The recent Victorian election results showed Australian voters want governments to play a pro-active role delivering public services, infrastructure, improved labour standards, and sustainability. They showed that in a time of deep cynicism with federal politics, States (and Territories) can play an important role filling the democratic void left by dysfunction and policy paralysis at the Commonwealth level.

This commentary from Alison Pennington, economist at the Centre for Future Work, explores what the energetic campaign in Victoria revealed about our unique system of dual governance and the potential for pro-active and progressive policy making. This commentary was originally published in New Matilda.

The Victorian election: Are states filling the democratic void?

A destructive and cynical politics is on the rise across the world with emergent right-wing populism a warning of what happens when people lose faith in political institutions.

In Australia, the Coalition government has been characterised by ongoing austerity, the retrenchment of public resources and capability to the tune of billions of dollars, but complete paralysis on just about every other policy reform (most visibly including massive inconsistency on energy and climate policy). This has led to a democratic void in Australian society.

Meanwhile, the recent victory of the Andrews Labor government on a bold social democratic platform of long-term investments in services, education and infrastructure projects (some with a 2050 completion date) gave Victorians a secure, positive vision of a more balanced, stable society – and voters endorsed that vision strongly.

How is it that these two wildly different scenarios of political life can exist alongside each other?

Many commentators have explained the Victorian election result as a mere by-product of the Coalition’s ongoing crisis (with subsequent warnings about the future of the federal Liberals). But this suggests Victorians were motivated by cynicism alone. In reality, Victorians rallied enthusiastically around a constructive, hopeful vision of State-level policy-making. Indeed, since federation, Australian communities and regions who have identified needs and desires unmet by the Commonwealth, have often turned to the state level of governance to get things done.

The unique organisation of governance in Australia, featuring a Commonwealth composed of somewhat independent States and Territories, has preserved a realm of Australian democracy distinct from the national level of affairs. At a time of deep cynicism with federal politics, the Victorian election result shows that States can fill the democratic void left by dysfunction and tribal politics at the Commonwealth level, strengthening Australian democracy and saving it from the worst of cynical politics we see emerging elsewhere (such as Trumpism in the US).

Where does the legitimacy of this State-based democracy come from? Despite losing (or handing over) many of their powers to the Commonwealth over time, States still retain power to administer the key public goods that Australians most value: like education, health care, civic services, and culture. These are the functions of government that people will energetically defend when they are undermined.

While the Australian constitution allocates responsibility for big-ticket public programs like healthcare and education to the States, the Commonwealth retains powers to raise the bulk of the revenue needed to fund these expensive services. This means States operate in a contradictory financial bind: always dependent on the federal government to honour the financing of essential services that the States are constitutionally bound to provide. This gives enormous economic and political power to federal governments— a power play that has been repeated many times over Australia’s history.

For example, a recent attempt by the Commonwealth to undermine the funding of public goods under the ‘spend within your means’ mantra was mounted in 2016, when Malcolm Turnbull and Scott Morrison tried to shift responsibility for raising revenue for public services to States. This was done without relinquishing any of the Commonwealth’s income and corporate taxation powers – all the while overseeing billions of dollars in cuts in healthcare and education in the federal Budget.

But the constitutional and financial bind faced by State governments has gained particular significance in recent years, as decades of ‘small government’ policies wound back public services in favour of highly-subsidised private models have come to a head. Publicly-subsidised private markets in aged care, disability care, healthcare, education, VET and childcare have all been proven failures: both in the quality of services delivered, and in the standards of employment for those doing the work.

Recent polling by the Australian Institute shows that 64 per cent of Australians want an increase in public spending funded by tax revenue from wealthy individuals and high-turnover businesses. Australians value government provision of public goods, even more than personal income tax cuts. The failure of federally-backed market experiments within spheres of life where Australians demand a proactive and productive government role, has left the political field wide open – and States are in prime strategic political terrain to fill that space.

State action is applauded in the face of Commonwealth inaction. For instance, amidst recent turmoil in federal energy and climate policy, the Victorian, SA and ACT governments have proactively invested in renewable energy industries. And State governments in Victoria, SA, ACT and QLD have found innovative work-arounds to protect workers from new exploitative labour practices, despite the dominance of the Commonwealth in the jurisdiction of labour law: including labour hire licencing schemes, mandated minimum pay and safety conditions, and a new inquiry just launched into on-demand ‘gig’ work and its implications for the Victorian economy.

The Victorian election results provide another clear insight into what Australians value and what they will tolerate. They confirm that Australians care about a fair society – underpinned by the public provision of healthcare and education (including a revamped TAFE sector), new infrastructure, action on renewable energy, and employment conditions that allow Australians to live a decent quality life.

With the Andrews government’s pledges for sizeable investments in all of these endeavours ratified so strongly by voters, it shows that the failure of Commonwealth policy and politics can be mitigated by popular, publicly-minded campaigns at the State level.

A future federal government could build on the example set by the Victorian election. It could use its much stronger policy and fiscal levers to charter a course that addresses the growing labour market power imbalances, restores the billions cut from hospitals, schools and housing, prepares our economy for a renewable energy future, and delivers a comprehensive program of tax reform.

But until that decisive break with the failed austerity and cynicism of recent federal politics, the Victorian election results confirm that in the meantime, States can step firmly into the breach. They can and must continue to function as a key site for the expression of Australians’ demands for a more equal, inclusive, participatory society, with a proactive role for government in delivering public goods.