STATE government was much bigger yet simpler in 1955, when Henry Bolte became premier. The role of the states was clear. They ran the hospitals and schools, public transport and the police, and anything else that wasn't spelt out as a federal responsibility. They built and ran the roads, the dams, and public housing. They oversaw planning, local government, rivers, and most areas of business. They provided our electricity, gas and water. The money was in Canberra, but most of the power over our daily lives was in Spring Street.
That meant that we knew where the buck stopped. If you thought state services were inadequate, you knew who to blame. It's a very different world now.
Australia's founding fathers gave us a federal system with a fatal flaw: they failed to give the states adequate revenue sources to match their responsibilities. Instead, Canberra was given far more revenue sources than its responsibilities required. As Alfred Deakin put it, the states were left "legally free, but financially bound to the chariot wheels of the central government".
The result is that, today, a federal government loaded with money intrudes into many areas of state politics. Even where the states remain clearly in charge, the services they can provide are limited by the size of the grants Canberra gives them. And for Victorian voters unhappy with those services, it is no longer clear where the buck stops.
Take hospital waiting lists. In the Whitlam years, the Commonwealth agreed to pay 50 per cent of the costs of running public hospitals. But, as the demands grew, the Commonwealth welshed on its share of the deal. The Howard government's decision in 2003 to cut $1 billion from hospital funding if you doubt it, you can find it on page 54 of budget paper 2 that year was only the most obvious way in which it dropped its end, leaving the state to carry most of the load.
The state government now pays 60 per cent of hospital costs, and they are rising at a rate of knots. In 1999-2000, when Labor took power, Victoria spent $3.8 billion to run its hospitals. Last year, 10 years later, it spent almost $9 billion, up more than 130 per cent in a decade. Yet hospital waiting lists continue to grow, emergency wards keep getting overcrowded, and Victorians are understandably angry.
Why have demands on hospitals grown so rapidly? There are some very good reasons, the best of which is that fewer of us are dying. In that decade, from 1999 to 2009, the death rate of Victorians across all ages fell by 16 per cent. Neonatal death rates were cut by 29 per cent, death rates of people aged 65 to 69 fell by 25 per cent, death rates of those aged 75 to 79 fell by 24 per cent. That is very good news, in which our health system can take pride.
But it costs money. Those who might have died a decade ago now spend more time in hospitals, whether as inpatients or outpatients, and the state government has to pay the bill. Many have been saved by expensive new equipment, for which the state has to pay the bill.
Back in Bolte's time, everyone had their own GP, and if your child got sick at night, the family GP would come over to see her. It doesn't work like that now. Hospital emergency wards have become the GP of the night, and they're crowded and overworked, and the state is paying the bill for that, too.
Financing state governments was also simpler in Bolte's time. The state made sure its revenue covered its operating expenses and a bit over, and borrowed the money it needed for new infrastructure. Bonds issued by state governments and their agencies were guaranteed by the Commonwealth, the banks were required to hold plenty of them, and mum-and-dad investors also held their share. The state's net debt totalled more than 50 per cent of gross state product (GSP), but that was no problem.
Now, the states compete in global markets for their money, and we have developed a political culture that insists that our debt must have a top-drawer AAA credit rating. You only keep that if you don't have much debt. In the past two years, the Brumby government has stepped up the pace on infrastructure spending, lifting state debt to 5 per cent of GSP, which is forecast to reach 8 per cent by 2012. That's only a fraction of what it was in Bolte's time, and the ratings agencies aren't worried not yet but if it went much higher, they would be.
So what does a state government do? Build less infrastructure, and let the unmet needs escalate? Or find ways to get the private sector to do it, often at greater cost such as the Brumby government's desalination plant, which the Auditor-General says will cost us the equivalent of $5.4 billion over the 27 years of the contract? Or take on more debt, and try to get Canberra to share the cost? Governments are hemmed in from every side.
Australia is now a high-wage, low-tax country, and new infrastructure is prohibitively expensive. To me, the most stunning figure in this campaign was Labor's estimate that putting the railway line under the road at St Albans will cost $165 million. When you look at how Asian cities such as Singapore, Kuala Lumpur and Taipei are rolling out state-of-the-art metro systems, it breaks your heart that we can't do the same.
In Singapore, I wandered up to a metro building site and saw a notice to workers in Bengali. Singapore built its metro by importing cheap workers from Bangladesh, and sending them home after the job was done. That's not our way but it works and ours doesn't.
State government is about trying to meet limitless needs with very limited resources, to satisfy a public whom nothing will satisfy. I salute those brave souls who offer to do it.
