State and territory leaders will urge the federal government to increase hospital funding at the first meeting of the national cabinet since the 21 May election. Health care is set to be the key issue on the agenda on Friday, with the states calling for an additional $5 billion in federal funding for public hospitals, as well as the extension of a separate arrangement for COVID-19 healthcare funding that is slated to expire in September:
The federal government has paid for half of each state’s Covid health funding – including for vaccinations, diagnosis and treatment of patients and efforts to minimise the virus’s spread – since January 2020.
The arrangement is due to end on September 30.
Under the separate public hospital funding agreement, which is due to expire in 2025, the federal government contributes 45 per cent and the states pay 55 per cent but want this increased to an even split. They also are pushing for the removal of the 6.5 per cent funding growth cap.
Victorian Premier Daniel Andrews expected a “united front” from all premiers and chief ministers at Friday’s national cabinet meeting and said 50-50 funding represented a “true partnership”.
“I’m very clear about this: I don’t want the new federal government to proceed with Mr Morrison’s cutbacks that were scheduled to take effect in September; 50-50 is fair,” Mr Andrews said.
“Capping funding at 6.5 per cent when you know that you’ve got so much catch-up to do, you’ve got flu and Covid and everything else you normally deal with, that doesn’t make any sense to me.”
The health crisis is symptomatic of a broader issue impacting the federation: the embedded vertical fiscal imbalance.
Because the Commonwealth collects around 80% of the nation’s total tax revenue, the states are critically starved of funds for health, other essential services and infrastructure. This funding imbalance is made worse by the federal government’s mass immigration policy, which continually adds to demand for government services and infrastructure.
The Albanese Government should make fixing the vertical fiscal imbalance a key plank of its reform agenda, preferably as part of a program of broad-based tax reform.
I am not holding my breath, however, given previous governments baulked at reform.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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