"Abolishing writers' awards is a cost-cutting measure, but also a step towards the unscrutinised exercise of power," she said of the Newman Government's axing of the premier's awards.
"Prizes like this one are important to writers, but they are not necessary: we would keep writing without them, as writers do in many countries where they are banned.
"But prizes are very important to the nation. They show that free speech is alive and unbeholden to government, or to media barons.
The Trust Company, which administers the award, also called on the Federal Government to bring the Miles Franklin into line with other literary prizes by making it tax-free.
Trust Company CEO John Atkin said the Government needed to show its support for Australia's struggling arts sector.
"The Prime Minister's Literary Awards for which the prize money of $80,000 is tax-free," he said.
"Miles Franklin's aim in setting up the award was the advancement of Australian literature and as guardians of her legacy we feel that the tax, waived for the Government awards, is unfair and unnecessary."
Speaking on behalf of the judging panel, University of Queensland literature professor Gillian Whitlock said the five judges whittled an initial pile of 63 books down to just five before selecting last night's winner.
She said they admired the ambition of All That I Am, which spanned decades and continents.
"This book reminds us that exile and experiences of dislocation and removal have long been part of Australian life, and traumatic memories endure," she said.
"Funder's historical novel tells the story of the Jewish socialist intellectuals who opposed the rise of the Third Reich in across Europe."
Funder pipped 2001 Miles Franklin winner Frank Moorhouse for this year's most prestigious literary prize. Moorhouse's book Cold Light finished his Edith Campbell Berry trilogy about the rise and fall of the League of Nations.
Whitlock said the series brought to life previously unexplored elements of Australian life and that, in Edith, Moorhouse created one of this country's great and enduring fictional characters.
Others shortlisted were debut novelist Favel Parrett, whose Past the Shallows tells the heartbreaking story of three boys in the aftermath of their mother's sudden and mysterious death, Melbourne writer Tony Birch whose novel, Blood, partly reflects the author's own difficult childhood in a story of 13-year-old Jesse who navigates a world of crime, violence and danger to protect his little sister and Gillian Mears who, after a hiatus of 10 years, returned to writing with Foal's Bread, a moving story about a family and their horses, set in the late 1930s.
All That I Am, however, has enjoyed a dream run since it was published last September, winning a total of seven awards including two at the 2012 Indie Awards, two at the Australian Bookseller Industry Association Awards and the 2012 Barbara Jefferis Award in May.
It has occupied a regular spot in Nielsen BookScan top 10 bestsellers and won the Nielsen BookData 2012 Booksellers Choice Award.
Full story at The Courier Mail