Key areas of public service provision in Australia are subject to complex patterns of joint
government involvement that can lead to inefficiencies. Clarifying government roles and
responsibilities is likely to have a significant potential for improving public sector efficiency.
Fragmentation of decision making and funding arrangements, particularly in the areas of hospital
services and old-age care, creates incentives for cost and blame-shifting between government levels. A
collaborative approach between government levels to overcome some of these problems, as recently
initiated by the Council of Australian Governments, would help to develop better governance
arrangements and improve spending assignments. A less complex system of inter-governmental
transfers would also contribute to a more effective specification of spending responsibilities. Stronger
revenue-raising capacity of the states, through a further improvement in the efficiency of the state tax
system, would raise the ability of sub-national governments to meet expenditure responsibilities and
be better prepared for coping with demographic change.
