16 October 2009

When Should Legislation be Federalised?

Safe Work Australia has now published an exposure draft of occupational health and safety legislation to be largely adopted by Australian jurisdictions.

It was accompanied by a consultation regulatory impact statement prepared by Access Economics, which proves again that the ‘seamless economy’ agenda is for the big end of town.

As it says in the part of the RIS dealing with impact on businesses:


While dealing with multiple OHS regimes does impose significant costs on a number of businesses, only a small proportion of businesses are affected.

Not only are the vast majority of Australian businesses small, but
the Productivity Commission (2004) estimated that 99% of Australian businesses only operated within one jurisdiction in 1998.

Of the businesses that do operate in multiple jurisdictions, nearly two-thirds (65%) only operate in one other jurisdiction than their home one (ABS, 2007).

Even for large businesses with over 200 employees, the Productivity Commission (2004) reported that the majority (58%) still only operate within one jurisdiction.

However, of the remaining large businesses that operate across jurisdictions, they tend to have operations in around five jurisdictions on average (ABS,2007).

These ratios are somewhat different if weighted by employees. While only 0.3% of businesses have more than 200 employees, according to the Productivity Commission, these businesses accounted for 44% of private sector employment. Because of large businesses’ higher propensity to operate across borders, and large employment share, this means that an estimated 28.5% of private sector workers are employed in businesses that operate in multiple jurisdictions.

Access says in its conclusion:

The costs and benefits of the model Act are small and not readily quantifiable.

The qualitative assessment so far suggests that the model Act is expected to bring medium sized benefits for business, principally in reduced red tape for multi-jurisdiction operations. These will be partially offset by a small increase in adjustment costs…. There will probably be some small safety benefits for workers, with no significant offsetting costs to workers. There will be a small increase in adjustment costs for government (relative to such ongoing costs in the counterfactual); partly offset by some marginal benefits in improved compliance efficiency.

Combining these effects, Access Economics expects that the model Act will confer an overall marginal to small net benefit.

An ‘overall marginal to small net benefit seems a small reason to change the legislative requirements for 99% of the regulated cohort – not to mention the loss of clear political responsibility for the development of OHS law in Australia as it passes from parliaments to an unelected COAG ministerial council.

As various pieces of economic literature have suggested, state level governments within a federation should minimise taxing highly mobile tax bases.

Using similar logic, perhaps there should be a threshold test applied when redesignating responsibilities within the Australian federation so that if the thing being regulated is either fixed in one spot (in particular, anything fixed to the land), or happens at a particular spot (for example, law and order issues, or the provision of services to residents) it is appropriate for legislation to be state or territory based.

However, if it is genuinely something that is mobile - for instance either the trade of goods (particularly consumer goods) capable of easy movement across state borders or the setting of performance standards for such moveable goods - it is more appropriate for national regulation.

This would appear to maximise economic efficiency, without overly forfeiting all the advantages of competitive federalism, or, if in particular if the outcome is government by COAG committee, of democracy itself.

23 September 2009

Lawyers Federalise as Occupational Health and Safety Bickers

There has been movement on two proposed national schemes.

Lawyers will join doctors, plumbers and real estate agents as professions that will operate under one set of rules, following a COAG decision made in February at the request of the Commonwealth.

At a speech in Perth on 17 September, the Attorney-General (Mr McClelland) said:


Australia now operates within a vastly different legal and economic landscape to that under which the present system of legal profession regulation developed.

Australian lawyers and consumers no longer operate in just one State or Territory.

To deliver a seamless national economy we can no longer justify such disparate regulation for just one profession.

If other professions in Australia can be regulated through a simple, unified, national structure there is no reason why the Australian legal profession should be an exception.

A better approach is required if we are to remain successful in the long-term – and given the wide variety of interests involved, we must think creatively about operating together in a Federation.
………

Given the undeniable economic imperative, the collective political will of COAG and good will from all stakeholders, I am sure we will be able to achieve an outcome that will deliver significant tangible benefits to not only the profession, but the Australian community in general.

He inveighed against the fact that consumers, lawyers and firms have to deal with nearly 5,000 pages of regulation, and indicated he hadn’t met one lawyer that has read, let alone digested all of this regulation.

Probably that’s because most practitioners operate in one jurisdiction, and consumers are only concerned about the laws relevant to their state and territory. This is a bit of a straw man, really.

Nevertheless, a National Legal Profession Taskforce has proposed the establishment of a National Legal Services Board – a joint state and territory entity that seems a cross between the proposed National Body anticipated by the IGA for Specified Professions and the National Boards to be established under the national registration and accreditation scheme for health professionals.

The Board would be a single standard-setter for all lawyers in Australia, constituting ‘key experts from differing backgrounds including legal practice, consumer protection (whatever that constitutes!) and the regulation of professions.'

It is to deal with issues relating to admission eligibility, the granting of practising certificates, practising entitlements and conditions, the form and manner in which practise is conducted, complaints handling and discipline,

So they retain their 'relevance', state bodies (including professional bodies) could perhaps be delegated responsibility to determine whether someone was eligible for either admission or a practising certificate.

During his speech, the Attorney said:

In short, in framing new national regulations, we need to keep in mind the experience the average punter has with the system and we need to consider how we can make that better.

A good test is to ask whether lawyers would be willing consumers of legal services.

Currently, I don’t think many would.

Actually, as an ‘average punter’, I don’t think the Australian legal system is operating that badly.

Nevertheless, one set of regulations from a board containing (amongst others) consumer protection experts will undoubtedly change it all.

A national scheme closer to fruition is that dealing with occupational health and safety.

As we noted earlier, WA indicated to the Workplace Ministers Ministerial Council in July that it had problems with penalty levels and right of access granted to unions under the proposed OHS package.

As the Australian reported on 22 September:

Mr Buswell (the WA Treasurer) said he supported elements of the Rudd government's reform agenda, but there was potential for unionists to do backroom deals to change the regulations over time. "Our view is that the changes the commonwealth are trying to implement are not good for Western Australia, not
good for employers nor employees in Western Australia and at this stage we're not going to be supporting it," he said.
"They're changes which we think open us up to a potential where Western Australian occupational safety and health is driven, potentially, by the sorts of backroom meetings and negotiations we've been seeing between the union movement and the government, and that's not good for Western Australia."

As we have also noted earlier, the unions aren’t necessarily thrilled with the proposed OHS package either.

The OHS package is the first real test of how the COAG executive federalism model will have to resolve disputes between stakeholders with clear and legitimate interests to protect. Unfortunately, there is no parliament to break these sort of impass.

It will be interesting to see how this pans out .... and whether the 'collective political will of COAG and good will from all stake holders' will last the distance with the creation of a national legal profession.

14 September 2009

Why is crossing the floor such a novelty?

Senator Judith Troeth recently crossed the floor to vote with the Government in support of their plan to stop charging asylum seekers and immigration detainees for their mandatory detention.

Immigration Minister Chris Evans lauded her for her decision.

On the same day, three ALP MPs endorsed a petition calling on the government to retain the prohibition on parallel importation of books.

It will be interesting to see if they cross the floor should the Government decide to remove the ban.

It is not often that ALP members cross the floor. This is because party rules prevent it.

In particular, Rule 5 says (in part):


d. The Federal Parliamentary Labor Party shall have authority in properly constituted Caucus meetings to make decisions directed towards establishing the collective attitude of the Parliamentary Party to any question or matter in the Federal Parliament, subject to:

i. at all times taking such action which may be possible to implement the Party's Platform and Conference decisions;

ii.on questions or matters which are not subject to National Platform or Conference or Executive decisions, the majority decision of Caucus being binding upon all members in the parliament; and

iii. no attitude being expressed which is contrary to the provisions of the Party Platform or any other decision of National Conference or National Executive



The existence of this rule in particular weakens the role of all Australian parliaments.

In Westminster, party whips divide votes into three categories.

In very trite terms:

a ‘one line whip' tells members what the party line is, however, there is a degree of discretion as to whether the line is followed;

a ‘two line whip’ is a debate in which a member is expected to vote in according to the party line, unless there is a strong conscientious objection; and

a ‘three line whip’ is a debate where the member should simply follow the party line.

However, all that said, there are many circumstances in which members of the House of Commons have 'rebelled' from the Whip and voted against party, notwithstanding the declaration of a three line whip.

Ask yourself: how often do you see an ALP member 'cross the floor' in Parliament? The answer is 'seldom' - and when they do, they are usually disciplined.

In that case, it is hardly surprising that the alternative political grouping becomes as rigidly controlled - if they weren’t, common sense tells you they would never win a parliamentary vote.

There are many circumstances where party discipline means that MPs are voting for a proposal against their better judgement.

The best way to ensure that legislation is appropriate is to ensure that there is a properly functioning parliament with members making decisions according to their conscience and not their party whip.

Matters may very well be assisted if the ALP abolished its rule.

Fifield vs. Abbott: the confused state of the Liberal Party on federalism

In a recent article for The Punch, Mitch Fifield wrote a copperplate defence of Australia’s federal model.

The principles of Federalism are timeless. Liberals believe in the principle of subsidiarity: that power, where possible, should be located as close as possible to the people so that it is responsive to their demands. Liberals are wary of concentrating power in the hands of a small number of people. Liberals also believe in checks and balances – abolishing or rendering state governments impotent would leave a federal administration’s power virtually unchallenged.

Liberals also believe in competition. States competing for jobs, investment and talent should lead to lower taxes, lighter regulations and more attractive communities to live in.

He had better have a chat with Tony Abbott, who has different views about the issue:

My proposal is not to abolish the states but a referendum to give the national parliament the same authority over them that it's long had over the territories. It's not a bid for more power to Canberra. Rather, it's an attempt to establish clear lines of accountability and responsibility.

The Liberal Party is the erstwhile party of federalism: it certainly is no longer the ‘states rights’ party, as the Howard Government’s use of the corporations power to federalise Australia’s industrial relations laws illustrates.

The Fifield/Abbott discussion is a healthy one to have whilst a party is in opposition.

However, as we have previously discussed the Henry Review will raise the issue of whether Australia should be viewed as a federation or a single market, whilst in our previous article we noted the idea of whether state parliaments have a role in setting standards will be challenged as interested stakeholders challenge one size fits all legislation designed to bring about a ‘seamless economy’.

Both these developments and the fact that Australia is slowly lurching towards a federal election means that the Liberal Party will need to have some view as to how they see the federation operating – perhaps far sooner than they imagine.

The challenge to the seamless economy commences

The ACTU is commencing a campaign against the harmonised OHS law being developed by Safework Australia on behalf of the Ministerial Council on Workplace Relations.

The Secretary of the ACTU (Mr Lawrence) said ‘the draft legislation was unacceptable and safety standards needed to be ''improved, not reduced in any shape or form''’.

The AMA is equally unhappy with the proposed legislation proposing to introduce a national registration scheme for health professionals, which in its view ‘fails the public interest test’.

These reforms form part of the ‘seamless economy’ agenda, which generally collapses eight laws developed at state or territory level into one law operating throughout Australia.

As we have said earlier:

As a general proposition, the ‘applied model’ of legislation – where one jurisdiction will develop and pass model legislation through its parliament with the remaining states or territories subsequently passing legislation that picks up the model legislation is the favoured way of introducing harmonised
legislation when regulating areas previously the province of states and territories.Whilst nominally capable to amend legislation, state parliaments – including those chambers without government majorities - have typically accepted the national legislation without batting an eyelid, on the grounds that ‘COAG decided’.
The COAG executive federalism model of public administration, in which state parliaments passively pass laws decided by either COAG as a body (or a ministerial council within the COAG structure) is now at an interesting stage of its operation.

This is because the legislation designed to implement the ‘seamless economy’ is now being rolled out - stakeholders are now challenging the merit of the contents of the finalised legislation.

This beggars the question: to which democratically elected body can these stakeholders appeal?

It can hardly be to those legislative chambers where the governments who form COAG have majorities.

So, the interesting thing will be whether the AMA and the ACTUs of the world actively lobby state parliaments for amendments to COAG approved harmonised legislation.

If so, it will be fascinating to see whether those parliamentary chambers where there are government minorities – the Legislative Assemblies of the ACT and the NT, the upper houses of NSW, Victoria, Tasmania and South Australia and both houses of the Western Australian Parliament (if the National Party can be persuaded to side with the ALP on a particular issue) – have the chutzpah to amend COAG legislation – particularly as it could cost their state money.

It will be finally interesting to see what the Liberal Party chooses to do in this situation. In most legislatures, it will be the vote of the Liberals that will determine whether an amendment will pass.

It would therefore be desirable for the Liberal view on the role of COAG and (more generally) the role of state parliaments as standard setters to be clarified. This will be discussed more in the next article.

03 September 2009

Unfixing Parliamentary Terms

John Della Bosca has had a fall.

The Sydney Morning Herald has made a call: Nathan Rees should go to the Governor and just go to the polls.

Many hanker for an early election. However, the presence of a fixed four year terms acts as a barrier.

The concept was introduced into NSW following an agreement between Nick Greiner and the independent members of Legislative Assembly following the 1991 election that produced a hung parliament.

The rationale is explained by Clover Moore, one of the independents who negotiated the agreement, where she says on her website:


My work to reform Parliament led to the current four year fixed terms of State Government, reducing the number of elections and the political manipulation of their timing.

The then government acknowledged the idea was one of a number of:

….changes to the framework of Government in New South Wales to respect a strong Parliament and to ensure the accountability of Executive Government to the Parliament are necessary.

The fixed term concept is now washing through the other Australian jurisdictions.

It strikes me the idea works from a wrong premise.

It presumes Australian Parliaments are strong. They are in fact quite weak. Party discipline is so strong that independent action by MPs is almost unheard of. What the Executive wants, the Executive gets.

For all intents and purposes, under NSW law a successful no confidence motion is necessary to bring about an election.

Short of a schism in the ALP, if the NSW Government really decided to bring an election some government members would have to tactically abstain from the vote.

This could be called the ‘Bundestag solution’.

Germany has the same sort of fixed term provisions as NSW.

In 2005, members of the German government abstained from voting in a confidence motion so that an election could be called following increased dissatisfaction with, and instability within, a coalition of the Social Democrats and the Greens.

However, query whether that would look fair dinkum to either the electorate or (for that matter) the Governor.

After all, the intention of fixed four year terms is to reduce the number of elections and the political manipulation of their timing.

And so, it would appear the NSW Government will be with us until 2011.

Fixed four year terms for a parliament weakened by rigid party discipline is poor public policy.

We do not believe in fixed terms.

There are some occasions where the capacity to call an election is desirable. For instance there could an issue that is so big that it is proper to call an election to decide on whether the policy is a good idea – a ‘back me or sack me’ election.

Alternatively, there could be civil unrest of some nature (like a series of strikes) such that it is appropriate to call a ‘who runs the country’ election.

However, you can’t really identify whether an issue is one of these sorts of issues in advance. Everything turns on the political context of the day.

That is not to deny that there is a legitimate expectation that a government will usually run to term, or that there will be parliamentary leaders who will go to the electorate for cynical political reasons.

However, we think the electorate is smarter than many in the political classes think. Anything that is particularly cynical will be punished. The last Western Australian election is probably case in point.

And in any regard, we don’t think that an exercise in democracy is a bad idea at any time.

We also think that 4 years is too long between elections.

It is probably right that 4 years is the common period for a parliament or elected official.

However, demand in many of these jurisdictions there is a capacity to easily call elections should circumstances arise.

In other circumstances, the electoral system is designed to ensure that the system’s overall electoral mandate remains fresh.

For example, Barack Obama is President of the United States for four years. However, the House of Representatives is elected for two years. One-third of the Senate is elected at the same time as the House of Representatives.

It therefore means that whatever Obama does will receive an electoral test every two years, not every four. Any policy overreach can be punished; proper policy rewarded.

If there is to be fixed terms, then a fixed three year term is probably appropriate.

However, we have always supported the erstwhile Australian system of unfixed three year terms.

We have never accepted the argument that four year terms are necessary because it would be too hard for politicians to implement contentious yet necessary policy reforms because of fear of electoral consequences.

The microeconomic reforms generally described as national competition policy (and now the National Reform Agenda) have led to significant changes to the structure of Australian society – all achieved by governments of different persuasions within a political system with unfixed three year terms.

There is also a case for allowing the upper house to block supply.

The NSW Legislative Council has not had the capacity to block supply since 1933.

However, there may be a case to return this power to the upper house so as to force an unpopular government to an election.

Some will reject this idea because of a wish to avoid the controversy that arose in 1975 following the refusal of supply by the Senate that ultimately led that led to the downfall of the Whitlam Government.

That said, the 1975 election led to the Coalition to win a clear parliamentary majority – however, the controversy surrounding the decision to block supply caused will ensure that an upper house would need to think long and hard before it decided to deny the Executive its appropriation.

No-one would want to have a political environment such as that currently operating in NSW.

Yet this is the unintended consequence of a policy design thought to be a good idea by participants in a hung parliament of nearly 20 years ago.

The policy experiment has failed. It must be reformed. We should go back to the future with unfixed three year elections.

The Henry Review and the Australian Federation - Defining the Debate

The previous two articles illustrate the two different ways one can view how Australia, as a federation, should function.

As we said in an earlier article:

Many will say …. Australia is an integrated common market, with people and companies commonly undertaking activities across state borders.

Moreover, Australia exists in a globalised world, with the complication of different rules in different states a reason not to come to Australia.

Regulatory difference is nothing more than a mere compliance costs that distort allocative efficiency with no public benefit.

In this case, there to be only one set of rules (usually encapsulated in legislation), preferably made by one legislative body – in our case, the Australian Parliament.

The states would have the role of (effectively) an English county council, concentrating on service provision based on national standards. However, there are alternative arguments.

The (few) supporters of a federal system argue that citizens benefit where there is genuine "competitive federalism" –the idea that different jurisdictions will make different rules and regulations and have different levels of taxation, with each jurisdiction ultimately picking up what is "best practice" or face the loss of people and investment.

A similar argument is one holding that States are "incubators of innovation" –a place where different ideas can be tried, with the good ones taken up in the bad ones discarded - and if an idea is really bad, the entire nation doesn’t have to face the consequences.
The contents of the Henry Review means the time is now right for a full political discussion of whether the nation should be viewed as a federation or a single market.

However, the decisions should not be made through the Governor’s Club of COAG.

Whilst a bureaucrat like Henry may see some advantages in going down this route, these massive reforms should be discussed by the elected representatives reflecting the interests of all political interests represented in Australian parliaments – and not just the representatives of the executives that have been drawn from them.

Ideally, early in 2010 there should be a full constitutional convention, drawn from the Australian legislatures in a manner similar to the conventions convened in the 1980’s by the Hawke Government, to fully discuss the issue of what is the role of state government of the 21st century, to flesh out the issues of the structure of the Australian federation.

From there, each of the major political parties should then set out policies that set out the appropriate role of a state in a 21st century federation (including the role of a state parliament) and the role of COAG within the Australian federation.

The winner of the 2010 election should then put their preferred view to another constitutional convention, from which appropriate constitutional amendments (that may not go as far as Tony Abbott is advocating) could be prepared for the consideration of the Australian people.

The Henry Review will be an important reference document as this debate proceeds. It will be interesting to see how the argument will pan out.

31 August 2009

The Henry Review and the Federation - a Constitutionalist's View

The previous article set out parts of a speech given by Ken Henry, the Secretary to the Australian Treasury and chairman of the Future Tax System Review.

Henry looked at the issue of fiscal federalism through the prism of Australia as a single market, with taxes and allocation of responsibilities ‘assigned’ to the appropriate level of government through the operation of an intergovernmental agreement.

Kenneth Wiltshire from the University of Queensland Business School responded to the contents of the speech in the Australian on 24 August.

He said:



If Australia had a unitary system of government, some of (the observations of Henry) might be appropriate. Even then, a tax review ought to begin with the time-honoured principles of taxation, including that taxes should be fair and equitable, efficient, appropriate, certain, non-distorting, easy to administer and transparent. It would also begin by acknowledging that Australia is generally too dependent on direct taxes, which are often higher than our competitors', and that the tax system has too much vertical imbalance in its federal-financial relations.

But Australia is not unitary; it is a federation and any tax review of this kind should begin from the premise that states are sovereign partners. They do not need to be "empowered"; they already have sovereign powers, including in taxation, and they had them before the commonwealth was created.


He went on to say that the units of a federation can have different tax bases that can give rise to diversity, choice and competition – and also different tax rates in different jurisdictions.

Wiltshire then noted:



Henry is correct about two things: (a) the present state tax bases serve to distort economic behaviour by industry and individuals, and (b) the blame game is all about dollars. But both these features are caused by the commonwealth's intrusion into the states' constitutional powers, and the conditions it attaches to the majority of funding it gives to the states. Henry's proposals would exacerbate this situation. Clearly, asking the head of the federal Treasury to design a fiscal framework for the federation is like putting a fox in charge of the chicken coop.

Wiltshire suggests that the States should surrender their rights to the GST and instead recommence levying income tax, with the role of the Commonwealth Grants Commission of ensuring horizontal fiscal equity between the states ‘to ensure that no state is penalised for financial circumstances over which it has no control’ continuing.

He finally said:



Contrary to Henry's recently stated views, this is meant to be a tax review, not an expenditure review. If there is to be any decision about realignment of government functions in the light of the tax arrangements, that should be done by elected representatives of the states, not by bureaucrats. If he is not careful, he will certainly end the blame game between the commonwealth and the states, because all of them will blame him for the ensuing mess.

This all sets up an economist vs. constitutionalist debate on the structure of the Australian federation. My observations are set out in the next article.

The Henry Review and the Australian Federation - an Economist's View

As we said in a previous article:

….the debate that will follow the Henry Review is probably the right time to realign who does what within the Australian federation, and then determine how those functions should be funded.

The debate has begun.

The head of the Future Tax System Review (Treasury Secretary Ken Henry) gave a speech on taxation reform and fiscal federalism in Sydney on 19 August.

It reveals that the Treasury Secretary is very much an economist as he said:

While it is nearly 20 years since the National Competition Policy reform agenda recognised Australia as a single market, rather than a series of state-based markets, no overarching attempt has been made to integrate the federation’s tax-transfer system into a single national system. While the GST replaced some highly inefficient taxes at both the Commonwealth and State levels, those reforms did not attempt to integrate the federation’s tax system.

My fellow panellists and I are well aware of the significant opportunity that the review provides to articulate a truly integrated, coherent tax-transfer system within the federation. Having said that, we are under no illusion that such a task will be easy. But if Australia is to meet the challenges and make the most of the opportunities of the 21st Century, then the federation’s tax-transfer system also needs a 21st Century architecture.

He is clearly of the view that tax revenue should be centrally collected….

Centralisation would also make it transparent that Australian governments use many taxes to raise revenue from the same tax base. For example, tax is levied on labour income through the personal income tax ($126 billion), payroll tax ($16 billion), fringe benefits tax ($4 billion) and superannuation funds ($12 billion). And there are eight different governments levying payroll tax. It is questionable whether such arrangements are the best way to levy taxes on labour income.

….although this does pose problems in a federation:

The Panel will also be mindful of how raising tax revenue affects incentives on the spending side. In particular, how can the balance between a simpler tax system administered centrally be squared with the need for the States to be accountable by having to raise their own revenue to finance their marginal spending?

One way to deal with the issue is to change the structure of the federation:

I mentioned earlier that the revenue assignment of each level of government is dependent on how we view respective long-term financial needs. And this, in turn, depends on what we think is the appropriate role of each level of government in improving the well-being of Australians. Which government is best
placed to be the financier of government services? Should a particular government be the sole provider of the service, or one provider amongst many?

I do not anticipate that the Panel will be recommending that the
Commonwealth take over the delivery of any particular services currently provided by the States, nor vice versa. However, we shouldn’t assume that the present allocation of roles and responsibilities is optimal. Much of the fiscal federalism architecture reflects past thinking about the appropriate role of
government and the available means of addressing disadvantage.

He goes on to say:

This highlights that the nature of fiscal federalism is changing. The financial, informational and institutional advantages of the Commonwealth have seen it assume an increasing role in addressing perceptions of horizontal inequity and as a social insurer against disadvantage. On the other hand, there appears to be at least a tenuous consensus that the States have distinct advantages over the Commonwealth in supplying front line services. They are closer to their own communities and have been doing it for years. Recently, other providers of such
services have emerged; especially in the not-for-profit sector. Social housing services are a case in point. This seems to be a form of ‘good’ competition.

So it is clear that Henry sees some change in the federal structure – to be determined by (another) intergovernmental agreement:

Finally, designing an improved tax-transfer system for the federation is not enough. The Panel is also aware that the implementation and maintenance of a package of reforms is a difficult task in our federation. A new intergovernmental agreement (IGA) would be necessary.

A broad based reform agenda, rather than a series of stand alone reforms, increases the likelihood that the gains from wide ranging reforms can be enjoyed by the community at large – even if some changes might be portrayed as not being in the interests of particular groups of people. By setting out and agreeing these reforms in an IGA, governments will send a strong message to the public that all of the reforms will be delivered. This should provide additional comfort to those who will benefit from future reforms that they will actually be delivered.


As the next article shows, not everybody agrees with this view.

17 August 2009

Putting the unions back into government

The Australian has reported the recent ALP National Conference decided that:

…unions will be appointed to federal government boards,, committees and advisory bodies in a move that will increase their influence over critical national policies.

The decision, negotiated as part of a workforce package by Julia Gillard and senior union leaders at the ALP national conference [on July 31] follows increasing anger at their exclusion from some of the Rudd Government’s key advisory bodies, including the Henry tax review.
The Review of the Corporate Governance of Statutory Authorities and Office Holders, usually called the Uhrig Review was published in 2003.

It is the template guiding how government boards and other administrative structures are established that has been broadly been followed by governments of both persuasions.

Whilst at page 93 of the Review suggests representational appointments are ‘entirely appropriate’ for advisory committees it says at pages 98 - 99:

The review does not support representational appointments to governing boards as representational appointments can fail to produce independent and objective view. There is the potential for these appointments to be primarily concerned with the interests of those they represent, rather than the success of the entity they are responsible for governing. While it is possible to manage conflicts of interest, the preferred position is to not create circumstances where they arise.

At page 100, Uhrig suggests that ‘better practice’ means that:

In getting the best from boards, appropriately experienced directors are critical to good governance
and

Representational appointments to boards have the potential to place the success of the entity at risk.
It would be unfortunate if government boards and committees of inquiry charged to investigate specific policy issues requiring technical expertise were again weighed down with people who are ‘the honourable member’ for a specific sectoral interest.

That runs the risk of decisions made by these bodies being captured by those interests.

The public interest is not served.

This is one decision of the ALP National Conference that requires review.

Tony Abbott sets the battlelines for the federalism debate

Tony Abbott has written an article in The Australian that confirms his preference for what is effectively unitary government for Australia.

He first expressed this view in his book Battlelines.

In his newspaper article Abbott says:


My proposal is not to abolish the states but a referendum to give the national parliament the same authority over them that it’s long had over the territories. It’s not a bid for more power to Canberra. Rather, it’s an attempt to establish clear lines of accountability and responsibility.
He wants constitutional change so as to permit the Australian Parliament to make laws for the ‘peace, order and good government of the country’ – that is, confer on the national parliament the plenary power to make laws on anything.

Despite what he says, it is a bid for more power to Canberra.

The structure of the Constitution means there are some areas where the Commonwealth cannot legislate. Allowing the Commonwealth Parliament to legislate over any given subject necessarily means the Commonwealth gains power.

A bit of honesty would help debate.

Moreover, even though the travails of the Defence Department chronicled by Malcolm Farr in the Daily Telegraph suggest that not every area of commonwealth administration is an example of perfection, the Australian article gives the clear impression that Abbott thinks that the Feds run things better because, well…. they’re the Feds.

He says:

Similarly, at least since Queensland abolished death duties in the 1970s, there are no discernable examples of good policy adopted by one state and then copied by the others that would render plausible the argument that ‘states area laboratory for policy change’.

Anyone comparing commonwealth government health programs (such as Medicare and the Pharmaceutical Benefits Scheme
delivered by private doctors and pharmacists) with state government ones (such as public hospitals run by giant bureaucracies) would have to conclude that Canberra understands the subsidiarity principle far better than the states.

Taking the last observation first, if you are going to compare things you should compare like with like.

Both Medicare and the PBS are designed from the ground up as subsidy schemes with the intention to reduce the cost of particular goods and services to consumers and no more.

Hospitals provide direct medical services.

It may well be better if public hospitals were privately owned, thus facilitating the creation of a real contestable market in the provision of hospital services.

But comparing the administration of subsidy schemes with the administration of institutions providing services is a false analogy.

That said, there is an absence of modern examples of how the federal system has developed a novel policy development slowly picked up by other jurisdictions.

The development of modern seat belt laws is the usual example trotted out – but that is now nearly 40 years old.

Moreover, as a recent intervention by Queensland Treasurer Andrew Fraser has recently suggested, without own source revenues there are limits to what a state can do as a ‘sovereign’ jurisdiction.

By implication, there is only limited capacity for a state to be a policy ‘laboratory’.

The debate will be assisted if a list of tangible policy initiatives developed in one state and adopted in others can be identified, so a final decision can be made as to whether in the 21st century there are advantages to a genuine federal system, or that in fact Canberra is always right after all.

15 July 2009

Pape and Fiscal Federalism

Having the ability to do things is great if you have the money to do them.

And the States don’t have the dosh to do much.

As Bob Carr has observed, as a result of High Court decisions State Governments have lost the power to (effectively) tax petrol and alcohol – a lot of the capacity for states to raise ‘own source revenue’ has been lost.

The Australian reported a recent appearance of Queensland Treasurer Andrew Fraser at the Toowoomba Chamber of Commerce thusly:


"Without fiscal sovereignty, state sovereignty is illusory," Fraser said, in his unique style. "The sheer imbalance of the fiscal capacities of the states vis-a-vis the commonwealth invites a form of implicit fiscal bullying and tacit mendicancy. It is this dynamic that pervades commonwealth-state financial relations."
……………….

In his speech, Fraser pointed out that, with 45 per cent of all revenues across the states and territories coming from commonwealth grants, his own revenue streams were limited.

"The nature of the state revenue base - dominated as it is by transfer duty, payroll taxes and royalties - is narrow and sectoral," he said. "On the principles of tax design, this is undesirable. The effects of a sectoral decline can quickly tip a state budget in a manner disproportionate to the broader changes in the economic environment."

When all three sectors tip, as has occurred of late in the mining sector, property market, and in employment generally, a state such as Queensland finds itself in huge trouble, now contemplating a budget deficit of more than $3 billion.

The next pivotal part of the play will be the Henry Review of the tax system.

In a speech given on 26 March 2009 review chairman Ken Henry noted that improving the federal structure of the tax transfer system was an one of the important elements of the review.

He said there were three dimensions to this assignment exercise – the level of government responsible for the design of the tax; the level of government responsible for administration and collection of the tax; and the level of government that receives the revenue raised by the tax.

After noting that state and territory level governments should ‘avoid tax bases with high interjurisdictional mobility’ he said:


It is usually the case that whoever controls the policy and administration will also receive the revenue – and it is important that governments have some capacity to alter revenue consistent with their marginal expenditure choices.

But it is also usually the case in federal systems that there is an imbalance between the revenue that each level of government raises and its expenditure requirements. For some taxes, therefore, part or all of the revenue may be given to another level of government.

Then there is the question of how this revenue is distributed among governments at the same level and with what conditions.

There are trade-offs to be made in this three-dimensional assignment task. The more the policy and administration of the tax system is centralised at the national level, the greater the opportunity to develop a less complex and more efficient tax system.

However, centralisation obviously also means that sub-national governments have a greater reliance on revenue from the national government. And this may influence their spending decisions.

So the issue could ultimately boil down to:

1. Should taxes be levied by:

(a) the entity responsible for the expenditure; or

(b) the entity that can most conveniently and efficiently collect the revenue.

And, if the answer is (usually) the feds:

2. How much of a policy say should they have over the way in which the money they have collected is spent.

Following the High Court decision in Pape, the debate that will follow release of the Henry Review is probably the right time to realign who does what within the Australian federation, and then determine how those functions should be funded.

A win of sorts for Federalism - Pape v. Commissioner of Taxation

On 7 July the High Court handed down a decision called Pape v. Commissioner of Taxation.

In a narrow sense, it decided that the decision to pay the tax bonus to eligible Australians earlier in the year was constitutional.

However, it is a decision that could have significant ramifications on the federal structure.

The Australian Parliament has increasingly appropriated money to directly fund projects and schemes using the so-called executive power of the Commonwealth without regard to whether the thing being funded is relevant to one of the areas for which the Commonwealth has constitutional responsibility.

This proposition did not receive total High Court support.

The general direction of the Court is contained in this paragraph of the joint judgement of Justices Hayne and Kiefel:

In the end the Commonwealth's submissions about the executive and incidental powers came down to the proposition that the Commonwealth's power to spend is limited only by the need to obtain parliamentary approval for the proposed expenditure. That contention should be rejected. The matters of history
described earlier in these reasons do not require its acceptance. Its acceptance would not be consistent with what Mason J referred to as "the broad division of responsibilities between the Commonwealth and the States achieved by the distribution of legislative powers" and would, by "enabling the Commonwealth to carry out within Australia programmes standing outside the acknowledged heads of legislative power merely because these programmes can be conveniently formulated and administered by the national government", effect a radical transformation in what has hitherto been thought to be the constitutional structure of the nation. To hold that the Commonwealth power to spend does not extend so far is consistent with what was decided in the Pharmaceutical Benefits Case and, after the AAP Case, in Davis v The Commonwealth.
Sadly, it will require more litigation to work out with greater certainty what is ‘good’ direct Commonwealth expenditure and what is ‘bad’ direct expenditure, although it would appear that things that are clearly Commonwealth responsibilities will still be okay.

Leaving aside the mechanism of section 96 tied grants, the States could be liable to fund a greater range of activities. Could they even if they wanted to? This is discussed in the next article.

11 July 2009

COAG Meets in Darwin and Paul Everingham scrubs the States

COAG met in Darwin on July 2.

The previous day – Territory Day - the NT News reported comments from the ‘father of Self Government’ Paul Everingham which said that states and territories were a waste of taxpayer money and that the Northern Territory should be run out of Canberra.

He was reported as saying that when self-government for the NT was granted 31 years ago:


‘Back then people were still getting telegrams…but communication has improved. It is the internet age. People can also fly everywhere on relatively cheap airlines'.

This is a more earthy way in expressing something we have mentioned in an earlier article:


Many will say the Seamless Economy Project is good idea - Australia is an integrated common market, with people and companies commonly undertaking activities across state borders.

Moreover, Australia exists in a globalised world, with the complication of different rules in different states a reason not
to come to Australia.Regulatory difference is nothing more than a mere compliance cost that distort allocative efficiency with no public benefit.

The majority of the COAG decisions appear to underline the Everingham view of the world.

Those decisions include:


  1. the development of a national regulatory body for vocational education and training;
  2. the development of a unified national system of child care licensing;
  3. the Coordinator-General mechanisms set up by the Commonwealth to take responsibility for Nation Building programs and projects funded by the Commonwealth and delivered by the States under the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund;
  4. the creation of national regulation for maritime safety, rail safety and heavy vehicles, including the appointment of the Australian Maritime Safety Authority as the national safety regulator for all commercial shipping in Australian waters and a single national heavy vehicle regulator; and
  5. the development of national performance measures for development applications (DA).
Quite a list really for one COAG, really.

And there are other Ministerial Councils working on uniform legislation.

For instance, the Standing Committee of Attorney-Generals (SCAG) is working on the issue of whether there should be a national regulator for the legal profession, as well as on uniform succession laws on administration of estates of deceased persons.

This followed a debate immediately before the Darwin COAG as to whether the Federal Government should take over the administration of the hospitals system.

The time is coming where an overt (rather than a covert) decision should be made as to whether Australia is to be a federation or a unitary nation.

A new Australian Consumer Law

On 24 June the Government introduced amendments to the Trade Practices Act 1974.

It is the first step towards bringing together 13 consumer (fair trading) laws that operate in Australia within the TPA.

The Bill is called the Trade Practices Amendment (Australian Consumer Law) Bill 2009.

Generally based on Victorian legislation, the most important aspect of the legislation is to create a mechanism to void ‘unfair’ standard form contracts involving ‘an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption’.

It was expected that the reach of this legislation would include business to business transactions.

However, as Consumer Affairs Minister Emerson said in his second reading speech:

The unfair contract terms law reforms were agreed by COAG in October 2008 and were based on the extensive consultation undertaken by the Productivity Commission.

These reforms are based on the extensive practical experience of the Victorian government in implementing and enforcing similar laws.

Since then the government has sought views on both the reforms more generally in February and on an exposure draft of the unfair contract terms provisions in May. In response to these consultations the Treasury received just under 200 submissions from many consumers, businesses and other stakeholders.

The government has also had numerous meetings with key stakeholders about these changes. And I understand that the Treasury has met and spoken with a wide range of people about these provisions.

We have consulted, and we have listened. And this is reflected in the provisions set out in this bill, which differ in key respects from those that the government exposed in May, particularly in respect of the exclusion of business-to-business transactions.

In relation to the question of whether business-to-business contracts—and particularly those involving small businesses—should be included under the unfair contract terms provisions, the government is currently reviewing both the unconscionable conduct provisions of the Trade Practices Act and also the
Franchising Code of Conduct.


It would appear that the Franchise Council of Australia, satisfied with the protection contained in its sector specific legislation (principally the Trade Practices (Industry Codes – Franchising) Regulations 1998, had an excellent lobbying win.

However, smaller businesses who perceive they face unequal bargaining power when seeking goods and services from larger suppliers could feel less sanguine.

Larger businesses will undoubtedly be happy that business to business transactions have been removed from the ambit of the legislation.

However, they could still be concerned that aggressive use of the legislation will remove the certainty that standard form contractual documentation offers the market place.

On 25 June the Senate referred the Bill to the Senate Economics Committee for report by 7 September.

The closing date for submissions is 31 July.

As the Minister said in his second reading speech:

The government has also indicated its intention that this bill should be referred to a senate committee, and this issue will—no doubt—be further considered as part of that process.

No doubt.


It is finally noted that COAG signed off on an Intergovermental Agreement to underpin a uniform Australian Consumer Law at its Darwin meeting on 2 July.

Harmonising Australia's OH&S law - the next step

On 10 June the new Safe Work Australia Council held its first meeting.

One of the first things it was charged with was to give effect to the decisions of the Workplace Relations Ministerial Council (the WMRC) made on 18 May 2009 as to how model occupational health and safety legislation should be framed, following consideration of the two volume National Review Into Model Occupational Health and Safety Laws prepared by a committee chaired by Robin Stewart-Compton.

It decided it would release the model occupational health and safety legislation (and accompanying regulatory impact statement) during September.

The legislation is broadly based on the Victorian model.

The general test for liability will be whether it is ‘reasonably practicable’ to avoid a hazard in a particular workplace.

However, there is no longer a concept of ‘employers’ having duties to ‘employees’.

Indeed, the objective is to move away from the traditional emphasis on the employment relationship when working out whether a duty of care is owed; rather, the intention is to provide greater health and safety protection for all persons involved in, or affected by, work activity.

Company officers will be have a duty to exercise ‘due diligence’ to ensure that workplace hazards are reduced or removed.

The new legislation will also capture independent contractors as well as people working from home.

One significant change is the expansion of the duty of care imposed by OHS legislation owed by a business to anyone who is ‘in or adjacent to’ a workplace.

Whilst the Ministerial Council did say in its consideration of the Stewart-Compton report:

Care needs to be taken during drafting to ensure that the scope of the duty is limited to matters of occupational health and safety and does not further extend into areas of public safety not related to the workplace activity
this will be a tricky drafting job.

Done poorly, it could impact broadly on the general law relating to occupiers liability and negligence.

It remains open how uniform OH&S legislation will be.

As we have remarked earlier, paragraph 5.1.8 of the COAG agreement on OHS reform says:

The adoption and implementation of model OHS legislation is not intended to prevent jurisdictions from enacting or otherwise giving effect to additional provisions, provided these do not materially affect the operation of the model legislation, for example, by providing for a consultative mechanism within a jurisdiction.

And as we remarked earlier:

And so in this case legislation will be uniform – unless it isn’t.

As part of the WMRC decision, unions will not be able to commence prosecutions, and prosecutors must prove OHS offences beyond reasonable doubt – the Council expressly voted down the current position in NSW – making union stakeholders quite cross.

WA declined to sign the communiqué as they were unhappy about the use of conciliation to resolve OHS issues, the low standard of proof for workplace discrimination claims, union right of entry to workplaces and the level of gaol terms.

It remains a question how much of the national model each jurisdiction takes into its own law, although it is noted that uniform OHS laws are one of those things for which states and territories receive ‘reward payments’ under the National Partnership to Deliver a Seamless Economy.

So money may ultimately speak in favour of uniformity.

National Registration of Health Professionals - the next step

In a previous article we noted that a national scheme for the regulation of health professionals was being developed.

We said:

An intergovernmental agreement (IGA) to establish a scheme of national registration for health professionals was signed on 26March 2008.It is designed to establish a single national registration and accreditation scheme for the nine currently regulated medical professions ranging from doctors to osteopaths.

We also noted:

To allow the national scheme to commence on time (1 July 2010), the Queensland Parliament has passed the Health Practitioner Regulation (Administrative Arrangements) National Law Act 2008,which establishes the a single registration board for each of the nine professions as well as an Australian Health Practitioner Regulation Agency as (effectively) a company under Queensland law, that will support the various boards.

However, the finer details of the scheme are still being developed.

Another piece of legislation now being developed will fill these in.

It is intended to introduce the relevant Bill into the Queensland Parliament before the end of the year.

However, there is concern as to what sort of parliamentary oversight the Agency will be subject to once it commences operation – it is nominally an entity created by the Queensland Parliament, but exercises legal powers in all Australian states and territories.

There is also concern that the Australian Health Ministers Council rather than specialist professional boards can make the standards that health practitioners must meet – instruments not subject to parliamentary disallowance by any legislature. (UPDATE: the new legislation (discussed below) vests the making of accreditation standards with national registration boards)

It would appear that this issue in particular will not be subject to change because it is a structure that has been decided by COAG.


That said, the Senate Community Affairs Committee has decided to inquire into the proposed national registration scheme.The timing is a bit odd – well after the IGA that set the ball rolling, but only just before a draft of the proposed Bill setting out the nuts and bolts of the national scheme is released.

However, it is nevertheless a review.

The exposure draft of the legislation designed to introduce a national scheme of registration for health information (called the Health Practitioner Regulation National Law) has now been released, with the Committee (thankfully) extending its report date 16 August, so comments on the legislation can be taken.

One of criticisms we have with the executive federalism model of developing regulations (encapsulated by the COAG process) is the absence of parliamentary oversight of subordinate regulatory instruments made under the scheme.

Unlike its interim predecessor, the proposed final law allows for parliamentary disallowance of regulations.

This is good, but disallowance is not extended to registration standards, accreditation standards and codes of practice that go to who can (or cannot) practise as a health professional as well the guts of the detail as to how the professions will be regulated.

The issue of the level parliamentary oversight in the COAG regulatory model still requires to be worked through – hopefully this is where the working through will happen.

Harmonised occupational regulations for specified occupations - the next step

On 30 April COAG signed the Intergovernmental Agreement for a National Licensing System for Specified Occupations.

The national system will regulate a mish-mash of occupational areas.

The nominated occupation areas are: air conditioning and refrigeration mechanics;, building and building related occupations; electrical; land transport (passenger vehicle and dangerous good drivers); maritime; plumbing and gasfitting; and property agents.

As expected, COAG followed the advice of the decision regulatory impact statement and adopted a ‘national delegated agency’ model of licensing.

A national licensing board will head a national licensing body charged to develop national licensing policy.

This will enable the body to develop rules in areas including licence eligibility and maintenance requirements, licence classes, compliance and enforcement standards, disciplinary arrangements and licence fees.

The body will be aided by specific occupational licence advisory committees, who will provide ‘the principal source of advice’ on licensing policy.

Existing jurisdictional regulators will be expected to continue performing current registration/enforcement functions.

Victoria is the host jurisdiction for the proposed legislation. Other states will pick up the Victorian law by reference.

It is proposed to expose a draft of the proposed legislation in October with a view of introducing legislation into the Victorian Parliament in the second quarter of 2010.

It is an interesting licensing model.

Decision makers framing the laws governing what a particular trade can or can't do should have some background in the area so what is done is both workable and appropriate.

The National Licensing Board (which presumably will make rules such as licence standards) will constitute an independent chairman and up to eight other people, including two ‘regulators’ appointed on a rotating basis.

It is difficult to see how such a board (or the bureaucracy that supports it) would have the capacity to have a genuine understanding of, and thus make optimal regulations for, sparkies and realos and some classes of truckies….and air conditioner mechanics (amongst others).

One imagines the specialist subcommittees will be the real decision makers.

That is probably why the IGA requires a representative of the committee to ‘attend the board meeting to discuss (the measure to be enacted)’.

The proposed national legislation will need close examination to see whether this structure is genuinely workable.

To that extent, now that a host jurisdiction has been identified (Victoria), it is hoped that the parliament of that state will establish some form of committee structure to test the quality of the policy – and not just assess something against how well the wishes of an unelected COAG council has been given effect.

This includes appropriate measures to allow parliamentary scrutiny of rules that will govern who can enter the various trades and professions, and how they will be subsequently regulated.

16 April 2009

The Seamless Economy Regulatory Project - Some Reforms

This series of articles illustrate that the manner by which Australian legislation is made is changing.

The articles show that whilst some consultation is undertaken at the margins, in many circumstances once something forms part of an intergovernmental agreement (an IGA) or is contained in a COAG resolution, it is next to cast in stone.

This leads to an undesirable democracy deficit.

A parliamentary process allowing the review of decisions emanating from the COAG process should be formalised.

In June 2008 the House of Representatives Standing Committee on Legal and Constitutional Affairs published a paper discussing constitutional reform.

The sole recommendation contained in the paper is that intergovernmental agreements should be automatically referred to a parliamentary committee for scrutiny and report to the Parliament.

This idea should be adopted.

It should also apply to draft bills that flow from an IGA.

IGAs and draft bills should also be referred to relevant committees of state and territory parliaments such as the Western Australian Uniform Legislation and Statutes Review Committee.

There should also be some capacity to permit parliamentary review where some COAG recognised body such as a Ministerial Council can make rules and regulations having the full force of law, such as the capacity to make standards for the national scheme for health professionals referred to in an earlier article in this series.

Thus, if a parliament of a participating jurisdiction disallows a subordinate instrument made by a ministerial council within the period of time that state or territory law permits the disallowance of subordinate instruments, the instument should be taken not to be in force anywhere in Australia.

In this way, the interests of all stakeholders can be heard, better legislation developed and the protections of a federal system of government retained whilst allowing the development of harmonised regulations that are seen as necessary to allow the Seamless Economy to efficiently function.

Decision makers in companies and industry associations will have to establish strategies to ensure their interests are protected as the new regulations underpinning the Seamless Economy develop.

The Seamless Economy Regulatory Project and Democracy Deficit Part 2

There are some signs that state parliaments may be commencing to assert their sovereignty over rule by COAG.

The Queensland Scrutiny of Legislation Committee considered the Health Practitioner Regulation (Administrative Arrangements) National Law Bill 2008, which established the framework to allow for the national scheme of registration for health professionals to commence.

It said:


It is the committee’s practice to draw to the attention of the Parliament any provisions of a bill which are to give effect to national scheme legislation. The committee, in common with the legislative scrutiny committees of the Parliaments of other Australian States and the Commonwealth, has identified concerns that elements of intergovernmental legislative schemes might undermine the institution of Parliament. The committees’ concerns relate to the potential for the executive to formulate, manage and possibly alter such schemes to the exclusion of legislatures. The committee has also warned against a perception of a reduced need for legislative scrutiny of an intergovernmental agreement proposed for ratification.

……

In The Constitutional Systems of the Australian States and Territories, Professor Gerard Carney provides a summary of concerns regarding the legislative scrutiny of national scheme legislation:

A risk of many Commonwealth and State cooperative schemes is ‘executive federalism’; that is, the executive branches formulate and manage these schemes to the exclusion of the legislatures. While many schemes require legislative approval, the opportunity for adequate legislative scrutiny is often lacking, with considerable executive pressure to merely ratify the scheme without question.

Thereafter, in an extreme case, the power to amend the scheme may even rest entirely with a joint executive authority. Other instances of concern include,for example, where a government lacks the authority to respond to or the capacity to distance itself from the actions of a joint Commonwealth and State regulatory authority. Public scrutiny is also hampered when the details of such schemes are not made publicly available. For these reasons, a recurring criticism, at least since the Report of the Coombs Royal Commission in 1977, is the tendency of cooperative arrangements to undermine the principle of responsible government. A further concern is the availability of judicial review in respect of the decisions and actions of these joint authorities.

Certainly, political responsibility must still be taken by each government for both joining and remaining in the cooperative
scheme. Some blurring of accountability is an inevitable disadvantage of cooperation – a disadvantage usually outweighed by the advantages of entering this scheme. But greater scrutiny is possible by an enhanced and investigative
role for all Commonwealth, State and territory legislatures.

Drawing from some specific criticisms made by the Committee, the Queensland Opposition said this when debating the Bill:


From the outset, it is important to note that there is broad support for national registration for health practitioners. Again, I repeat that there is broad support for national registration for the health professions.

There is overwhelming consensus of the need for consistently high standards and portability of registration of health practitioners across Australia. However, the problem lies with the national law that will establish an unaccountable political institution that will not only control and influence what health practitioners are taught but also how to treat and help sick people while following orders from politicians and bureaucrats without reproach.

The bill before this House is a sugar-coated toxic blend of important and required reform for a national health practitioner registration scheme with an accreditation and training proposal that threatens Australia’s envied position as having one of the best and most comprehensive professional standards of training and practice for our medical practitioners.

There is a need for a greater capacity for public involvement in the development of the regulatory structure of the Seamless Economy evolves is required. This is dealt with in the final article of this series.

The Seamless Economy Regulatory Project and Democracy Deficit Part 1

As a general proposition, the ‘applied model’ of legislation – where one jurisdiction will develop and pass model legislation through its parliament with the remaining states or territories subsequently passing legislation that picks up the model legislation is the favoured way of introducing harmonised legislation when regulating areas previously the province of states and territories.

Whilst nominally capable to amend legislation, state parliaments – including those chambers without government majorities - have typically accepted the national legislation without batting an eyelid, on the grounds that ‘COAG decided’.

This system can give rise to what can be called a ‘democracy deficit’, as can be seen in this example.

During 2008 the Australian Parliaments considered the Australian Gas Law, which instituted a single law for the Australian natural gas market.

South Australia was the lead jurisdiction. The Greens wanted to move an amendment to the legislation in the Legislative Council.

However, as the Greens Member said:

We are going through the motions here. We are able to ask some questions; I guess there is a democratic exercise there but, in terms of amendments, the pressure is very much on legislators here not to propose or to accept any amendments. Really, if we were honest, we are not the lead legislative jurisdiction; we are not the lead legislator: we are the lead rubber stamp. I think that is an outrageous way to pass laws in this country. Having got that off that my chest, I will move my amendments when we get to them.

As an Opposition member (and former Minister) explained:


The only other point I would make is that I doubt very much whether minister Conlon and indeed probably all the other ministers at the moment actually understand the legislation that is going through the council. It is actually only being driven by hard-working and very competent officers who work on this
as their livelihood, and the point that the Hon. Mr Holloway made is almost entirely accurate.

It is certainly my experience that, in trying to debate some of these issues as they were, not in relation to national gas but national electricity, and have a debate with some ministers in the past, they had no comprehension at all of the details of the legislation. Ministers get a summary brief from their office which says 'here is what has been arrived at. These are the major issues.'
The Green member continued:


There were no meritorious reasons that these ought not be accepted. However, as the Hon. Rob Lucas says, we are all in a difficult position, because our various executives have got together and decided what our laws should be, and here we are effectively being invited to rubber-stamp them.

Whilst supportive of uniform national approaches, I for one am not prepared to be a rubber stamp to the extent that I turn my back on sensible amendments that incorporate into our legislation recognised environmental and social principles. It just makes sense that we do it, and I do not think that it undermines the uniform national legislation.

In the ACT Legislative Assembly, when discussing the same legislation, the Green member said:


The reform or harmonisation of the national electricity market, as agreed at COAG's Ministerial Council on Energy meetings, has been happening steadily in the background without much, if any, input by state and territory governments.

Especially now that Australia has Labor governments across all states and federally, an ever-increasing number of decisions are being made at COAG level, meaning that decisions are not subject to the usual scrutiny that parliaments would otherwise have.

This means that these decisions can be made by ministers and their advisers without any public or stakeholder input and without any community consultation; we should be satisfied if they take external views into account at all. It seems that COAG is the new government that counts. It is appointed by premiers and chief ministers, not elected by people.

She also said:


Given the process through which this legislation has been developed, it is a farce to even discuss the matter here in this chamber. The agreements have already been made at the ministerial council level; even though the states and territories are going through the motions of debating the bill in each place, in actual fact the bill that just passed in South Australia is the only one that counts.

A colleague in South Australia, Mark Parnell, put some amendments forward which would take social and environmental aspects into account. However, these were defeated by the two major parties as there was significant pressure there in South Australia not to make any changes at all. Mr Parnell is concerned that the South Australian government is not the lead legislator but the lead rubber stamp for the energy reforms.

She concluded:

Due to the ambulatory forces, whenever South Australia amends its schedules, our legislation is automatically updated. This puts a lot of pressure on our minister for energy, the Chief Minister, to be alert and fully engaged in the COAG processes, where ultimately all decisions about our energy markets are decided—not here in the Assembly. It also leaves the Chief Minister with the responsibility for informing the rest of the Assembly when there are significant updates, as the schedules are inbuilt and not disallowable or even notifiable.

Thus, up until now it has been the case that ‘COAG says’. However as the next article shows, this could be changing.

The Seamless Economy Project - Is it a Good Idea?

The previous four articles illustrate how the regulations are made in an Australia with a seamless economy.

Many will say the Seamless Economy Project is good idea - Australia is an integrated common market, with people and companies commonly undertaking activities across state borders.

Moreover, Australia exists in a globalised world, with the complication of different rules in different states a reason not to come to Australia.

Regulatory difference is nothing more than a mere compliance costs that distort allocative efficiency with no public benefit.

In this case, there to be only one set of rules (usually encapsulated in legislation), preferably made by one legislative body – in our case, the Australian Parliament.

The states would have the role of (effectively) an English county council, concentrating on service provision based on national standards.

However, there are alternative arguments.

The (few) supporters of a federal system argue that citizens benefit where there is genuine "competitive federalism" –the idea that different jurisdictions will make different rules and regulations and have different levels of taxation, with each jurisdiction ultimately picking up what is "best practice" or face the loss of people and investment.

A similar argument is one holding that States are "incubators of innovation" –a place where different ideas can be tried, with the good ones taken up in the bad ones discarded - and if an idea is really bad, the entire nation doesn’t have to face the consequences.

To that extent, it is noted that in February 2009 the Standing Committee of Officials on Consumer Affairs have developed a discussion paper An Australian Consumer Law – Confident Consumers to assist in the development of a single national consumer law that will generally replace state based fair trading legislation.

Part III of the paper is entitled Consumer Law Reforms Based on Best Practice in Existing State and Territory Laws.

The Paper identifies a number of areas where activities (such as door to door sales, or lay-bys) are regulated in different ways (or not at all) and then asks for comments on what is ‘best practice’.

By definition, a single Australian consumer law would preclude this capacity to trial different forms of legislation.

Another danger is the development of a ‘democracy deficit’. This is discussed in the next article.

The Seamless Economy Regulatory Project - an Australian Consumer Law

On 2 October 2008, COAG adopted a recommendation from the Australian Council of Consumer Affairs Ministers to implement a national consumer law, based on the consumer provisions of the Trade Practices Act 1974.

The proposal is for current state based fair trading legislation to be replaced by agreed amendments to the Trade Practices Act, which will be picked up by state legislatures through the applied law model.

State based fair trading law will largely be repealed, with significant responsibility for consumer protection vested in the ACCC.

A discussion paper has been released seeking a degree of input into the structure of the IGA.

However, the input sought is limited. As pages 1 and 2 of the Discussion Paper says:


The purpose of this information and discussion paper is to:

Explain how the national consumer law will be developed; and

Explain the nature and scope of COAG's agreed reforms to create the national consumer law, and, in some limited circumstances, seek views on specific aspects of those reforms.

For example, COAG has decided that the law will provide consumers relief from an ‘unfair contracts’ contained within standard form contracts such as hire purchase agreements.

The ‘unfair contract’ provision proposed to be used is drawn from the law currently in force in Victoria.

The Discussion Paper seeks comment on whether small businesses should also be able to get relief from ‘unfair’ standard form agreements. However, relief from other forms of ‘unfair contracts’ appear to be ruled out because COAG has so decided.

That would appear to (notionally, at least) close off consideration of some of the recommendations of the Senate Standing Committee on Economics relating to relief from ‘unfair contracts’.

At page 49 of a report dealing generally with the unconscionable conduct provisions contained in Part IVA of the Trade Practices Act, non-government senators said:

We (the non government Senators) believe that the current Victorian legislative framework for dealing with unfair contract terms in consumer transactions should be extended to cover business to business relationships involving small business.
It will be interesting to see if the COAG decision will mean that it will be argued that this recommendation can’t be considered – simply because COAG has considered the matter and has made a decision.

The question of whether uniform legislation through the COAG process is a good idea or not is discussed in the next few articles.

The Seamless Economy Regulatory Project - National Licensing for Specifed Occupations

COAG has decided to harmonise the regulation of a number of trades and professions.

So as to improve efficiency and labour mobility, it is proposed to remove overlapping and inconsistent occupational licensing regulations.

The list of affected trades and professions is an eclectic one, constituting air conditioning and refrigeration mechanics, building and building-related tradesmen, electricians, land transport passenger vehicle and dangerous goods drivers, participants in the maritime industry, plumbers and gasfitters and property agents.

A regulatory impact statement (RIS) was prepared seeking comment on a number of issues.

However, as page 15 of the RIS makes clear, irrespective of comments received from stakeholders, it is proposed that a single national body will be responsible for ‘setting licence policy and a framework for operations’.

As with the registration of health professionals, there is no indication as to:

1. which parliament would have specific oversight of the single national body; and

2. whether it is anticipated that there is any parliamentary involvement in the development of ‘licence policy’.

COAG will sign an Intergovernmental Agreement (IGA) which will reflect the agreement between jurisdictions as to how the various trades and professions will be regulated at the proposed meeting on 30 April.

The next article looks at the development of a single Australian consumer law.

The Seamless Economy Regulatory Project - Occupational Health and Safety

On 3 July 2008 an intergovernmental agreement (IGA) was signed, which records a COAG agreement to introduce harmonised occupational health and safety laws.

It is proposed to implement harmonised OHS laws through the model legislation method, where a model principal Act supported by model OHS regulations and model codes of practice will be prepared.

Each jurisdiction would then give effect to the laws in as uniform a manner possible after having regard to the drafting protocols in each jurisdiction.

Unlike other national schemes, this agreement anticipates a capacity for some differences between states and territories.

Paragraph 5.1.8 of the Agreement says:

The adoption and implementation of model OHS legislation is not intended to prevent jurisdictions from enacting or otherwise giving effect to additional provisions, provided these do not materially affect the operation of the model legislation, for example, by providing for a consultative mechanism within a jurisdiction.
And so, in this case legislation will be uniform….unless it isn’t.

The Workforce Ministers Ministerial Council have agreed to resolve outstanding policy issues by May 2009, prior to the publication of an exposure draft in August.

There is no particular indication as to what policy issues are ‘outstanding’ between the jurisdictions.

The next article looks at the proposed national licensing scheme for specified professions.

The Seamless Economy Regulatory Project - National Registration of Health Professionals

An intergovernmental agreement (IGA) to establish a scheme of national registration for health professionals was signed on 26 March 2008.

It is designed to establish a single national registration and accreditation scheme for the nine currently regulated medical professions ranging from doctors to osteopaths.

The intention is to establish a scheme of national registration so health professionals can practise across State and Territory borders without having to re-register.

The national registration and accreditation scheme has at its apex the Australian Health Minister’s Council, assisted by an independent Australian Health Workforce Advisory Council.

A national agency is to provide assistance and guidance to the nine profession-specific boards, who will (amongst other things) make decisions relating to the registration of health professionals.

The scheme is to be implemented using the applied law model.

Queensland is the lead jurisdiction.

To allow the national scheme to commence on time (1 July 2010), the Queensland Parliament has passed the Health Practitioner Regulation (Administrative Arrangements) National Law Act 2008,which establishes the a single registration board for each of the nine professions as well as an Australian Health Practitioner Regulation Agency as (effectively) a company under Queensland law, that will support the various boards.

However, the finer details of the scheme are still being developed. Another piece of legislation now being developed will fill these in. It is intended to introduce the relevant Bill into the Queensland Parliament before the end of the year.

There has been significant consultation about various elements of the scheme.

However, there is concern as to what sort of parliamentary oversight the Agency will be subject to once it commences operation – it is nominally an entity created by the Queensland Parliament, but exercises legal powers in all Australian states and territories.

There is also concern that the Australian Health Ministers Council rather than specialist professional boards can make the standards that health practitioners must meet – instruments not subject to parliamentary disallowance by any legislature.

It would appear that this issue in particular will not be subject to change because it is a structure that has been decided by COAG.

That said, the Senate Community Affairs Committee has decided to inquire into the proposed national registration scheme.

The timing is a bit odd – well after the IGA that set the ball rolling, but only just before a draft of the proposed Bill setting out the nuts and bolts of the national scheme is released.

However, it is nevertheless a review.

The next article discusses the proposed harmonisation of occupational health and safety legislation.