Prime Minister Abbott Wants to Start A convesation On Reform Of The Federation (Picture: Getty/Brendon Thorne)

Australian Prime Minister Tony Abbott has called for an overhaul to Australia’s Federation, likening the current situation to the one that existed back when there was no Federal Government.

Speaking in Tenterfield on Saturday night at the Sir Henry Parkes Commemorative Dinner, Abbott said of the similarity between the two very distinct periods in Australia’s history:

Then we had no national government. Then, as we’ve been reminded earlier this evening, we had six colonies, each of them with a prime minister. No army, no unified railway, an embryonic sense of Australian-ness, but no nation that we could call our own, no government that was our national government. That was then – these days are different. We certainly have a national government and yet we have an unsatisfactory system of governance, because all too often wherever you look – whether it be the roads, the schools, the hospitals – it’s hard to know who is in charge. That is what bedevils modern Australia in so many areas of our national life – who is really in charge?

He said that just as Sir Henry Parkes started “a process that gave us a nation” Abbott said that he hoped, “we might start a process that will give us a more rational system of government”.

Abbott signaled a streamlining of resource delivery and responsibility between the Federal and state governments which had become a “dog’s breakfast” and which would lead to “less waste, less overlap, less duplication,” which would end the blame game evident at COAG and make it obvious to voters who is “really responsible for the things they don’t like”.

Abbott highlighted the gap between the collective revenue base of the states ($130 billion) and their annual expenditure ($230 billion). This gap is filled with $54 billion from the GST and $46 billion from Federal coffers, he said.

It was here that he opened up the prospect of of an increase in the GST, saying that in order to “address ‘vertical fiscal imbalance’ we could either adjust the states’ spending responsibilities down to match their revenues, or we could adjust their revenues up”.

That’s a hint at a higher GST but he followed up by saying:

The Commonwealth would be ready to work with states on a range of tax reforms that could permanently improve the states’ tax base – including changes to the indirect tax base with compensating reductions in income tax.

And so the debate about a higher GST has begun.

You can read the Prime Minister’s speech here

Business Insider Emails & Alerts Site highlights each day to your inbox. Email Address Join

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.