Subsidiarity is the principle that powers and responsibilities should be left with the lowest level of government practicable. Such a devolved system means there is greater local input into decision-making and States and Territories can customise policies and services to suit local preferences.
Eccleston R (2008). Righting Australia's vertical fiscal imbalance: transferring public hospital funding as an option for reform.
Agenda, 15 (3). Link to PDF
Vertical Fiscal Imbalance (VFI) is the root cause of intergovernmental conflict in the Australian federation, and un-remedied will limit the dividends of any revitalised Council of Australian Governments. The paper argues the while the GST has been an effective growth tax, it has exacerbated Australia's VFI and is unlikely to yield sufficient revenues to meet the expenditure pressures confronting the States. The paper suggests that transferring the funding of public hospitals to the Commonwealth will enhance the sustainability of State public finances and reduce the VFI.
Bennett S (2008). Specific purpose payments and the Australian federal system.
Research Paper no. 17, 2007–08. Parliament of Australia: Parliamentary Library.
Specific purpose payments are grants the Commonwealth makes to the states under section 96 of the Constitution on whatever conditions the Commonwealth government sees fit.
This research paper describes what functions specific purpose payments perform, how important they have become, their consequences for the delivery of services, how they might be improved, and whether their use might be gradually altering Australia's federal system in fundamental ways.
Fenna A (2008). Commonwealth fiscal power and Australian federalism.
University of New South Wales Law Journal, 31(2): 509-529.
Professor Alan Fenna of the John Curtin Institute of Public Policy writes:
Australian federalism is characterised by an unusually high degree of vertical fiscal imbalance (VFI). With just more than half of the service delivery responsibilities, the Commonwealth controls over 80 per cent of all tax revenue—well in excess of its requirements. Such disparity necessarily entails some system of fiscal transfer whereby the surplus funds of the Commonwealth are used to make up the corresponding shortfall in the States…
Australian federalism would benefit from changes moderating the degree and effects of VFI and bringing the use of tied grants under control.
Keating M, Anderson G, Edwards M, Williams G (2007). A Framework to Guide the Future Development of Specific Purpose Payments (SPPs).
A discussion paper by the ALP Advisory Group on Federal-State Relations.
This discussion paper was commissioned by the Australian Labor Party (ALP) to propose alternative options for reform of the architecture and operation of federal-state relations to reduce inefficiency, duplication and the opportunity for blame shifting and cost shifting.
Pincus J (2008). Six myths of federal-state financial relations.
Committee for Economic Development of Australia. Link to HTML
Federal-state financing expert Jonathan Pincus argues that much of what we think we know about federalism is wrong or overstated—and that Australian federalism has succeeded:
The Australian federal system must be judged as one of the most successful in modern history. This paper argues that a key to its success is the evolution of Australian federal arrangements in response to changing circumstances. Federalism can continue to assist Australians in achieving their aspirations in the twenty-first century, by encouraging the choice of good public policies, and facilitating their efficient implementation.
Walsh C (2008). Fixing fiscal federalism. In: Carling R (ed.) (2008). Where to for Australian Federalism?
St Leonards, NSW: Centre for Independent Studies (pp. 43-62).