November 16, 2025 • 23 mins
Four years ago, when our senior economics correspondent, Shane Wright, pointed out the failings of our central bank, government leaders, including the federal treasurer, sat up and took notice.
Well now, he’s at it again. And this time, he’s got his sights on what he calls an unspoken economic problem that is driving down our quality of life.
Today, Wright on how our convoluted system of government is hurting all of us, wasting billions of dollars each year. And what it might take, to fix it.
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S1 (00:01):
From the newsrooms of the Sydney Morning Herald and The Age.
This is Morning edition. I'm Samantha Seelinger Morris. It's Monday,
November 17th. Four years ago, when our senior economics correspondent
Shane Wright, pointed out the failings of our central bank.
Government leaders, including the Federal Treasurer, sat up and took notice.
(00:26):
For one thing, the reserve Bank of Australia and its
policies were subjected to their first review in 40 years. Well,
now he's at it again. And this time he's got
his sights on what he calls an unspoken economic problem
that's driving down our quality of life. Today, Shane Wright,
(00:46):
on how our convoluted system of government is hurting all
of us, wasting billions of dollars each year and what
it might take to fix it. Shane. We have to
let the listeners into how excited I am to speak
to you about this. Let's get stuck in because you
(01:06):
and our colleague Millie Maroy, you've made a very big call.
You say our federation is failing. So what do you
mean by that?
S2 (01:15):
This is the the glue that holds together the entire country,
the entire economy, from here in Canberra to the state capitals,
down to the smallest local government council in the country.
And this year, all of these levels of government are
going to collect $1 trillion in taxes and fees and
(01:36):
charges for the very first time, and how that money
is spent from getting the rubbish collected to fuelling our
defence forces, it is clear that there are huge problems
that need to be addressed and it's it's affecting our
standard of living, it's affecting how our economy works.
S3 (01:56):
Okay, well let's get into this. I mean, how is.
S1 (01:59):
Our federation failing and how does this manifest? Like, what
are the problems that you and I and our listeners
are experiencing but might not know it as a result of,
I think, what is the essence of this, which is
that our federation is a total mishmash of responsibilities and rules. Right.
S2 (02:16):
I'll start with I'll go from big, really important to
maybe not so important. So most state premiers know how
many people are in their hospitals who should be in
aged care. For instance, we talked to Peter Malinauskas, the
South Australian premier. Every Friday he gets a sheet of paper.
(02:38):
This is the number of people who should be in
a much lower cost aged care facility or at home,
rather than in a very expensive public hospital bed. And
that is at the heart of it is a problem
with the Federation because the states are responsible for hospitals.
But the federal government is responsible for aged care. And
(03:01):
they're also responsible for, say, GPS through Medicare payments. And
that tension between the two means that people aren't in
the right facilities. It's putting extra costs onto taxpayers at
the state level and at the federal level. So that's
a really concrete example of something that's a problem. Not
(03:23):
maybe not so quite important if Sam, I know how
much a mountain bike, uh, fan you are, love rolling
around on if you decided to take your New South
Wales standard mountain bike helmet, put it on your head
and went for a ride around Tasmania, beautiful mountain bike country.
(03:45):
You'd be breaking the law. The the helmet on your
head is not a standard accepted by Tasmania because Tasmania
is dragging the chain on a change to the types
of helmets that were allowed to. We should be wearing
as we roll around on a mountain bike that has
been going on for about eight years. So this is
(04:05):
a problem with the states. And so right at this
very moment, yep, you'd be breaking the law. Rolling around
the hills near Queenstown with your your New South Wales
standard but non Tasmanian standard mountain bike helmet.
S1 (04:19):
Well that's what I wanted to ask you because you
say it's I think hurting overall the entire economy. So
how so is it just what you've said before that
you know we're all paying costs. Uh that really is
just wasted money or is it more.
S2 (04:32):
It's it's more than wasted money. And Jim Chalmers, who
gave gave me some time to talk about this and
really leant into this whole issue. He says it is
a handbrake and he's remember, it's not all that long
ago that he sat around for three days talking to
business leaders and great thinkers and, um, and you could
tell so many of the issues that were being brought
(04:54):
up were related to how the federation operates. So it
can be cost. It is like in economics you talk
about opportunity cost, which is right now I might. What
is the cost of me dyeing my hair if I
don't dye my hair? Okay. And I know you. I
can see you laughing at that point, but it's the
(05:15):
it's the cost of not doing something versus the cost
of doing something. So if we are throwing money at
things that we. It means that we can't spend money
on things that we might want to. So we might
be spending spending 15 bucks on those high vis vests
for our rail workers in New South Wales and Victoria.
But that may mean 15 less dollars that we can
(05:36):
put into the New South Wales and Victorian health systems.
Straight up. So think of it that way. Like I
was talking to an expert around, say, getting a like
one of the great technological, technological changes of the last
10 or 15 years has been the advent of batteries
moving a battery from Perth to Victoria, where you might
(05:57):
be able to recycle. You've got three pieces of paperwork
because you're going through three different states now. That makes
no sense when there's really very little difference between the
driving across the Nullarbor, driving across near Adelaide and then
driving through Bendigo to get all the way into Melbourne,
(06:18):
that we shouldn't have so many little frictions, little extra costs,
which ultimately we pay an economic cost.
S1 (06:27):
Well, and this might be an impossible question, but is
there any way to quantify, like how many millions of
wasted dollars this all amounts to say per year?
S2 (06:37):
Yeah, you're in the billions. You're a billions. I would,
in fact, I'd say in the tens of billions.
S1 (06:42):
Whoa! In a year.
S2 (06:44):
In a year.
S1 (06:44):
Okay, so that's that's astonishing. And if I understand from
your excellent features. You know, one of the main problems
is that there's so many duplications, right? Of rules and
regulations that are not standard across the various states and territories.
So can you get us through some of the other
big ones because there's lots of duplications, right.
S2 (07:04):
Duplication or stupidity? Duplications being polite. Stupidity is where I
got to at the end of this. For instance, if
I'm driving a train, but because of our network of
private and public train systems, you need 5 or 6
different types of communication systems in the loco as you're
(07:26):
driving across from one state to another. So it was
in the early 1960s that finally Sydney and Melbourne were
linked by a single rail gauge. But we've now created
all these other problems. I could not believe when I
got told that there are light signals that everyone has
(07:48):
seen on the side of rail lines. They mean different
things in different states. So like this. Try to imagine
if I went drove from Queensland into New South Wales
and the red sign meant go on a traffic light.
This is what's going on on our rail lines and
they mean different things to a driver going between. So
(08:11):
one means stop, one means slow down, one means keep
keeps going. And some signals don't exist depending on which
state you're in.
S1 (08:19):
Okay, so that sounds like a fair example why this
might be stupidity as opposed to my more generous or
polite duplication.
S2 (08:27):
See, I knew I'd win you over on that.
S1 (08:28):
Yeah, you. You've absolutely won me over. And of course,
you've got other insane examples. You know, you've got one
line where you say a business that operates across the
nation faces up to 36 different versions of payroll tax.
That was astonishing. And then you've got this, uh, this man,
Bran Black, he's the Business Council of Australia chief executive.
And he said complying with these different payroll rates and
(08:51):
thresholds across the country strikes me as more difficult than
the moon landings. So I guess my question to you
is this all sounds insane, and I can understand that
the people in relevant businesses would be tearing their hair out,
but I get the sense that this is hurting all
of us. So how is this hurting both business and
ordinary people?
S2 (09:11):
Let's go to the payroll tax because you have to.
If you're a business, you have to set up different systems,
like if you're if you are a major like the
biggest employee employers in the country, Coles and Woolworths, operating
in every state and territory, you have to set up
different HR systems and then comply with those HR systems
(09:34):
around payroll tax. That costs money. It just like as
much as you want to say, yep, they're making money.
They're making profits. La di da di da. But ultimately
that's an extra cost that will be passed on to Mr.
and Mrs. Briggs out in Bonny Doon or out in
Glenelg when they go to pay for their groceries. So
(09:56):
and that's a really small thing. I now own a, um,
two different high vis vests. One, if I was to
work on a rail line in New South Wales, one
if I was to work on a rail line in Victoria. Now,
if you're down, say, Albury-Wodonga, where there's a lot of trail,
(10:17):
a lot of train movement and a lot of interaction,
15 bucks for a high vis vest that is not
going to get worn out very quickly. Might seem small
and you'd be right. But if you keep adding in
tiny little costs, you get to a very large cost.
And as I say, if the states and feds and
(10:38):
the councils and councils are collecting more than $1 trillion,
I think it's a fair argument to say, if we
can find a way to reduce those, that would be
a step. Welcome to the world that the Federation has
created by trying to be do so much. And with that,
a lot of correlation and connection between the states, the
(10:59):
feds and the councils as well.
S4 (11:04):
We'll be right back.
S1 (11:09):
And I want to get into another element in your features,
which is, you know, where we can lay blame. We
love to lay blame. I mean, you know, so, Shane,
let's get into this because you write about there being
a major fiscal imbalance between the federal government and the states.
You know, you write that the states sources of revenue
have shrunk while the demand for services has grown. And,
(11:30):
you know, it's the states, of course, that have the
responsibilities for providing so many areas of our life, massive
ones health, education, justice. So can you just walk us
through this? Why this fiscal imbalance? Like, how does it
impact you and me?
S2 (11:42):
So let's start with our trillion dollars of of money
that's going to be collected. Three quarters of that will
be collected by the federal government. Straight off, even though
so much of what they hand off of that ends
up in areas of responsibility for the state's health, education, policing,
(12:07):
we end up there's a lot of federal money that
ends up with policing, for instance, or security, no matter
how you how you want to define it. Um, so
much of that money, about 100 billion. So a 10th
of that is GST, which the states are free to
spend on whatever they like with, but they also end
up going back into these core responsibilities. Then there's all
(12:30):
these require these agreements between the feds and the states, say,
around health spending, where the feds saying we'll give you money,
but you have to spend it on this. We're seeing it.
We're seeing it in housing at the moment. Say, I
had one premier saying, do you know that the federal government's, um,
housing initiatives are like building social housing? We have to
(12:54):
fund half of it. The feds announced the Anthony Albanese
announces this, and then we discover, hold on. We've got
to match what he has promised so that this is
where the fiscal imbalance really comes to the fore, because
so much of what is provided by the states, they
(13:15):
they don't get enough money to provide it.
S3 (13:18):
I can understand that this.
S1 (13:19):
Is really angering the premiers. I mean, you had one
elected official interviewed for the series that when it comes
to housing, they said, and I'm going to quote here,
I don't often see these words in a piece by
Shane Wright. The situation is effed. Okay. So that's that's
some strong language. And Chris Minns, the New South Wales premier,
he he summed it up very simply. I think he said,
you know, we do all the work. To cut a
(13:40):
long story short, we do all the work and they
collect all the money. Okay, so I understand the states
are angry, but how does this impact you and me? Like,
break it down for me. Like, how is it impacting
my hip pocket, the listener's hip pockets.
S2 (13:52):
Right. If you can't get into an emergency department in
a public hospital, and it's because the the states don't
have enough money, or they're having to do other things
with the cash that they have, you're affected by you're
affected by what's going on in the Federation straight off. Um,
(14:12):
be it in education, like education is one of those
really difficult areas because ultimately the feds, until Bob Menzies
came along and started giving out money for private to
the Catholic school system, the federal governments were not involved
in state education systems. Okay, like as I'm a child
(14:36):
who moved between Victoria and New South Wales growing up,
which meant there was a reason I'm really good at
Australian history, because I did it three times, did it
three times before I got to university, where I got
an A-plus in my end of end of semester exam
because I had done it so often. We've we've made
(14:57):
steps in terms of, say, national curriculum, which is getting
the school, getting our school systems to say we will
teach XYZ. But there are still differences in those. So
I always feel I always feel sympathy for anyone who
moves cross border in any year with a child, because
that poor child has to come to terms with. They're
(15:18):
not nearly as substantial as the differences they were when
I went, went back in the days of horses and
buggies and went to school, and there was a chalkboard
and everything else. They've moved on from that. But there
are still differences in that space, for instance.
S1 (15:31):
But so is Canberra just being too greedy with the
amount of money that it takes from taxes. Even though
the states are doing so much work. Like, can I
just blame Canberra?
S2 (15:39):
No, you can't blame Canberra because Canberra has at least
twice in the last 40 years tried to hand back
income tax powers to the states. The states said, oh no,
we don't want to do that. People will blame us
if we start increasing income tax. So everyone blame. There's
always everyone wants to blame somebody else. And there is
a really good reason economically why you would have the
(16:01):
federal government collect all income tax. It's much cheaper to
do it that way. Like the US has huge problems
because they are spending far more on state based income
tax collection systems as well as a federal one. Now,
would you want to fill out a state income tax
return every year plus your federal income tax return? I
(16:23):
don't think so.
S1 (16:24):
That's a hard no, but.
S2 (16:26):
That's a hard no.
S1 (16:26):
That's a hard no. I hate all forms. But I
have to ask you about something else which you said
has just been a spectacular failure. And that, of course,
is the GST. So can you just walk us through
very briefly, um, why this was such a failure, I guess,
and how it's failing you and me and the listeners now,
if it is.
S2 (16:46):
Well, hell, how long has this piece of string to
discuss the problems with the GST? Take us through it briefly.
S1 (16:51):
Shane Wright.
S2 (16:52):
You did say briefly. So when John Howard introduced the GST,
he came up with this and it made absolute sense
at the time. We will quarantine all the GST revenue
to the states. The GST will grow probably faster than
the economy. So this will be a really good growth
tax and the states will get more. Two things happen.
(17:12):
One is the assumption that this would grow faster than
the economy proved wrong because of the exclusion. So health, education,
financial services and fresh food. The four fastest growing areas
of expenditure over the last 25 years have been those
areas that were excluded. So that's a problem. Two along
along came China. So China, the greatest lift lift in
(17:37):
people out of poverty in the world's history based off industrialization.
Industrialization based off digging up a hell of a lot
of West Australian red dirt called iron ore and turning
it into steel. So this this actually it I think
it's fair to say it's broken the way that the
(17:58):
GST system is allocated. I am not going to go
into the Commonwealth Grants Commission because we I don't have
that would be a Ted talk and would require, I
don't know how many sheets to explain to the general public,
but but how.
S1 (18:12):
Is the GST hurting us? Is it hurting you and
me and our listeners?
S2 (18:16):
Because like at the moment, it's costing every person it'll cost,
let's say, the deal that was done by Scott Morrison
to try and fix the problems about how much money
out of the GST is shared around the states when
he came up with his idea back in 2018. It'll
only cost a couple of billion dollars. We're looking at
$60 billion. That's the cost that you, me and everyone else,
(18:39):
including West Australians, are paying in extra tax, extra tax
to funnel this money both back into Western Australia and
to make sure nobody else in the Commonwealth is left
worse off now. So this whole system is at the
it's at the centre of a Productivity Commission inquiry. We had,
(18:59):
for instance, Roger cook, the West Australian premier in Canberra
just last week. Just saying, please don't take my GST.
Please don't do it. It's, it's it's all fine. It's
all fine. But he understands that there are huge problems
because he is being looked after by federal taxpayers, which
is not how this whole system was set up to work.
S5 (19:20):
So Shane, what needs to change?
S1 (19:22):
Like it seems like it is such a massive headache
of a problem. What would be the first thing that
you would change to fix this mess?
S2 (19:30):
Well, apart from locking premiers and prime ministers and counsellors
in a room and not letting them out until they
sort it out, some of these issues.
S1 (19:37):
Don't think that's.
S2 (19:38):
Lawful. I don't think that's lawful. So one of the
reasons we started down this doing this series is that
it's ten years since Tony Abbott started a white paper
process about Federation. Now, for all the issues around the
Abbott government and Tony Abbott himself, he was absolutely onto
something because he could see the problems that the Federation
(20:01):
in its operation was causing. His solution was effectively we'll
just the states will have to look after education and
health by themselves. And the states went, hold on, there's
100 odd billion dollars that we'd have to come up with.
It might have an impact on, say, the education of
our children and the health of all, of all Australians.
(20:22):
They didn't they weren't too keen on it. Then Tony
Abbott decided to call Prince Philip a sir and it
all it all went to hell. Anyway, the the concept,
the idea of having a really good look at how
the Federation works is, is I think it's well worth doing.
It would take time. You would actually you'd actually have
(20:45):
to get some bipartisanship. But Jim Chalmers understands that there
are problems. Say Ted O'Brien, the shadow treasurer, understands there
are problems which go to how they how is the
federal government going to keep funding what it needs to fund,
how the state's going to continue funding, what they need
to fund, and how do you maintain the quality of
life and improve the performance of the economy? These are
(21:08):
all connected to this issue.
S5 (21:10):
Okay, so it's nearly.
S1 (21:11):
125 years since Federation. I'll just wrap up by asking,
is this ever going to be mopped up? I mean,
we have a famously cautious prime minister at the moment,
fairly ambitious federal treasurer. Is this ever going to be
mopped up? I don't mean, you know, within this government,
but ever. Shane. Right. Do you have hope?
S2 (21:30):
Um, I, I don't know if I can answer that now.
I like my hope may have been dashed by dealing
with this for such a long period of time and
going through it. But you can see like, say, Jim
Chalmers is trying to take some action through we're talking about, say,
Australian standards.
S1 (21:47):
Okay. Well, thank you for your time. And may I
just say, you know, to the listeners, to your nearly
a year of work really on this. So all I
can say is I can't wait to hear when we
speak next what our Prime Minister, Anthony Albanese, makes of this.
I know he'll be reading it. Shane, do you have
like a a time to to catch up with him
after he reads this?
S2 (22:06):
Look he'll have to sit down and take a Bex, uh,
after reading all this and put it and put on
a vinyl record, which, uh, will probably have been made
overseas and imported safely into this country.
S1 (22:17):
And two vinyl vests, you know, one with parallel lines,
one with a cross, depending on which state he's in. Thanks, Shane. Right.
S2 (22:24):
Always a pleasure, Sammy.
S1 (22:35):
Today's episode of The Morning Edition was produced by myself
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(22:57):
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your inbox every morning. Links are in the show. Notes.
I'm Samantha Selinger. Morris, thanks for listening.
From the newsrooms of the Sydney Morning Herald and The Age.
This is Morning edition. I'm Samantha Seelinger Morris. It's Monday,
November 17th. Four years ago, when our senior economics correspondent
Shane Wright, pointed out the failings of our central bank.
Government leaders, including the Federal Treasurer, sat up and took notice.
(00:26):
For one thing, the reserve Bank of Australia and its
policies were subjected to their first review in 40 years. Well,
now he's at it again. And this time he's got
his sights on what he calls an unspoken economic problem
that's driving down our quality of life. Today, Shane Wright,
(00:46):
on how our convoluted system of government is hurting all
of us, wasting billions of dollars each year and what
it might take to fix it. Shane. We have to
let the listeners into how excited I am to speak
to you about this. Let's get stuck in because you
(01:06):
and our colleague Millie Maroy, you've made a very big call.
You say our federation is failing. So what do you
mean by that?
S2 (01:15):
This is the the glue that holds together the entire country,
the entire economy, from here in Canberra to the state capitals,
down to the smallest local government council in the country.
And this year, all of these levels of government are
going to collect $1 trillion in taxes and fees and
(01:36):
charges for the very first time, and how that money
is spent from getting the rubbish collected to fuelling our
defence forces, it is clear that there are huge problems
that need to be addressed and it's it's affecting our
standard of living, it's affecting how our economy works.
S3 (01:56):
Okay, well let's get into this. I mean, how is.
S1 (01:59):
Our federation failing and how does this manifest? Like, what
are the problems that you and I and our listeners
are experiencing but might not know it as a result of,
I think, what is the essence of this, which is
that our federation is a total mishmash of responsibilities and rules. Right.
S2 (02:16):
I'll start with I'll go from big, really important to
maybe not so important. So most state premiers know how
many people are in their hospitals who should be in
aged care. For instance, we talked to Peter Malinauskas, the
South Australian premier. Every Friday he gets a sheet of paper.
(02:38):
This is the number of people who should be in
a much lower cost aged care facility or at home,
rather than in a very expensive public hospital bed. And
that is at the heart of it is a problem
with the Federation because the states are responsible for hospitals.
But the federal government is responsible for aged care. And
(03:01):
they're also responsible for, say, GPS through Medicare payments. And
that tension between the two means that people aren't in
the right facilities. It's putting extra costs onto taxpayers at
the state level and at the federal level. So that's
a really concrete example of something that's a problem. Not
(03:23):
maybe not so quite important if Sam, I know how
much a mountain bike, uh, fan you are, love rolling
around on if you decided to take your New South
Wales standard mountain bike helmet, put it on your head
and went for a ride around Tasmania, beautiful mountain bike country.
(03:45):
You'd be breaking the law. The the helmet on your
head is not a standard accepted by Tasmania because Tasmania
is dragging the chain on a change to the types
of helmets that were allowed to. We should be wearing
as we roll around on a mountain bike that has
been going on for about eight years. So this is
(04:05):
a problem with the states. And so right at this
very moment, yep, you'd be breaking the law. Rolling around
the hills near Queenstown with your your New South Wales
standard but non Tasmanian standard mountain bike helmet.
S1 (04:19):
Well that's what I wanted to ask you because you
say it's I think hurting overall the entire economy. So
how so is it just what you've said before that
you know we're all paying costs. Uh that really is
just wasted money or is it more.
S2 (04:32):
It's it's more than wasted money. And Jim Chalmers, who
gave gave me some time to talk about this and
really leant into this whole issue. He says it is
a handbrake and he's remember, it's not all that long
ago that he sat around for three days talking to
business leaders and great thinkers and, um, and you could
tell so many of the issues that were being brought
(04:54):
up were related to how the federation operates. So it
can be cost. It is like in economics you talk
about opportunity cost, which is right now I might. What
is the cost of me dyeing my hair if I
don't dye my hair? Okay. And I know you. I
can see you laughing at that point, but it's the
(05:15):
it's the cost of not doing something versus the cost
of doing something. So if we are throwing money at
things that we. It means that we can't spend money
on things that we might want to. So we might
be spending spending 15 bucks on those high vis vests
for our rail workers in New South Wales and Victoria.
But that may mean 15 less dollars that we can
(05:36):
put into the New South Wales and Victorian health systems.
Straight up. So think of it that way. Like I
was talking to an expert around, say, getting a like
one of the great technological, technological changes of the last
10 or 15 years has been the advent of batteries
moving a battery from Perth to Victoria, where you might
(05:57):
be able to recycle. You've got three pieces of paperwork
because you're going through three different states now. That makes
no sense when there's really very little difference between the
driving across the Nullarbor, driving across near Adelaide and then
driving through Bendigo to get all the way into Melbourne,
(06:18):
that we shouldn't have so many little frictions, little extra costs,
which ultimately we pay an economic cost.
S1 (06:27):
Well, and this might be an impossible question, but is
there any way to quantify, like how many millions of
wasted dollars this all amounts to say per year?
S2 (06:37):
Yeah, you're in the billions. You're a billions. I would,
in fact, I'd say in the tens of billions.
S1 (06:42):
Whoa! In a year.
S2 (06:44):
In a year.
S1 (06:44):
Okay, so that's that's astonishing. And if I understand from
your excellent features. You know, one of the main problems
is that there's so many duplications, right? Of rules and
regulations that are not standard across the various states and territories.
So can you get us through some of the other
big ones because there's lots of duplications, right.
S2 (07:04):
Duplication or stupidity? Duplications being polite. Stupidity is where I
got to at the end of this. For instance, if
I'm driving a train, but because of our network of
private and public train systems, you need 5 or 6
different types of communication systems in the loco as you're
(07:26):
driving across from one state to another. So it was
in the early 1960s that finally Sydney and Melbourne were
linked by a single rail gauge. But we've now created
all these other problems. I could not believe when I
got told that there are light signals that everyone has
(07:48):
seen on the side of rail lines. They mean different
things in different states. So like this. Try to imagine
if I went drove from Queensland into New South Wales
and the red sign meant go on a traffic light.
This is what's going on on our rail lines and
they mean different things to a driver going between. So
(08:11):
one means stop, one means slow down, one means keep
keeps going. And some signals don't exist depending on which
state you're in.
S1 (08:19):
Okay, so that sounds like a fair example why this
might be stupidity as opposed to my more generous or
polite duplication.
S2 (08:27):
See, I knew I'd win you over on that.
S1 (08:28):
Yeah, you. You've absolutely won me over. And of course,
you've got other insane examples. You know, you've got one
line where you say a business that operates across the
nation faces up to 36 different versions of payroll tax.
That was astonishing. And then you've got this, uh, this man,
Bran Black, he's the Business Council of Australia chief executive.
And he said complying with these different payroll rates and
(08:51):
thresholds across the country strikes me as more difficult than
the moon landings. So I guess my question to you
is this all sounds insane, and I can understand that
the people in relevant businesses would be tearing their hair out,
but I get the sense that this is hurting all
of us. So how is this hurting both business and
ordinary people?
S2 (09:11):
Let's go to the payroll tax because you have to.
If you're a business, you have to set up different systems,
like if you're if you are a major like the
biggest employee employers in the country, Coles and Woolworths, operating
in every state and territory, you have to set up
different HR systems and then comply with those HR systems
(09:34):
around payroll tax. That costs money. It just like as
much as you want to say, yep, they're making money.
They're making profits. La di da di da. But ultimately
that's an extra cost that will be passed on to Mr.
and Mrs. Briggs out in Bonny Doon or out in
Glenelg when they go to pay for their groceries. So
(09:56):
and that's a really small thing. I now own a, um,
two different high vis vests. One, if I was to
work on a rail line in New South Wales, one
if I was to work on a rail line in Victoria. Now,
if you're down, say, Albury-Wodonga, where there's a lot of trail,
(10:17):
a lot of train movement and a lot of interaction,
15 bucks for a high vis vest that is not
going to get worn out very quickly. Might seem small
and you'd be right. But if you keep adding in
tiny little costs, you get to a very large cost.
And as I say, if the states and feds and
(10:38):
the councils and councils are collecting more than $1 trillion,
I think it's a fair argument to say, if we
can find a way to reduce those, that would be
a step. Welcome to the world that the Federation has
created by trying to be do so much. And with that,
a lot of correlation and connection between the states, the
(10:59):
feds and the councils as well.
S4 (11:04):
We'll be right back.
S1 (11:09):
And I want to get into another element in your features,
which is, you know, where we can lay blame. We
love to lay blame. I mean, you know, so, Shane,
let's get into this because you write about there being
a major fiscal imbalance between the federal government and the states.
You know, you write that the states sources of revenue
have shrunk while the demand for services has grown. And,
(11:30):
you know, it's the states, of course, that have the
responsibilities for providing so many areas of our life, massive
ones health, education, justice. So can you just walk us
through this? Why this fiscal imbalance? Like, how does it
impact you and me?
S2 (11:42):
So let's start with our trillion dollars of of money
that's going to be collected. Three quarters of that will
be collected by the federal government. Straight off, even though
so much of what they hand off of that ends
up in areas of responsibility for the state's health, education, policing,
(12:07):
we end up there's a lot of federal money that
ends up with policing, for instance, or security, no matter
how you how you want to define it. Um, so
much of that money, about 100 billion. So a 10th
of that is GST, which the states are free to
spend on whatever they like with, but they also end
up going back into these core responsibilities. Then there's all
(12:30):
these require these agreements between the feds and the states, say,
around health spending, where the feds saying we'll give you money,
but you have to spend it on this. We're seeing it.
We're seeing it in housing at the moment. Say, I
had one premier saying, do you know that the federal government's, um,
housing initiatives are like building social housing? We have to
(12:54):
fund half of it. The feds announced the Anthony Albanese
announces this, and then we discover, hold on. We've got
to match what he has promised so that this is
where the fiscal imbalance really comes to the fore, because
so much of what is provided by the states, they
(13:15):
they don't get enough money to provide it.
S3 (13:18):
I can understand that this.
S1 (13:19):
Is really angering the premiers. I mean, you had one
elected official interviewed for the series that when it comes
to housing, they said, and I'm going to quote here,
I don't often see these words in a piece by
Shane Wright. The situation is effed. Okay. So that's that's
some strong language. And Chris Minns, the New South Wales premier,
he he summed it up very simply. I think he said,
you know, we do all the work. To cut a
(13:40):
long story short, we do all the work and they
collect all the money. Okay, so I understand the states
are angry, but how does this impact you and me? Like,
break it down for me. Like, how is it impacting
my hip pocket, the listener's hip pockets.
S2 (13:52):
Right. If you can't get into an emergency department in
a public hospital, and it's because the the states don't
have enough money, or they're having to do other things
with the cash that they have, you're affected by you're
affected by what's going on in the Federation straight off. Um,
(14:12):
be it in education, like education is one of those
really difficult areas because ultimately the feds, until Bob Menzies
came along and started giving out money for private to
the Catholic school system, the federal governments were not involved
in state education systems. Okay, like as I'm a child
(14:36):
who moved between Victoria and New South Wales growing up,
which meant there was a reason I'm really good at
Australian history, because I did it three times, did it
three times before I got to university, where I got
an A-plus in my end of end of semester exam
because I had done it so often. We've we've made
(14:57):
steps in terms of, say, national curriculum, which is getting
the school, getting our school systems to say we will
teach XYZ. But there are still differences in those. So
I always feel I always feel sympathy for anyone who
moves cross border in any year with a child, because
that poor child has to come to terms with. They're
(15:18):
not nearly as substantial as the differences they were when
I went, went back in the days of horses and
buggies and went to school, and there was a chalkboard
and everything else. They've moved on from that. But there
are still differences in that space, for instance.
S1 (15:31):
But so is Canberra just being too greedy with the
amount of money that it takes from taxes. Even though
the states are doing so much work. Like, can I
just blame Canberra?
S2 (15:39):
No, you can't blame Canberra because Canberra has at least
twice in the last 40 years tried to hand back
income tax powers to the states. The states said, oh no,
we don't want to do that. People will blame us
if we start increasing income tax. So everyone blame. There's
always everyone wants to blame somebody else. And there is
a really good reason economically why you would have the
(16:01):
federal government collect all income tax. It's much cheaper to
do it that way. Like the US has huge problems
because they are spending far more on state based income
tax collection systems as well as a federal one. Now,
would you want to fill out a state income tax
return every year plus your federal income tax return? I
(16:23):
don't think so.
S1 (16:24):
That's a hard no, but.
S2 (16:26):
That's a hard no.
S1 (16:26):
That's a hard no. I hate all forms. But I
have to ask you about something else which you said
has just been a spectacular failure. And that, of course,
is the GST. So can you just walk us through
very briefly, um, why this was such a failure, I guess,
and how it's failing you and me and the listeners now,
if it is.
S2 (16:46):
Well, hell, how long has this piece of string to
discuss the problems with the GST? Take us through it briefly.
S1 (16:51):
Shane Wright.
S2 (16:52):
You did say briefly. So when John Howard introduced the GST,
he came up with this and it made absolute sense
at the time. We will quarantine all the GST revenue
to the states. The GST will grow probably faster than
the economy. So this will be a really good growth
tax and the states will get more. Two things happen.
(17:12):
One is the assumption that this would grow faster than
the economy proved wrong because of the exclusion. So health, education,
financial services and fresh food. The four fastest growing areas
of expenditure over the last 25 years have been those
areas that were excluded. So that's a problem. Two along
along came China. So China, the greatest lift lift in
(17:37):
people out of poverty in the world's history based off industrialization.
Industrialization based off digging up a hell of a lot
of West Australian red dirt called iron ore and turning
it into steel. So this this actually it I think
it's fair to say it's broken the way that the
(17:58):
GST system is allocated. I am not going to go
into the Commonwealth Grants Commission because we I don't have
that would be a Ted talk and would require, I
don't know how many sheets to explain to the general public,
but but how.
S1 (18:12):
Is the GST hurting us? Is it hurting you and
me and our listeners?
S2 (18:16):
Because like at the moment, it's costing every person it'll cost,
let's say, the deal that was done by Scott Morrison
to try and fix the problems about how much money
out of the GST is shared around the states when
he came up with his idea back in 2018. It'll
only cost a couple of billion dollars. We're looking at
$60 billion. That's the cost that you, me and everyone else,
(18:39):
including West Australians, are paying in extra tax, extra tax
to funnel this money both back into Western Australia and
to make sure nobody else in the Commonwealth is left
worse off now. So this whole system is at the
it's at the centre of a Productivity Commission inquiry. We had,
(18:59):
for instance, Roger cook, the West Australian premier in Canberra
just last week. Just saying, please don't take my GST.
Please don't do it. It's, it's it's all fine. It's
all fine. But he understands that there are huge problems
because he is being looked after by federal taxpayers, which
is not how this whole system was set up to work.
S5 (19:20):
So Shane, what needs to change?
S1 (19:22):
Like it seems like it is such a massive headache
of a problem. What would be the first thing that
you would change to fix this mess?
S2 (19:30):
Well, apart from locking premiers and prime ministers and counsellors
in a room and not letting them out until they
sort it out, some of these issues.
S1 (19:37):
Don't think that's.
S2 (19:38):
Lawful. I don't think that's lawful. So one of the
reasons we started down this doing this series is that
it's ten years since Tony Abbott started a white paper
process about Federation. Now, for all the issues around the
Abbott government and Tony Abbott himself, he was absolutely onto
something because he could see the problems that the Federation
(20:01):
in its operation was causing. His solution was effectively we'll
just the states will have to look after education and
health by themselves. And the states went, hold on, there's
100 odd billion dollars that we'd have to come up with.
It might have an impact on, say, the education of
our children and the health of all, of all Australians.
(20:22):
They didn't they weren't too keen on it. Then Tony
Abbott decided to call Prince Philip a sir and it
all it all went to hell. Anyway, the the concept,
the idea of having a really good look at how
the Federation works is, is I think it's well worth doing.
It would take time. You would actually you'd actually have
(20:45):
to get some bipartisanship. But Jim Chalmers understands that there
are problems. Say Ted O'Brien, the shadow treasurer, understands there
are problems which go to how they how is the
federal government going to keep funding what it needs to fund,
how the state's going to continue funding, what they need
to fund, and how do you maintain the quality of
life and improve the performance of the economy? These are
(21:08):
all connected to this issue.
S5 (21:10):
Okay, so it's nearly.
S1 (21:11):
125 years since Federation. I'll just wrap up by asking,
is this ever going to be mopped up? I mean,
we have a famously cautious prime minister at the moment,
fairly ambitious federal treasurer. Is this ever going to be
mopped up? I don't mean, you know, within this government,
but ever. Shane. Right. Do you have hope?
S2 (21:30):
Um, I, I don't know if I can answer that now.
I like my hope may have been dashed by dealing
with this for such a long period of time and
going through it. But you can see like, say, Jim
Chalmers is trying to take some action through we're talking about, say,
Australian standards.
S1 (21:47):
Okay. Well, thank you for your time. And may I
just say, you know, to the listeners, to your nearly
a year of work really on this. So all I
can say is I can't wait to hear when we
speak next what our Prime Minister, Anthony Albanese, makes of this.
I know he'll be reading it. Shane, do you have
like a a time to to catch up with him
after he reads this?
S2 (22:06):
Look he'll have to sit down and take a Bex, uh,
after reading all this and put it and put on
a vinyl record, which, uh, will probably have been made
overseas and imported safely into this country.
S1 (22:17):
And two vinyl vests, you know, one with parallel lines,
one with a cross, depending on which state he's in. Thanks, Shane. Right.
S2 (22:24):
Always a pleasure, Sammy.
S1 (22:35):
Today's episode of The Morning Edition was produced by myself
and Josh towers. Our executive producer is Tammy Mills. Tom
McKendrick is our head of audio. To listen to our
episodes as soon as they drop, follow the Morning Edition
on Apple, Spotify, or wherever you listen to podcasts. Our
newsrooms are powered by subscriptions, so to support independent journalism,
(22:57):
visit the page or smh.com.au. Subscribe. And to stay up
to date, sign up to our Morning Edition newsletter to
receive a summary of the day's most important news in
your inbox every morning. Links are in the show. Notes.
I'm Samantha Selinger. Morris, thanks for listening.
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