Senator REYNOLDS (Western Australia) (20:35): I rise to speak on the coalition government’s white paper on the reform of our Federation. Firstly, I would like to congratulate the Prime Minister and the government for providing all Australians with this historic opportunity to have a direct say in the future of our Federation.

Over the years I have become a passionate supporter of our Constitution—not because I am a rearward looking traditionalist but because for 114 years it has delivered stable government and it possesses unique mechanisms to successfully deal with intractable conflict and stalemate. As I said in my first speech, I am both a passionate Western Australian and a proud Australian—two different but nonetheless consistent identities. I believe our Constitution continues to serve both identities well and that collectively we have the capacity to be far greater together than apart. But our union must always be just and it must always be efficient. There is no perfect democracy. The extensive deliberations and compromises of our own founding fathers delivered us an enduring and robust Federation, but not a perfect one. I have learnt through my experience here and overseas that the health of all democracies is neither self-evident nor self-sustaining, and we must never take it for granted.

Unlike many other modern democracies, our Constitution was born of talk, not war. Our nation is a testament to what can be achieved peacefully and with an enduring spirit of sovereign cooperation and compromise. The slogan ‘one people, one destiny’ used by two of our founding fathers, Henry Parkes and Edmund Barton, resonated across Australian colonies, since it was a message of sovereign cooperation and not integration. In 1928, the Western Australian Premier Philip Collier declared that this enormous country cannot be governed from a political centre by men almost entirely ignorant of conditions in the far corners of the land. Now in this place, as a senator for Western Australia, I have already seen that this statement is as true today as it was then.

I also said in my first speech that I believed it is time that, as a nation, we celebrate and encourage the diversity of our states and territories and approach our Federation with a new respect and a new maturity. To understand the present and prepare for the future it is first wise to look at the past. In 1901 it was the promise of collective and stronger defence, foreign affairs and trade, rail standardisation and the abolition of intercolonial duties and excises that got the colonies over the line to deliver Federation. Critically, the guarantees that a sufficient revenue funding base would be available for the states to meet their new constitutional obligations got Western Australia over the line, but only just. Revenue was also the prime motivation for the 1933 secession attempt by Western Australia. To help understand Western Australia’s concerns then and now, it was predicated at Federation that only 25 per cent of total state and Commonwealth taxation revenue would be required by the new Commonwealth government, with the remainder going to the states.

But, as Sir Robert Menzies observed in the mid-1960s, it was a starry-eyed expectation that the new Commonwealth parliament and government would be cheap. Sir Robert was absolutely right. Today total revenue raised is split 75 to 25 per cent in the Commonwealth’s favour. The simple truth is that, since Federation, despite review after review, we have never provided a sufficient revenue base for both the states and the Commonwealth to meet the increasing levels of service expected by all Australians. The goods and services tax was introduced by the Howard government to remedy some of the ills of vertical fiscal imbalance. As a broad based consumption tax, the GST has allowed revenue to flow directly to the states. But its method of distribution is now punishing economically successful states—in particular my state of Western Australia—by allocating back to them far less than they collect in order to subsidise consistently underperforming states. To highlight this iniquity, WA’s projected per capita share of GST will fall from 45c in the dollar last financial year to 38c this financial year, and based on current projections it may fall as low as 11 per cent in just three years. Critically, our long-term economic growth depends on all states doing better, not on slowing down the sectors of the economy that are doing well.

Consider the following facts and implications not only for Western Australia but also for the rest of the nation. If Western Australia received GST revenue on a per capita basis, this year alone it would have been $3.7 billion better off, enabling it to fund critical infrastructure projects and support our rapid population growth. Instead, the downgrading of WA’s credit rating from AAA to AA1 by Moody’s was a stark reminder of the impact this chronic underfunding has on our most productive state, a state on which today the rest of the country is so reliant.

The Western Australian Treasurer, Mike Nahan, said yesterday that, while WA has to live within its means, it is no longer sustainable for Western Australia to pour money into the coffers of other states. The extent today of this subsidisation is simply staggering. The typical Western Australian household will pay on average $6,000 of GST per year. From that amount, $3,700 will go to subsidising households elsewhere in Australia. That leaves only $2,300 for Western Australia to pay for essential services. To highlight it even further, this year, $496 million of the money collected from Western Australians goes to Tasmania; $746 million to South Australia; and $142 million to the ACT. Unbelievably, $598 million also goes to Queensland, a relatively productive state. This year alone WA taxpayers are supporting the Northern Territory by $1.73 billion. This situation is neither just nor was it ever the intent of our founding fathers. This is one of the reasons I so strongly support the concept of competitive federalism.

I agree with Henry Ergas, who observed that resource states need to provide better public services than other states and charge lower taxes in order to attract people. Our current federal-state arrangements simply do not provide for this to occur. I believe all states possess competitive advantages, and I simply do not believe there are any excuses for all of our states not to thrive; merely I believe that there is a lack of political leadership to innovate and transform. In my first speech I welcomed the Prime Minister’s white paper on reform of the Federation. On this side of the House, we are aware of the issues that have led to this white paper, which are clearly laid out in the Commission of Audit report. This report notes that responsibilities have accumulated over time and that this has increased the risk of administrative duplication and overlap, higher costs, blurred accountability, opportunities for cost-shifting and a reduction in the efficiency and effectiveness in the delivery of services. Australian taxpayers are certainly not getting value for their taxation dollars today.

In this white paper process the Commonwealth, working with the states and territories, will seek to clarify the roles and responsibilities of each level of government to reduce waste and inefficiency and increase the effectiveness of the federal system. Most encouragingly for Western Australia is that this white paper will align closely with the forthcoming white paper on the reform of Australia’s taxation system.

The Prime Minister’s announcement on the Federation white paper stated that an issue to be considered would be ‘the most appropriate approach for ensuring horizontal fiscal equalisation does not result in individual jurisdictions being disadvantaged in terms of the quality of services they can deliver to their citizens’. In plain English, that means revenue share—a critical issue for Western Australia, not just for equity but also to ensure that we can remain the economic powerhouse of our nation. The white paper on the reform is a wonderful opportunity, therefore, to begin a statewide conversation around reform of our Federation. Now is the time to get the conversation going and for all Western Australians, like me, to learn more about our rich constitutional history and our respective roles within it.