Victoria and the federation, is it time for a Vexit?
At what point does Victoria say to the Commonwealth of Australia, enough is enough?
The election spendathon and the federal budget put into stark relief the financial rip-off that Victoria suffers for our membership of the federation.
Is it time for Victoria to take a new path?Credit:Wayne Taylor
Victoria was allocated less than 6 per cent of $3.6 billion in new infrastructure funding in this year’s pre-election budget, despite having 26 per cent of the nation’s population. On top of this, the new GST arrangements mean Victoria will lose up to $1.1 billion per year, enough to fund 9000 teachers, 9200 police officers or more than 10,000 nurses.
There has never been a greater distribution of federal taxpayers’ money away from Victoria, and it has never occurred in a more brazen manner. We now have a federal financial model and an election pork-barrelling machine that is systematically and unfairly making Victoria poorer.
In Western Australia the idea of leaving the federation is a regular topic of debate. Perhaps it is time for Victoria to consider the unthinkable – to go it alone in our own best interests. A Vexit.
Let’s be honest, it’s not just on financial matters where Victoria is being held back by the Commonwealth.
Prime Minister Scott Morrison attends the Sydney Royal Easter Show over the weekend.Credit:James Brickwood
Federal elections are won and lost in regional Queensland and western Sydney. This means these regions play an oversized role in national political debate. As a result, Australia’s national policy settings tend to be more conservative than what the majority of Victorians would like.
Former prime minister John Howard once described our state as the Massachusetts of Australia. I am not sure what that makes a state like Queensland or NSW, but there is stronger support in Victoria for progressive policy positions on issues like energy and climate, asylum seekers and refugees, support for universities, industry and innovation policy.
With an advanced economy and a population of close to 7 million, Victoria is similar in size to countries like New Zealand, Denmark, Singapore.
These also happen to be countries that Australia often looks to for inspiration. Countries that Victoria could be more like if we were to go it alone.
Wind turbines in Denmark.Credit:iStock
Unshackled from the federation Victoria could have a refugee policy that is more humanitarian like New Zealand. Environment and climate policies like the renewables and green super-power of Denmark. And a dynamic and innovation-led economy like Singapore.
Regardless of the potential benefits, however, the reality is that Victoria is not going to leave the Commonwealth of Australia any time soon.
The Constitution makes it all but impossible as it has no provision for a state to secede, while the preamble states that the Australian federation is “indissoluble”.
Beyond these legalities, neither Victoria nor Australia needs the unhelpful distraction of a Brexit Down Under.
But surely, it is time for Victoria to start playing hardball to ensure we get our fair share of the federal financial carve-up.
As a result of its complaining, WA received a $4.4 billion bonus payment on their GST receipts under a special deal with the Canberra. This means the deeply indebted Commonwealth is borrowing money to pay billions to WA despite it being the only state with a budget surplus – thanks to booming iron ore prices. It is outrageous, and it must be overturned by whomever wins the May federal election.
If the federal government is not going to give Victoria a fairer share of the financial pie then more radical solutions must be debated – Victoria could demand control over a greater portion of Commonwealth revenue coupled with the state taking on a greater share of service delivery responsibilities.
For example, a component of the GST or income tax rate paid in Victoria could be set by the state, with all the revenue from that component returned to Victoria. In return, Victoria could take full responsibility for an area currently shared with the Commonwealth such as aged care or training or tertiary education.
This would help fix the fundamental problem with the federation: the extreme mismatch between revenue raising and service delivery responsibilities, and the lack of clarity in responsibilities between the Commonwealth and the states.
Victoria would no longer be able to blame the Commonwealth for its financial woes. The state would be able to reform some of its own inefficient state taxes. And Victorians, who rely on the vital services the state delivers, will know exactly who is accountable if service levels fall short.
Desperate times call for desperate measures and Canberra needs to know Victorian’s are sick of being screwed over. Radical options are on the table, including a Vexit!
Nicholas Reece is a principal fellow at the University of Melbourne and deputy lord mayor of Melbourne.
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