Thank you very much Tom, ladies and gentlemen. I want to thank Tom and the Menzies Research Centre for inviting me here tonight, but more than that, for the contribution that the centre makes to the great battle of ideas. In the end political parties are sustained more by ideas than anything else and the contribution of this centre to the constancy of Liberal ideas is absolutely crucial. And it's also very fitting that I'm here in Melbourne to offer some reflections on Australian federalism, because it was in this city, as you all know, that our Federal Parliament sat for the first 26 years of the federated Australia.
A little over 60 years ago, Robert Menzies spoke in those ringing terms of his about the 'magnificent journey' that he and the other founding fathers and mothers of the Liberal Party were embarking on. And guiding this journey over that 60 years has been a philosophy of private enterprise and individual freedom, harnessed to building a strong, united, competitive and fair Australia.
The Liberal Party, importantly amongst centre right parties around the world, is the custodian of two traditions - it's the custodian of the classical liberal tradition, it's also the custodian of the conservative tradition in Australian politics. It continues the vision that Menzies had of a party that stands above sectional interests to represent the great mainstream of the Australian community. We are a party both of courageous reform when that reform is needed. And also a party that defends and preserves the traditions of Australia that we all cherish. And the Menzies Research Centre, by delivering ideas and policy options to the heart of Government, is uniquely placed to extend Australian Liberalism's historic contribution to what our founder called 'magnificent journey'.
I'm very privileged to lead a Government committed to renewal from a position of strength. And after nine years in government let me enthusiastically pick up what Tom said, and that is that we are more determined than ever to engage in the battle of ideas. We know that if Australia is to prosper further through the 21st century we must continue along the path of vigorous reform.
In addressing the condition of federalism in Australia let me make it clear at the outset that the federal structure of the Australian nation will remain. The responsibility of all of us in government is to make the federal system work better for all the Australian people. If we had our time again, we might have organised ourselves differently, perhaps many of us have had those thoughts, I certainly have on numerous occasions, but they are only thoughts, thoughts can be beautiful but they are only thoughts and there's not much point in indulgencing ourselves in theorising. And in that context there's been a little bit of commentary of late that my Government has discarded its political inheritance in a headlong rush towards centralism. Ironically, this charge has arisen just as the Commonwealth is being urged, often by the same people who make the comments, to assume more and more responsibilities - especially in areas of economic and social infrastructure traditionally owned and run by the States.
Let me say at the outset that these fears of a new centralism rest on a complete misunderstanding of the Government's thinking and its reform direction. Where we seek at present a change in the Federal-State balance, our goal is to expand individual choice, freedom and opportunity, not to expand the reach of the central government. Let me illustrate in a policy area very close to my heart and close to the hearts of many in the audience, that is the issue of industrial relations. The desire to have a more national system of industrial relations is driven by our wish that as many businesses and employees as possible have the freedom, the flexibility and the individual choice which is characteristic of the Government's philosophy in the area of workplace relations. And this can only be achieved at present by removing the dead weight of Labor's highly-regulated State industrial relations systems.
In this area the goal is to free the individual, and not to trample on the States. We have no desire at all to take over functions that are being properly discharged by the States and the Territories. On the contrary, through the introduction of the Goods and Services Tax, the Government has delivered the most important federalist breakthrough since the Commonwealth took over income tax powers through the exercise of the defence power during World War II. But nor will we shirk our responsibility to seek the best possible outcomes for the nation and to extend Australia's economic prosperity through this century.
I am, first and last, an Australian nationalist. When I think about all this country is and everything it can become, I have very little time for vestiges of state parochialism. This Government's approach to our Federation is quite simple. Our ideal position is that the States should meet their responsibilities and we will meet ours. And our first impulse is to seek state cooperation with States and Territories on national challenges where there is overlapping responsibility. But I have never been one to genuflect uncritically at the altar of States' rights. Our Federation should be about better lives for people, not quiet lives for governments.
Australian Liberalism has always been a highly optimistic creed. It values freedom and initiative over compulsion and conformity. And the golden thread of this inheritance is to trust the choices of the Australian people. It is a philosophy that we bring to areas such as education, healthcare, workplace relations and helping parents find the right balance between work and family responsibilities. It is a philosophy that has a timeless quality in a world of constant change. And I believe that part of that change, especially in the last 10 to 20 years, has been the greater focus by the Australian people on ties to nation and to their local community, and less on traditional state loyalties.
What I call the nationalisation of both our economy and our society can be seen very clearly over time. When I was a young solicitor in Sydney in the early 1960s, our legal firms were confined exclusively to state capitals. A Sydney law firm like the then Allen Allen and Hemsley, now of course Allens Arthur Robinson, would, for example, have Victorian agents for its business in Melbourne. The very expression Victorian agents sounds quaint, even old fashioned in the world of the 21st century. Today, of course, that is no longer the case and the same trend has occurred across all sectors of the Australian economy. Think too of something really important and that is the nationalisation of our football codes. Once upon a time, someone following the Victorian Football League would have been an oddity in Sydney or Brisbane. Today, we all put in our footy tips for the AFL every Friday, in many codes in the case of prime ministers. And who would have thought a few years ago that Melbourne would for a time hold the record for the largest Rugby crowd in Australian history?
In the vital area of education, the increased mobility of our population means that no fewer than 80,000 Australian students move from one State or Territory to another each year. And against this backdrop of the nationalisation of our economy and our society there is understandable frustration, even anger, among the Australian people at what they see as the constant buck-passing in our federal system and a failure to achieve uniformity when that uniformity will deliver obvious benefits.
Too often we talk about cost-shifting. All Australians hear is blame-shifting. As societies change and attitudes change, so there are inevitable pressures on political structures and parties to change as well. I'm reminded especially of this when I think of our party's conversion to the cause of industrial relations reform. For many years, the Liberal Party was more than comfortable with the old system of centralised wage fixing and arbitration. I well recall Menzies praising the system's contribution to industrial peace and productivity in writings after his retirement. Like many others, he saw any move towards workplace bargaining as leading inevitably to strikes and industrial dislocation. This is not a view that many Liberals would hold today. And nor is there any desire within the Australian community - in a more entrepreneurial and self-reliant nation - to turn back the clock to what we would now see as a highly illiberal industrial relations system.
Similarly, my own attitude towards our federal system has evolved over a life in politics. Like other Liberals, I am a strong constitutionalist. The dispersal of power that a federal system promotes, together with its potential, and I stress potential, to deliver services closer to peoples' needs, are threads of our political inheritance that I have always valued and greatly respected. The trouble is that, in practice, there is often less to these arguments than meets the eye. For instance, the view that State governments have benign decentralist tendencies has always been something of a myth. At various times, State Governments of both persuasions have found occasion to trample over local government decision-making. Without passing judgement on particular cases, it does expose the selective indignation of the States when it comes to the virtues of decentralisation. And a State education bureaucracy can appear pretty remote if you are a parent in Mount Isa or Kununurra struggling to make sense of your child's unintelligible report card. This indifference to localism can apply to metropolitan areas as well. In recent years in both New South Wales and Queensland, government schools wishing to expel students under a strict anti-drugs policy have been overruled by State bureaucracies, to the understandable chagrin of parents and teachers.
But Mr Chairman, the major source of discontent with Australia's federal system today must turn on the underwhelming performance of current State governments following the introduction of the Goods and Services Tax. Those who argue that my Government has embraced centralism are suffering from a severe case of historical myopia. Our decision five years ago to grant every last dollar of the GST to States and Territories was the greatest vote of confidence in the federal system in the Liberal Party's history. For years, literally for years - first as Treasurer and then as Prime Minister - I sat across the table from Premiers of both political persuasions who pleaded for access to a growth tax. These calls came as strongly from Charles Court and Joh Bjelke-Petersen and Jeff Kennett as they did from Neville Wran and John Cain and Steve Bracks. They said, in affect: 'Give us a growth tax and we will leave you alone. We will get on and deliver the services like public hospitals, public transport, police and government schools which are the core responsibilities of state governments.' We delivered with the GST. And it liberated the States from their dependence on inefficient financial taxes and from general revenue assistance grants provided by the Commonwealth.
No government in 60 years has given the States more fiscal autonomy to fulfil their constitutional responsibilities. In March 2000, we calculated that States and Territories would benefit in the first eight years by $3.7 billion over and above the previous revenue sharing arrangements. In fact, the latest estimates suggest that that benefit has climbed to almost $10 billion. Over the next five years, States and Territories collectively will be $16 billion better off than they would have been under the arrangements that I inherited when I replaced Mr Keating as Prime Minister. In that time, the windfall to Victoria alone will be approximately $3.2 billion. All the Commonwealth asks now is that the States make a determined effort to meet their responsibilities and obligations. Part of that bargain was to reduce the burden of state taxes. Peter Costello has outlined a plan which would cut indirect taxes by $8.8 billion by 2009-2010 and still leave the States better off by around $7.5 billion. This targets inefficient, nuisance taxes on business - especially a range of stamp duties. Abolishing these taxes will help Australian firms to compete in a tough, competitive world. It is not centralism to want to cut taxes. It is liberalism.
Looking across our federal system, we do find areas where the Federation works well, areas where the case for rationalisation is strong, and areas where a more incremental approach is the best way to proceed. Cooperation between the Commonwealth and the States on water reform is a good example of how the federal system can work for Australia's betterment. While the States have a constitutional responsibility for water management, a national approach was needed to deal with what I have called the great conservation challenge of our age. The greatest of Australian rivers, the Murray, flows from Queensland to South Australia. What happens in one State directly affects irrigation and the environment downstream in another State. Farmers need to have secure access to water - our scarcest resource - on a sustainable basis. The Commonwealth therefore led the development of the National Water Initiative and has now established the National Water Commission, with the cooperation, I'm pleased to say, of most State and Territory governments.
Only last week I signed a path breaking agreement with the Chief Minister of the Northern Territory. And it set out how together the Commonwealth Government and the Government of the Territory could better deliver services to Aboriginal Australians. It included an arrangement by which the Territory would provide housing programmes on behalf of both governments. We also agreed that we will continue to work together to ensure that indigenous families can have far greater choice in how they can lease Aboriginal land to have their own homes and to build their own businesses. I hope that we can have similar agreements very soon with other States and Territories.
These two examples, water and a limited area of indigenous policy, show that, with sufficient political commitment and goodwill, there is no intrinsic barrier to the Commonwealth and the States together tackling great national challenges.
In other cases, however, I believe, that the existing structure of Federal-State responsibilities has run its course. Soon, my Government will unveil a new round of industrial relations reforms to bring Australia's workplace relations system finally into the 21st century. Reform is vital if Australia is to further consolidate the transformation of its economy to one where wages are based on the capacity of firms to pay and on the productivity of individual workplaces. We made very good progress towards a more flexible and competitive system with the passage of the Workplace Relations Act in 1996. But, as many of you know, important reforms in areas such as unfair dismissals and improved flexibility in agreement making have been blocked repeatedly in the Senate.
We've also seen Labor States gum up workplaces with regulation in recent years, often at the behest of the unions. Independent contractors, the very epitome of the free enterprise system, have been under regular attack from unions and Labor Governments looking to place barriers on the freedom to contract and to place conditions on the use of independent contractors. In last year's election campaign, the Government promised to protect the rights and the legal status of independent contractors. And we are well advanced with plans to do so.
But with the unexpected but welcome and favourable election outcome in the Senate, we are now in a position to drive the industrial relations reform process further in ways consistent with our philosophy. I believe that a single set of national laws on industrial relations is an idea whose time has come. It is the next logical step towards a workplace relations system that supports greater freedom, flexibility and individual choice. Again, this is not about empowering Canberra. It is about liberating workplaces from Colac to Cooktown.
To further demonstrate that a uniform industrial relations system is no embrace of radical centralism, I remind you that the Kennett Government here in Victoria referred these powers some years ago and the Bracks Government has maintained this position. And I'm pleased to note today in Sydney the Leader of the Parliamentary Liberal Party in New South Wales committed a further Coalition Government in that state to a referral of industrial relations powers to the Commonwealth in the event of a successful outcome at the next election. And let me emphasise that there is no evidence that this referral of powers in Victoria has disadvantaged the workers in this state. And that experience exposes the rather hollow character of some of the scare campaigns engaged in in this area by our political opponents..
We have come a long way from the days when the Industrial Relations Club set the wages and conditions for workplaces around this country. But in an age when our productivity must match that of global competitors, forcing Australian firms to comply with six different workplace relations systems is an anachronism that we can no longer afford. The current system of overlapping federal and state awards is too complex, costly and inefficient. Employers and employees frequently face a patchwork of regulation, having to accommodate overlapping state and federal regulations within the same workplace. And there are currently some 2,300 federal awards and over 1,700 state awards, and multiple state and federal awards can apply to same business. Small businesses in particular struggle to cope with that complex system. Our preference is for a single system to be agreed between the Commonwealth and the States - as was the case with Victoria's referral of power in 1996. But, in the absence of referrals by the States, the Government will do what it reasonably can to move towards a more streamlined, unified and efficient system. We are considering a package of reforms based on the corporations power that will bring roughly 85-90 per cent of employees into a national workplace relations system.
I want to remind you, however, that those areas where the Commonwealth seeks to cover the field in our federal system will always be very rare. In most cases, making our Federation work better will rely on an incremental approach. Incremental reform usually gets a bad press, especially from editorial writers accustomed to dispensing advice in 800 words or less. But incremental or piecemeal reform is in fact the kind of reform that liberals and conservatives invariably are most comfortable with. Indeed, as Karl Popper taught us half a century ago, it is often the most rational approach - especially if the alternative is utopian social engineering.
Health and education are two areas where overlapping roles and responsibilities are built into our federal system. Despite problems that arise from time to time, I am not one who regularly denigrates our health and education systems. They are among the best in the world. And I had a vivid reminder here in Melbourne today in visiting that wonderful bionic ear centre of the sheer excellence and world class of the medical scientist that this country has produced. Among comparable countries in our health system we rank highly: third for people's life expectancy; sixth for healthy life expectancy; and third in the OECD for overall health system effectiveness. Our education system is also rising to the challenge. According to the most recent data, Australian 15-year olds are performing well against benchmarks for reading, mathematics and science when compared with their counterparts elsewhere.
There will always be great room for improvement and the Australian Government has a particular responsibility to promote choice and to ensure high national standards both areas. But I am not persuaded by some of the options for radical reform that are often canvassed. In particular, I am not persuaded that the effectiveness or efficiency of healthcare in Australia would be improved by the Commonwealth assuming responsibility for public hospitals. Any possible gains would be outweighed by the disadvantages to local hospitals and their communities of management by a more distant health bureaucracy. And it is unlikely that consensus could be achieved for the necessary overhaul of Commonwealth-State financial relations that would follow such a transform.
My Government has adopted a more targeted approach to finding practical options to improve the delivery of health services to Australians. And last year, I commissioned a Task Force to prepare these options and its focus has been on examining pressures at the interface of the primary, acute, rehabilitative, aged and community care sectors and the obstacles to seamless care within our system. And these options will help inform my discussions with State Premiers when we next meet at the Council of Australian Governments meeting.
We do need to look carefully at the respective roles and responsibilities of Commonwealth, State and Territory governments for health, aged and disability care. We do so with only one intent: to make life easier for older people, those with disabilities and those who care for them. We are also looking at ways to drive reform in a targeted fashion in the area of vocational and technical education. Australia currently enjoys the lowest unemployment rate for 30 years. And this has created skills shortages in parts of the economy and as a result in last year's election campaign we made far-reaching commitments to boost opportunities in traditional trades. I've said many times before, and I repeat tonight, that this nation made a cultural error a generation ago when we embraced uncritically the notion that the highest path of success for a young person was to go to university. This did a huge disservice to the 70 per cent of young people who do not go direct from school to university. And it reflected an intellectual failure to understand the continuing needs of our economy.
The Commonwealth is intent on driving a cultural shift in the area of traditional trades with the creation for the first time of federally-funded Australian Technical Colleges in 24 centres around Australia. Each college will be run independently in a way that promotes choice, flexibility and excellence. Each will be linked with industry. Teaching staff will offered performance pay and the option of signing Australian Workplace Agreements. Greater award flexibility is also part of the solution to the problem of skills shortages. Too often, rigid State-based awards create licensing bottlenecks in traditional trades. In the housing and construction industry, for example, a person can be required to undertake three or four years training on apprentice wages without the option of more specific training over a shorter period. Many State awards also include barriers to the increased up-take of school-based New Apprentices and part-time New Apprentices. A single, unified and flexible system of industrial relations law will help to deliver a more market-oriented training system. And while the States currently own and run the TAFE system, the Commonwealth provides approximately $2.1 billion in annual funding. The Commonwealth will seek to further improve the national training system and to make it more responsive to the needs of industry by resuming the functions of the Australian National Training Authority in the middle of this year. For some, this is yet another terrible incursion into States' rights. In reality, it is the Federal Government stepping in where eight different state systems are failing to deliver what the nation needs.
Mr Chairman, can I conclude with some broader reflections? Australians are a non-ideological, pragmatic and empirical people. They want governments to deliver outcomes and not make excuses. They want governments that take responsibility, not states of denial. Now and in the future, my Government stands ready to cooperate with States and Territories on Australia's great reform challenges. And we will continue to err on the side of cooperation. But while ever the States fail to meet their core responsibilities there will be inevitable tensions in our federal system. With the GST, the States no longer have an alibi. There are times when tensions can arise within Australian liberalism's traditional commitment to limited government. This Government recognises that dispersal of power is basic to our philosophy. But so is leaning against an over-governed Australia - something that can become all too apparent in a federal system with eight Labor Governments. We resolve this ultimately by pursuing policies that spread power, freedom and opportunity to the suburbs, workplaces, towns and farms right across our nation. In the end, we approach the challenges of Australian federalism as we approach other challenges - not by walking away from our political inheritance, but by seeking to extend it.
Thank you.
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