The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

26 March 2008


Modern Federalism for Australia's Economic Future

At today's Council of Australian Governments meeting the Rudd Government and the States and Territories will substantially advance the Modern Federalism agenda to modernise federal-state relations and underpin growth and prosperity into the future.

After more than a hundred years, the governments of Australia are finally getting it right.

Today's meeting in Adelaide will lay crucial new foundations for reform in key areas of federal-state financial relations in particular.

Governments are expected to agree to a new architecture of cooperative funding arrangements that will replace the inefficient and complex system of grants that has plagued key areas of service delivery for decades.

The new financial architecture will make roles and responsibilities much clearer – so that Australians receive the level of service delivery they expect and deserve.

The terms on which the Commonwealth and the States engage with one another will change in several important ways:

First, the Commonwealth will dramatically reduce the number of specific purpose payments (SPPs) to just a handful.

Almost 90 existing agreements will be collapsed into just five – in health, childhood education and schools, vocational education, disabilities and housing.

Second, the States will get the flexibility they need to allocate resources to those areas where they will produce the best results.

The Commonwealth will move away from the cumbersome prescriptions of the past, and remove the input controls which inhibit State service delivery and priority-setting.

Instead, the focus will be on the achievement of outcomes – that is, what the States and Territories deliver to the people of Australia – rather than how they deliver it.

Third, the Commonwealth will provide greater funding certainty to the States.

There will be no more five-year agreements with take‑it‑or‑leave‑it offers when they expire. The new SPPs will be on‑going payments, with the Commonwealth and the States to periodically review funding levels to ensure they remain adequate into the future.

This will mean policy objectives and service delivery — not money — will be front and centre of Commonwealth-State relations – just as it should be.

For too long feuds over money have silenced crucial national dialogue on service delivery in key areas of our lives – both economic and social.

Fourth, public performance reporting will be made more transparent.

This will empower different levels of government to keep each other accountable.

More importantly, it will allow the people who use services and who drive our economy – the people of Australia – to hold their political leaders accountable.

Fifth, the Rudd Government will provide the States with incentive payments to deliver on key economic and social reforms.

This will reward States and Territories who best deliver the services and outcomes their citizens need and deserve.

Towards a Modern Federalism

The Rudd Government is committed to ending the blame-game that has held back federal-state relations for the last decade and blocked progress towards a modern Australian Federation.

We are determined to deliver fundamental reform to the way we do business with the States and Territories and today's COAG meeting will be a crucial step in that process.

A more effective Federation is a key plank in our long-term plans to:

  • deliver better services to working families wherever they live;
  • develop human capital;
  • build national productivity;
  • increase our international competitiveness;
  • create more effective markets for resources; and
  • end costly waste and duplication.

Today's agreement will demonstrate that the buck-passing of the past is behind us – and that we are now heading in a new direction towards a Modern Federalism.

These historic strides to modernise the Federation are just one way the Rudd Government is working hard to build a strong economy that delivers for working families.

26 March 2008