Political leverage

The Commonwealth exerts enormous influence over the States with a relatively limited effort. Take the latest phoney war over the sale of the Snowy Hydro scheme (jointly owned by NSW, Victoria and the Commonwealth). The PM was supportive of privatisation although he expected strong public opposition but then he had a change of heart. Something about it being an "icon". This led to the NSW Premier, the majority shareholder, saying the deal can't proceed.

Iemma will be disappointed by Howard's backflip for a number of reasons. Firstly, Howard beat him to it and secondly, NSW need the cash.

In the lead up to the NSW state elections next year, expect to see more of this (in health and education particularly). Howard has probably only delayed the sale, but the delay will further expose the new NSW Premier and give the NSW Liberals a better chance of winning in 2007. This is a clever tactic and an effective application of George Kennan's containment doctrine.