of the national SPPs in a financial year. These determinations will be in accordance with the principles provided in the intergovernmental agreement. There is provision for national partnership payments, new incentive arrangements with the states, to drive key economic and social reforms. The government has already started this process with around 20 national partnerships agreed by COAG.

The bill provides for the Treasurer to credit amounts to the COAG reform fund. For the first time in a very long time the complexity of the Commonwealth’s financial relations with states and territories will come under the umbrella of just one piece of legislation. That will be a significant achievement for the government and it will also greatly improve public transparency of these payments and the ability of the parliament to scrutinise the payment arrangements. It improves parliamentary scrutiny for payments to the states while at the same time providing more flexible payment arrangements.

That is a summary of the legislation. I have not wanted to overly outline, in this conclusion to the debate, the obviously impressive detail of this new set of very important arrangements. I would like to conclude by thanking Senator Coonan and Senator Feeney for their contributions and commend the bills to the Senate.

Question agreed to.

Bills read a second time.