Victoria and the federation, is it time for a Vexit?

With an advanced economy and a population of nearly 7 million, Victoria is similar in size to countries like New Zealand, Denmark, Singapore.

They also happen to be countries that Australia often looks to for inspiration. Countries that Victoria could be more like if we went it alone.

Wind turbines in Denmark.Credit:iStock

Freed from the federation, Victoria could have a more humanitarian refugee policy like New Zealand. Environmental and climate policies like renewable energy and the green superpower of Denmark. And a vibrant, innovation-driven economy like Singapore.

Regardless of the potential benefits, however, the reality is that Victoria isn’t going to be leaving the Commonwealth of Australia anytime soon.

The Constitution makes this virtually impossible as it does not provide for the secession of any state, while the preamble declares the Australian federation to be “indissoluble”.

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Beyond these legalities, neither Victoria nor Australia need the unnecessary distraction of a Brexit Down Under.

But surely it’s time Victoria started playing hardball to make sure we get our fair share of the federal financial split.

As a result of its complaint, WA received a $4.4 billion bounty on its GST receipts under a special deal with Canberra. This means the heavily indebted Commonwealth is borrowing money to pay billions to WA despite being the only state with a budget surplus – thanks to soaring iron ore prices. This is outrageous and must be reversed by whoever wins the federal election in May.

If the Federal Government fails to give Victoria a fairer share of the financial pie, more drastic solutions must be debated – Victoria could demand control of more of the Commonwealth’s revenue, coupled with the state taking on greater part of service delivery responsibilities.

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For example, a component of the GST or income tax rate paid in Victoria could be set by the state, with all income from that component returned to Victoria. In return, Victoria could take full responsibility for an area currently shared with the Commonwealth, such as care for the elderly or training or higher education.

This would help solve the fundamental problem of the federation: the extreme mismatch between responsibilities for revenue collection and service delivery, and the lack of clarity in responsibilities between the Commonwealth and the States.

Victoria could no longer blame the Commonwealth for her financial difficulties. The state would be able to reform some of its own inefficient state taxes. And Victorians, who rely on vital state-provided services, will know exactly who is to blame if service levels fall short.

Desperate times call for desperate measures and Canberra must know that Victorians are tired of being screwed. Radical options are on the table, including a Vexit!

Nicholas Reece is a Senior Research Fellow at the University of Melbourne and Deputy Lord Mayor of Melbourne.

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