Treasurer Sets Succession Agenda

by Steve Lewis - The Australian

Nick Minchin is the hard man of the South Australian Liberal Party, a close ally of John Howard and the finance gatekeeper who keeps watch on ministerial profligacy. Occasionally, he also likes to muse with his colleagues that he is the last remaining supporter of states' rights in cabinet.

Because it's abundantly clear that this Government, under the guidance of John Winston Howard, has been about centralising power.

Peter Costello is continuing the trend. Forget the hoopla about "recasting federalism". This is about stripping power from the states, giving Canberra a much bigger regulatory lever to ensure the economic wheels keep turning.

Liberal MPs know this quest for centralised power is at the expense of traditional support for states' rights. That much is clear. What is less obvious is why the Treasurer is getting excited about this particular area of reform. It hardly represents a populist route to the Lodge.

Costello's latest outburst had senior - very senior - Liberal figures scratching their heads, trying to work out why he was getting all worked up. Roads, petrol prices, interest rates, Big Brother: these issues strike a chord. But reforming Australia's century-old system of government is a minor issue for the vast bulk of the populace. Why, then, is Costello going to all this bother?

I think he's caught between his role as Treasurer and his desire to be the nation's leader. He wants to break out of the mould but knows everything he does is seen through the prism of his leadership ambitions.

Reforming federal-state relations can be argued as an economic necessity, an important area of reform to ensure Australia's ongoing prosperity. However, Costello's quest has been somewhat clumsy. He has raised the issue of fundamental reform of Australia's federal system and now faces the challenge of spelling out, in some detail, how he plans to go about it.

He also has to answer why he has decided to antagonise the states just 10 days out from the Council of Australian Governments meeting.

Costello insists he does not want to pick a fight with the states, that this should not be a battle of Us v Them. But what did he expect? He has done little through the years to disguise his contempt for the states' handling of GST revenues.

It is naive in the extreme to expect the states to react with mild bemusement rather than outright hostility. It also undermines his efforts to be seen as a reformist statesman with the nation's best interests at heart. As the Prime Minister argued yesterday, people don't care a hoot which layer of government delivers the service, they just want to see an end to buck-passing and name-calling.

To its credit, COAG has achieved notable reforms in recent years; on water and mental health, to name just two. The summits have been characterised by a general sense of working together in the national interest.

Costello's call to recast federalism stands in stark contrast to the more orderly, conservative route adopted by Howard, who has forged an effective working relationship with the Labor premiers.

The Treasurer does have some consistency on the issue. After all, he campaigned for an overhaul of regulatory arrangements on ports when the Dalrymple Bay imbroglio flared up last year. In July last year, Costello flagged plans for the commonwealth to take over price-setting regulation for ports and other critical infrastructure facilities.

He has been a consistent critic of the states' spending of the GST billions that have come their way since June 2000.

Clearly he believes there are votes in the issue; if not out there in punter-land, at least with his Coalition colleagues, who are eyeing the leadership dynamic closely during the winter parliamentary break.

The Treasurer is marking out territory to show he has a bold reform agenda, that he has ideas different from the incumbent, most noticeably on Australia becoming a republic.

Costello's challenge is to show that he has a properly thought-out reform agenda to work through; that his musings on federalism are more than another thought bubble from the putative Lodger. Working up a detailed plan to reform federal-state relations will show his colleagues that he is prepared to make the tough decisions, to take on vested interests, and that he has the hunger to implement a bold reform agenda.

In Costello's favour, he is talking reform as the Government is looking a tad tired, if not fatigued. It appears inevitable that Minchin will have to defer any retail float of Telstra, and the prospects for media reform are not good. On top of last month's decision to scrap the Snowy Hydro sale, the Government is looking somewhat jaded. Maybe this is reflected in today's Newspoll, which shows a slide in support for the Coalition and the Prime Minister.

Howard, of course, is giving himself maximum flexibility on the leadership issue. He has determinedly made it clear he will not turn his mind to the issue until late this year at the earliest. December? January? Both are possibilities, in the event Howard decides enough is enough and that it is time for Costello to take over, less than a year out from the election.

The challenge for Costello then would be to remake himself, showing off his considerable talents to the electorate while softening his image as a tough-talking Treasurer with an irritable smirk.

My betting is he would drop reform of federal-state relations like a bomb. Too hard. And not sexy enough.

Until then, though, expect to hear more from Costello the centralist.