14 December 2005

A new study has revealed that the New Tax System adopted in 1999 and the embedding of the GST have further diminished the fiscal autonomy of the States and Territories.

Former Queensland Treasurer The Honourable David Hamill believes the States are in danger of becoming just another set of service providers to the Commonwealth.

The findings of the study form part of Mr Hamill`s PhD thesis, from which he will graduate at The University of Queensland at 11am today (Wednesday, December 4).

Mr Hamill, who was Queensland Treasurer when the GST deal was signed in 1999, said the States and Territories had become increasingly reliant on a source of revenue over which they have no control.

“In the absence of fundamental change to its institutional framework, and in an environment in which the conduct of Australian federalism is characterised by coercion rather than cooperation, the increasing financial dependence of States and Territories on GST revenue is rendering them increasingly vulnerable to the dictates of the central government,” he said.

“This creeping centralisation is threatening the fundamental characteristics that distinguish Australia`s system of government as a federation.”

In 1999 the Howard Government heralded its New Tax System (ANTS) and the Goods and Services Tax (GST) as a major reform of Australia`s taxation system that would also enhance the financial capacity of the nation`s States and Territories to provide community services. It was claimed the reforms would stop the erosion of States` and Territories` fiscal capacity that had occurred with the Commonwealth expanding its role in social and economic affairs during the 20th Century.

But Mr Hamill warned that with the political and legislative capacity of the Commonwealth now enhanced by a parliamentary majority in the Senate, the Howard Government could press forward with the more controversial aspects of its policy agenda.

“This may include revisiting its tax reform agenda and the legislative compromises it made in 1999 to secure Australian Democrat support for ANTS in the Senate,” he said.

Mr Hamill said Australian federalism was moving into uncharted waters.

“Whereas the Liberal Party once saw itself as an advocate for federalism and the Labor Party was avowedly centralist, the roles have reversed.”

Treasurer of Queensland from 1998 to 2001, Minister for Education from 1995 to 1996 and Minister for Transport and Minister Assisting the Premier on Economic and Trade Development from 1989 to 1995, Mr Hamill was elected to the Queensland Parliament in 1983 and served six terms as MP for Ipswich until his retirement from the Parliament in February 2001.

Mr Hamill began voicing concerns about the legislation long before its introduction.

“We made it clear that we opposed the GST and the GST was central to these new arrangements,” he said.

“I argued in parliament and said I was concerned the States were going to lose their authority as they became more reliant on the Commonwealth.”

But it was in 2002, when he began his PhD at UQ under the supervision of the Head of the School of Political Science and International Studies Associate Professor Stephen Bell, that Mr Hamill was able to confirm his initial fears.

The study found that as the Commonwealth assumed a greater level of responsibility for raising revenue within the federation, the States and Territories were becoming increasingly reliant on Commonwealth payments to support their expenditure programs.

“The Commonwealth has exploited its constitutional power under Section 96 to extend its policy reach into areas traditionally within the legislative and administrative responsibility of the States, such as education, health and disability services,” Mr Hamill said.

“The Commonwealth provides financial assistance on terms that require States and Territories to contribute additional funds and comply with prescriptive administrative policy requirements.”

Mr Hamill said this had major implications for the future of the Australian federation.

“As fiscal capability is a critical contributor to state capacity, a scenario in which the Commonwealth coerces the States and Territories to vacate their already limited revenue base to rely on GST and other Commonwealth grants to fund their programs strikes at the fundamentals of a federal system of government,” he said.

This is the second time Mr Hamill will attend a UQ graduation ceremony. He first graduated from the University with a Bachelor of Arts with honours in 1979.

Then as a Queensland Rhodes Scholar he went on to complete an MA at the University of Oxford before returning to UQ as a tutor in 1982.

Mr Hamill is a Director of the ASX-listed Babcock & Brown Infrastructure Limited as well as a number of other companies engaged in the delivery of health services, the development of information technology and property investment services.

He is also active in a range of community organisations and is Assistant Treasurer for the Queensland Division of the Australian Red Cross.

Media: for more information, contact David Hamill (telephone 0438 107 944) or Chris Saxby at UQ Communications (telephone 07 3365 2479, email c.saxby@uq.edu.au).