Federalism and Subsidiarity : Principles and Processes in the Reform of the Australian Federation

The principle of subsidiarity offers a criterion for the rational allocation of roles within federations between federal and state governments. The principle states that 'functions should be performed by the lowest level of government competent to do so effectively'. However, embedded in the principle is a hierarchy: there are 'higher' and there are 'lower' levels of government. This hierarchy suggests a point of view from which assessments of optimal allocation are to be made. The deeper question, therefore, is this: 'who will decide for whom?' The reform of a federal system turns not only on what principles are used, but on questions of process: who will decide what those principles require, and how will they go about doing it? A problem of path dependency lies at the heart of Australia's federal malaise. It is this problem that we need to be grappling with when considering the optimal design of the system. To do so, we need to consider not only the principles but also the processes by which the federal system is to be reformed. This paper draws on the comparative experience of Switzerland, Germany and Austria to provide guidance about how Australia's federal system might best be reformed. An earlier version of this paper may be found at http://ssrn.com/abstract=2604783