Kevin Rudd has called them. They have come. The premiers and chief ministers have gathered in Melbourne for the first all-Labor COAG meeting.

A spectacular electrical storm raged above the city as the leaders took their seats, but not much else is expected in the way of thunder and lightening.

Health, indigenous affairs, business deregulation, housing, water and climate change are all expected to be discussed.

NSW Premier Morris Iemma has had his usual little whinge about the division of GST revenue. Victoria’s John Brumby has said he does not believe the meeting would discuss the commonwealth government taking over state responsibilities. The newest premier, Queensland’s Anna Bligh, says she wants “a clear road map forward on major issues like health”.

But if the premiers want movement on these issues, why do they need to wait for the Commonwealth? Why don’t the states take a lead?

The Commonwealth itself is the product of a premiers’ meeting, the most significant premiers’ meeting of them all, the meeting of the representatives of the colonies that begun the process of federation.

The Australian federation, its constitution and institutions are all products of the nineteenth century. They face both an economic and democratic challenges in the twenty-first.

The Business Council of Australia set out some of the economic challenges in its paper last year Reshaping Australia’s Federation: A New Contract for Federal–State Relations. It described how endemic problems in federal–state relations are costing Australia billions in wasted government spending and lost economic opportunity.

But the democratic dimensions must not be ignored. Federalism was designed with checks and balances. Any review needs to also examine how power is acquired, used and restrained; who has power over whom and what; and how money is raised and spent and by whom.

The states have views on all this. What’s to stop them taking a lead?