The Rudd Government is to slash the number of Specific Purpose Payments to the states from 89 to only five in a radical shake-up of Commonwealth-state financial relations.
To be unveiled at today's meeting of the Council of Australian Governments in Adelaide, the new deal has been branded "modern federalism" by Treasurer Wayne Swan.
"After more than 100 years, the governments of Australia are finally getting it right," Mr Swan said.
The action has been made possible by the rare alignment of all nine state, territory and federal governments in Labor hands, a "once-in-a-century" opportunity identified by the Premiers at their first COAG meeting with Prime Minister Kevin Rudd the week before Christmas.
Mr Swan says the nation's governments are expected to agree today "to a new architecture of cooperative funding arrangements that will replace the inefficient and complex system of grants that has plagued key areas of service delivery for decades".
The five continuing Specific Purpose Payments will be made in areas in which federal Labor campaigned extensively during last year's election: health, childhood education and schools, vocational education, disabilities and housing.
On health, Mr Rudd will commit today to creating up to 50,000 more training places to tackle "the health workforce crisis", particularly in nursing and dentistry.
His pledge comes as the medical community divides over Commonwealth plans for a national doctors' registry and as it seeks also to free up 2000 hospital beds by moving aged-care patients into nursing homes.
Mr Swan said the Commonwealth was moving away from "the cumbersome prescriptions of the past" and ending "the input controls which inhibit state service delivery and priority-setting".
"There will be no more five-year agreements with take-it-or-leave-it offers when they expire," he said. "The new SPPs will be ongoing payments, with the Commonwealth and the states to periodically review funding levels to ensure they remain adequate into the future.
"This will mean policy objectives and service delivery not money will be front and centre."
Mr Swan believes the new method will provide for greater government-to-government and people-over-government accountability.
As flagged at the December COAG meeting, certain states will be provided with incentive payments "to deliver on key economic and social reforms" in particular policy areas.
"Today's agreement will demonstrate that the buck-passing of the past is behind us and that we are now heading in a new direction towards a modern federalism," MrSwan said.
Meanwhile, ACT Chief Minister Jon Stanhope enters today's COAG discussions on binge drinking and problem gambling maintaining he is "a strong defender" of Canberra's "exemplary" community clubs.
While keen to join the fight to curb both issues, he said it was important that moves to do so were always "evidence-based".
If the states and territories were made to abandon all revenue from gambling, the Commonwealth would have to replace those funds at a price of $40 million a year in the ACT.
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