This article is more than 1 year old

This article is more than 1 year old

New South Wales may have sparked the latest federation stoush, with Australia’s largest states open to a potential review of state-federal funding arrangements.

The NSW treasurer, Dominic Perrottet, called the financial relations between the commonwealth and the states “a mess” in his budget speech, while announcing an expert panel to review the arrangements.

That comes on top of the establishment of the Board of Treasurers group by the states and territories in 2017, largely out of frustrations with how the commonwealth was negotiating and administrating funding arrangements.

Perrottet said the NSW review would examine funding arrangements from the state perspective.

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“We need to refresh the national conversation on how we can leverage our federation to deliver sustainable funding arrangements for our state,” he said.

The Victorian treasurer, Tim Pallas, said the Andrews government would be “watching the NSW review carefully” and he would speak to Perrottet about it.

“We have an unprecedented pipeline of infrastructure projects and service upgrades we just want to get on with delivering it,” he told Guardian Australia. “To do that, we need the commonwealth to be working with us.”

Victoria has previously expressed frustration with the federal government’s control over funding negotiations, and was a key player in establishing the board of treasurers, which sits without the federal treasurer, in order for the states to present a stronger negotiating position.

Queensland’s treasurer, Jackie Trad, who oversees Australia’s third-largest economy after NSW and Victoria, said she too would like to see further details on the NSW review.

“Whether it’s fighting for a fair deal on the GST, infrastructure funding, the NDIS, remote Indigenous housing, or on early childhood education, the Palaszczuk government is on the record that the current system isn’t working for Queenslanders,” she said.

The Western Australian treasurer, Ben Wyatt, agreed there was more work to be done to simplify and streamline the state-federal funding arrangements, which sit as a foundation of the federation agreement.

“I am interested in the proposals raised by my NSW counterpart and look forward to discussing them further at the next board of treasurers meeting,” he said. “However, I would note, that the success or failure of these proposals will be determined by the level of engagement of the federal government.”

A spokesman for the federal treasurer, Josh Frydenberg, referred to the last negotiations on the GST distribution, which were legislated in the last parliament, setting out a minimum funding floor no state or territory would fall below.

“The Coalition government fixed the GST so it is fairer and more sustainable so that no state or territory is worse off,” he said. “NSW as a sovereign state is entitled to conduct its own reviews to inform its view that it brings to commonwealth state treasurer’s meetings.”

But while the GST negotiations, which ended with NSW, Victoria and Queensland successfully winning a concession no state would be worse off, were settled, the future of scores of funding arrangements continue to be a source of frustration.

The complex web of national partnership agreements, which lay out future spending in health, education, and social programs, limit how far into the future states and territories can plan, and are based on estimate of population growth and demand.

The former prime minister Tony Abbott ordered a review into federation reform in 2014, noting the right to be “sovereign in their own sphere”, but the reforms were abandoned under Malcolm Turnbull’s tenure as prime minister in 2017.

Turnbull had briefly flirted with the idea of handing back a portion of income tax to the state’s to spend as they wished, but landed instead on a Productivity Commission review into GST allocation, which eventually led to the legislation which was passed in late 2018.

The nation’s treasurers, with the exception of Frydenberg, will meet again in August, where the future of financial regulations will be on the agenda, ahead of the next Coag meeting.