In recent times, the commonwealth has shown a keen interest in moving into areas of state responsibility. Most recent proposals involve either a direct assumption of state powers as is the case in industrial relations, or direct negotiations with the agencies or community organisations as in the case of university reform or funding for environmental projects. However, in the less partisan climate of the mid 1990s, the commonwealth was content to exercise more indirect levers, working through the states to reshape policy outcomes, while leaving formal responsibilities intact. This indirect approach, most evident in National Competition Policy, shielded the commonwealth from the messy political consequences of pursuing unpopular policy agendas, leaving the states to carry the bulk of the political opprobrium. Throughout much of the late 1980s and early 1990s, commonwealth-state relations around forest management were politically charged. The Regional Forest Agreement (RFA) process was a mechanism which reduced the political heat on the commonwealth whilst still allowing it to retain a degree of influence in state government resource management. This paper examines the RFA process from a federalist perspective. It asks has the RFA process allowed the commonwealth to remove itself from a difficult political situation , or instead has it provided the commonwealth with a sophisticated tool which allows it considerable influence with only minimal exposure to political flak? In the case of NCP, three factors were important in establishing the commonwealth's power - a national policy framework, a negotiated agreement and the strategic use of financial and other power resources. The paper finds that these elements are present to a lesser or greater extent in the RFAs suggesting that the commonwealth retains an important backseat role in forest issues.