Co-operation key to the united states of Australia

Illustration: Eric Lobbecke

Australia has responded to COVID-19 in a surprising and successful way. Past emergencies have seen power concentrated in the national government. The states and Australia’s federal structure have been put aside in favour of a commonwealth response. This time is different. Our leaders have instead embraced a diversity of perspectives and shared leadership across the commonwealth and the states. It suggests a very different model for how the nation might respond to future crises.

Federal systems share power across many governments, and so can be prone to complexity and indecision. They are designed to promote conflict and dissent to check central power and ensure that multiple voices are heard. This can be problematic during an emergency when decisions must be made quickly, and the nation must chart a single path forward.

These challenges meant that Australia’s federal structure was largely displaced during World War II.

Our national leaders assumed control over almost every aspect of the economy and civilian life, making Australia for all practical purposes a unitary state. High Court decisions upheld these arrangements because our defence demanded strong national government. This left prime ministers Robert Menzies and John Curtin able to use extraordinary powers to maximise Australia’s war effort.

The shift of power during national emergencies can reshape the nation for the longer term. In the case of World War II, it left a legacy of federal financial dominance that persists to the current day.

Before that conflict, income tax was levied by both the state and federal governments. This provided the states with the financial means to ensure their independence. The system was turned on its head in 1942, soon after Japan entered the war.

The commonwealth saw the need and the opportunity to assert itself as the sole recipient of income tax. It did so by executing a brutal takeover of state income taxation. Laws were passed to set commonwealth income tax at very high rates of up to 90 per cent of a person’s income. These further stated that no state income tax could be collected until a person had met their federal obligation. The public servants and the property of state taxation departments were also forcibly transferred to the commonwealth.

This wrested control of this lucrative form of tax revenue from the states. They were left with a massive hole in their budgets. The commonwealth responded by granting money to the states but made it clear that such grants would be reduced by the amount of any income tax collected by a state. The result was a bind in which the states lost their ability to levy income tax, as well as any incentive to do so.

Four states challenged the takeover in the High Court but lost. When the war ended, the scheme was left in place. In the decades since, the commonwealth has retained control of income taxation, leaving the states dependent on commonwealth grants to fund even their most basic operations. The result was a seismic, long-term shift in financial and political power away from the states to the commonwealth.

These events show how national crises can be the catalyst for long-term change to the federation. The current pandemic could have presented a similar opportunity. Federal leaders have argued over many years that the commonwealth should assert greater control over our health system. The crisis might have been used to justify a national approach to public health to enable scarce resources and hospital places to be deployed to maximum effect. This could have heralded a shift to national management of Australia’s health system.

Nothing of the sort has occurred because our federal leaders have exercised considerable restraint. Rather than sidelining the states, Prime Minister Scott Morrison has emphasised the need for co-operation and collaboration. A good example is Morrison’s creation of a national cabinet comprising federal and state leaders. It has elevated the importance of state leaders and worked against the idea that Australia should only have a commonwealth response to the pandemic.

There has also been surprising restraint in key policy areas. Tension and disagreement have been evident between the Prime Minister and state leaders over schools and the reopening of the economy. The commonwealth might use its remarkable biosecurity powers and financial dominance to achieve the outcome it wants in these areas. Instead, it has relied upon persuasion, and where this has been ineffective the states have been left to adopt their own approach.

The evidence suggests that Australia’s response to the pandemic has worked to date. An impressive and intelligent use of our federal structure has enabled us to better solve the complex problem of responding to a nationwide pandemic. It may well foreshadow a new way of responding to future national emergencies, including bushfires and other natural disasters.

This reflects well on our leaders, especially as compared to how things are faring in the United States. It has a similar federation to Australia, but in the case of the US the fractures in its political system and weaknesses in leadership have been more deeply exposed. The US response has brought out the worst in its federal structure. Lines of communication and responsibility have become confused, and rancour has replaced co-operation between the President and state governors. We can count ourselves fortunate that our leaders have had the sense to not take us down a similar path.

George Williams is Dean of Law at the University of New South Wales