This paper argues that the driving motivation for federalism reform in Australia should be to enhance Australian federal democracy. Federal democracy is a rich, compound, concept that supports responsive and accountable government, participation in public life, policy innovation and collective action where appropriate. Federalism and democracy are inextricably intertwined in Australia. Weakness in one has inevitable consequences for the other. Thus, at present, a severe federal fiscal imbalance and overuse of opaque intergovernmental decision-making processes have caused excessive centralisation of government at a cost to innovation and efficiency, over-concentration of power in the executive branch, duplication of bureaucracy and erosion of the democratic accountability of governments to the people through Parliaments.
The paper sets out ten principles to guide federal democratic reform. In doing so, it draws on ideas inherent in the text and structure of the Australian Constitution. The Constitution itself federalises democracy; limits the authority of each sphere of government by reference to considerations of subsidiarity; provides mechanisms for co-operative action that are consistent with the requirements of democratic accountability; recognises that the allocation of tax powers may leave the Commonwealth with a ‘surplus’, measured against its own responsibilities, to which the States are entitled and for the expenditure of which they are accountable; and requires distributed funds to be divided between the States on a basis that is ‘fair’. Federal democratic reform does not require constitutional change, although the Constitution might usefully provide a stronger framework for it, in ways that the paper describes.