Comments on Henry Ergas “Tony Abbott should flesh out plan to fix federalism”, 7/01/2013, http://www.theaustralian.com.au/opinion/columnists/tony-abbott-should-flesh-out-plan-to-fix-federalism/story-fn7078da-1226548558033
The Australian federation has worked reasonably well, even though it could do even better.
I think there is likely a small window of a good opportunity for reforming the federation, in terms of roles, responsibilities and revenue arrangement should the coalition win the next federal government - it could work together with the 4 largest states to undertake reforms, along the line of a more efficient federation with clear responsibilities and the means they each can use to raise revenue.
Fiscal imbalance should be restricted to largely nominal, like the GST and possibly a sharing of income taxes including company taxes. A new inter-governmental agreement should be made to protect state rights. Once made, any change can only be by a consensus agreement.
The federal government's role and functions should be in national defence, foreign policy and external trade, national social security, macroeconomic policies, and possibly inter-state policies. The rest should be with the states.
Fiscal equalisation should gradually decrease in proportion to state total revenues and move to almost equal per capita distribution or proportional by population shares.