The head of COAG's Reform Council says energy market reforms are at risk of being undermined by a growing level of suspicion between the Commonwealth and the states.
Prime Minister Julia Gillard is ramping up pressure on state premiers ahead of their meeting on Friday, urging them to agree to a range of changes aimed at bringing down power prices.
before signing up to any new arrangements at this week's Council of Australian Governments (COAG) meeting.
COAG Reform Council chairman Paul McClintock says there has been a disappointing level of commitment to energy market reforms, which he believes is linked to broader problems facing the future of federation.
"It'll be interesting to look at how the energy issue is faced this coming week," he said.
"I think [it will] depend a lot upon whether there is trust between the various members of COAG to actually say 'this is something we can do together', or people are going to play politics with this and consequently 'I'm just not prepared to expose myself and commit myself to the uncertainties of a cooperative approach'." The Commonwealth wants to put an end to the "perverse incentive" to overinvest in poles and wires, and give consumers more access to information about their electricity usage through the installation of so-called smart meters.
In 2007, federal and state leaders endorsed the national rollout of smart meters after initial trials were carried out.
However, according to the latest COAG Reform Council report released today, key milestones for the installation of smart meters have not been met.
"The agreement to roll out smart meters was always subject to agreed cost-benefit analysis, and that remains the case," Mr McClintock said.
"Personally, I felt that the case for smart meters could have been made out better than it has been.
"Smart meters have not been effectively sold as a way of actually reducing energy consumption.
"Some of the restrictions that were put around smart meters, which restricted the individual's ability to actually know what was going on and adjust their behaviour, meant that the program has never been seen in the community's mind as strongly linked to energy saving." 'At a crossroads' The latest report card from the COAG Reform Council marks the end of Mr McClintock's six-year tenure as chairman.
He has used the occasion to deliver a strong warning about the future of Commonwealth-state relations, arguing the way COAG operates needs to be reinvigorated or its reform agenda will fail.
"There has been a long period where there has been a growing level of suspicion between the governments as to whether there is a real commitment to working together," Mr McClintock said.
"We are at a bit of a crossroads.
Australians are losing faith - quickly, actually - in the ability of governments to work together.
"Really, we should stand back and say, this isn't good enough, and this is a major issue for our nation as a whole.
"This is not a debate about cooperative versus competitive federalism...
it's really about effective federalism." Mr McClintock says there is a growing number of issues where there is an overlap in responsibilities between the Commonwealth and the states, and this has led to a greater level of competition between the two levels of government.