COAG is dead. Long live the national cabinet

Prospects for federation reform, including changes to the tax system, have received their biggest boost in decades with the abolition of the Council of Australian Governments meetings.

Prime Minister Scott Morrison and state and territory leaders agreed on Friday to scrap COAG, formerly known as the premiers' conference, and replace it with the national cabinet, the crisis body they jointly established in March to respond expeditiously to the coronavirus crisis.

The national cabinet, which has now shifted its focus to the economic recovery, is a much leaner body which involves the leaders talking directly among themselves, devoid of bureaucrats and within the confines of cabinet confidentiality which encourages full and frank discussion.

"This new model will streamline processes and avoid endless meetings that do not result in action,'' Mr Morrison said.

While the cabinet confidentiality adds a layer of secrecy to discussions of national interest, Mr Morrison said it would ensure quicker decision making because it would minimise the politicking and grandstanding which often surrounded and stymied COAG deliberations on funding or policy.

"When these groups get together, there's a lot of theatre, a lot of people in the room,'' he said of the COAG process. "And that can, I think, restrict the genuine reform discussions that you have to have.

"One of the reasons why the national cabinet has worked is that it has actually operated as a cabinet.

"It's not a spectator sport. It's a serious policy deliberation which needs to be done between governments and by cabinet members within cabinets and it's applying the same disciplines and the same opportunities. What matters is the outcome.''

Whereas COAG would meet irregularly and infrequently, the national cabinet will meet once a month once the coronavirus crisis has abated, and will be supplemented by two meetings a year by a new National Federation Reform Council.

The latter body will comprise state and federal leaders and treasurers.

In another key change to streamline the bureaucracy, the treasurers will take full responsibility for negotiating Commonwealth-state funding agreements on hospitals, schools and other services, and the actual portfolio minister will be removed from the process.

On Friday, Mr Morrison announced the national cabinet had agreed to a new five-year hospital funding deal in which the Commonwealth would give the states $131 billion from 2020 until 2025.

This will be on top of the $8 billion the Commonwealth has tipped into the hospital system to equip it to deal with the pandemic. Mr Morison also guaranteed the states they would be no worse off in terms of health funding as a consequence of the pandemic.

As the crisis continued to ravage the economy, the latest monthly update from the Department of Finance started the budget deficit by the end of April was $40 billion, which was almost $33 billion more than the $7.6 billion forecast in the last budget update, released in December.

Spending was $12 billion higher than forecast in December and revenue was down by $20 billion.

With the government working up a plan to restore the economy over the next three to five years, Mr Morrison has nominated federation reform as one of the priorities.

This week, he told the states he was prepared to boost the $1.5 billion the Commonwealth contributed each year for skills and vocational education training if they adopted a nationally uniform system of fees and subsidies for courses and started producing skilled graduates that business actually required.

The new permanent national cabinet will be pivotal to driving such changes. Its other areas of focus will be increasing efficiencies and reducing duplication in energy, housing, infrastructure, population, migration and transportation.

Any proposal for tax reform will be worked up by the treasurers and taken to the National Federation Reform Council.

"The national cabinet will be driven by a singular agenda, and that is to create jobs,'' Mr Morrison said.

"It will have a job-making agenda. And the national cabinet will drive the
reform process between state and federal co-operation to drive jobs."

Mr Morrison assured that key non-economic issues that COAG dealt with, such as a national approach to combating domestic violence or trying to close the gap between Indigenous and non-Indigenous Australians, would continue through already established task forces.

They will brief the National Federation Reform Council once a year.

While the coronavirus crisis continues, the national cabinet would meet at least twice a week.

At its meeting on Friday, there was discussion about the various speeds at which each state and territory was moving to lift restrictions.

Western Australia and the Northern Territory were the most advanced in terms of reopening their economies. There continued to be robust debate over states such as Queensland yet to open their borders.

Mr Morrison said it was conceivable that citizens of NSW would be able to travel to New Zealand before they could travel to Queensland.

"Yes. And the states are aware of that,'' he said.

"I made it clear today the jobs in Qantas and Virgin, particularly those two airlines but others, that trans-Tasman channel being open is going to mean jobs for the aviation sector and flight attendants and baggage handlers and fuel operators, in the industry that has taken the biggest beating of all.''