Federalism in Australia
This paper was originally published in Volume 4 of International Constitutional Law, pp. 171-179.
1. A brief history1
The six Australian States of today's Australian federation – the Commonwealth of Australia, to use its formal name2 – are the six Australian colonies founded by the British between 1788 and 1859. As is well known, all were from the start (or, in the case of Western Australia, became) dumping grounds for convicts, replacing the lost American colonies which had previously filled that role. There is however one important exception to this convict heritage, namely South Australia, which began as and remained a colony of free settlers.
Having learnt its lesson in North America in the late eighteenth century, the Colonial Office of the nineteenth century was only too keen to accede to requests by the colonies for the greatest possible degree of self-government consistent with their place within the Empire (which the colonists themselves hardly wished to question for a variety of reasons ranging from emotional attachment to Great Britain to the advantages of Imperial defence). Five of the Australian colonies received grants of self-government in the 1850s;3 Western Australia had to wait until 18904 because of its isolation, comparative poverty and the fact that its population remained very low until discoveries of gold caused a rapid increase. Coupled with the grants of self-government in the 1850s were suggestions from Whitehall that the colonies should consider federating,5 but the adolescent colonies were not then in the mood for limiting their freedom within the Empire by subjecting themselves to an Australian federation.
It was not until the 1890s that federation of the six colonies was anything more than the subject of occasional speculation and speechifying. As the 1890s progressed, inter-governmental discussions culminated in constitutional conventions which produced draft constitutions for the Australian federation. By the standards of the times, this process was remarkably democratic. Many colonies elected the representatives they sent to the constitutional conventions, and in all colonies the draft constitutions were submitted to referenda of the people for approval. The second set of Australia-wide referenda produced a majority of voters in all colonies for an approved constitutional text. In most colonies, of course, only white men could vote, thus limiting the democratic credentials of the Australian Constitution by modern standards; but in South Australia women received the vote in time to vote in both referenda, and Aborigines also had, and actually exercised, the vote in the referenda – special arrangements were made for them to cast their vote in some remote locations, and in those locations the poll greatly favoured the proposed Constitution.6
The Constitution thus endorsed was sent, accompanied by an Australian delegation, to the British Parliament, as the only body capable of exercising legislative power over all Australia. With one small exception the Constitution was enacted at Westminster7 as approved by the Australian people; the exception increased the powers of the Judicial Committee of the Privy Council, the highest Court of appeal for the colonies, to hear appeals from the Australian Courts, but this jurisdiction has long since been abolished by legislation8 and this qualification is thus of historical interest only. From the start the Constitution provided for disputes about the powers of the federation and the States to be finally resolved by the local federal supreme Court it set up, the High Court of Australia.9
The federal Constitution of the Commonwealth of Australia was proclaimed by Queen Victoria, in the month before she died, to take effect with the new century on 1 January 1901. The Australian colonies became States of the new federation, which remained within the Empire (there being no declaration of independence associated with the federation). While Australian independence came gradually with the gradual dissolution of the British Empire at some time probably around the Second World War,10 the Crown remains a part of the Australian constitutional framework as a reminder of its origins. The absent Monarch is represented at federal level by a Governor-General and in each State by Governor;11 each of these officials is in practice selected by the government concerned.
2. The distribution of powers
When the Canadian colonies federated in the 1860s,12 they did so in the shadow of the greatest crisis ever to face the American federation. They were therefore even more than usually concerned to distinguish Canada from its giant neighbour and produced a unique scheme for the distribution of powers between centre and provinces.13 The Australian federalists of the 1890s were not subject to such pressures and faithfully copied the outlines of the American scheme for the distribution of powers to the extent that they drew up a set of enumerated powers for the centre set out in ss 51 and 52 of the Constitution and left the undefined residue with the States under s 107. The paradox that has emerged since is that the Canadian arrangements, which were meant to produce a strong centre and weak provinces, have succeeded in producing the reverse – a relatively weak centre and strong provinces; while in Australia the reverse aim – a weak centre and strong States – has given way to the strong centre and weak States much closer to that which the Canadians had hoped for in the 1860s but did not get. As will be shown, the Australian federation is marked in practice by a very strong legal position of the federation.
This situation has been reached as a result of two factors. The first is decisions of the High Court of Australia with which this section deals. The second is the federal government's extreme dominance of financial matters, which is the subject of the next section. The extra-legal background to all this is, however, important. Stated briefly, it is the lack of any Quebec in Australia and the relative lack of differences among the Australian States. Were it not for the great distances involved in Australia, it would be seriously questionable whether the degree of diversity among the Australian States would justify a federal system at all.14
Section 51 of the federal Constitution sets out forty subject-matters over which the federation has concurrent legislative powers.15 Exclusive federal legislative powers are rare and consist largely of three items in s 52, together with s 90 on excise duties which is to be dealt with in the next section. The concurrent legislative powers in s 51 range from the trivial if mildly poetic 'lighthouses, lightships, beacons and buoys' of s 51 (vii) to the enormously important areas of trading, financial and foreign corporations (s 51 [xx]) and external (i.e. foreign) affairs (s 51 [xxix]). The residue of powers not allocated to the federation is, as mentioned, with the States (s 107), the result of which is that there is in the Australian Constitution no list of State powers such as appears in the Canadian.
In hindsight this lack of specification of State powers can be seen as the greatest mistake in drafting the Constitution made by the founding fathers.
Until 1920, the High Court of Australia, staffed by those of the founding fathers who had accepted elevation to its Bench, attempted to supply this deficiency. In reading the list of federal powers, it was maintained, it was necessary to have regard to the unstated but well-known responsibilities which were intended by the founding fathers to remain with the States. The list of federal powers in s 51 was accordingly read with one eye on an invisible list of State powers, and federal powers were read restrictively in order to preserve those to which the States were accustomed.16 In 1920, in the celebrated Engineers Case,17 the centralist Judges found themselves for the first time in a majority, and this doctrine of reserve State powers was forever abandoned. Henceforth federal powers were to be given their natural meaning, untrammelled by a priori assumptions about the powers supposed to be reserved to the States. This view dispensed with the obvious difficulty of relying on an unwritten list of reserved States powers as an aid to interpreting the written list of federal powers. It also well suited the formalist and positivist mood of legal thought of the day. Extra-legal developments were also of importance, however, as one Judge of the High Court of Australia pointed out in 1971 :
[I]n 1920 the Constitution was read in a new light, a light reflected from events that had, over twenty years, led to a growing realisation that Australians were now one people and Australia one country and that national laws might meet national needs. [...] As I see it the Engineers' Case, looked at as an event in legal and constitutional history, was a consequence of developments that had occurred outside the law Courts as well as a cause of further developments there.18
As the century progressed, technical legal analysis further contributed to the expansive reading of federal powers. It became established that a law was to be classified as within a subject confided to the federal sphere as long as it directly operated within one of the subject-areas of s 51. Whether the law's primary concern was with such a subject or with some other subject was not relevant and could not nullify federal power. The opportunities which this opens for federal power are best illustrated by the example of Murphyores v. Commonwealth.19 Stated simply, in this case the federal government wished to prohibit sand mining on an island for environmental reasons. However, the federal government has no power over environmental matters. It does however have a power over foreign trade (s 51 [i]), and accordingly it prohibited the export of any sand mined, thus of course making the mining pointless and achieving the desired environmental result. This law was upheld by the High Court of Australia : the technical legal operation of the law was on a matter confided to the federal legislature, namely foreign trade, and neither the motive pursued nor the principal environmental objective of the law prevented it from answering the description of a law about foreign trade.
Thus, for a federal law to be valid, the federal Parliament need select only one part of any process on which federal laws are authorised by s 51 and legislate on that aspect of the activity. The potential of this method of interpretation to enhance federal powers was illustrated most recently by the Work Choices Case.20 Having achieved the unusual feat of obtaining a majority in both Houses of the federal Parliament, a conservative government passed wide-ranging reforms of industrial relations law. The federal Parliament has a very limited power over industrial relations in s 51 (xxxv), which is conditioned, among other things, upon there being a labour dispute 'extending beyond the limits of any one State'. Bypassing this, the federal Parliament enacted a law on industrial relations under its power over trading, financial and foreign corporations (s 51 [xx]), which of course form the vast majority of significant employers in Australia. The law was upheld. It had a direct legal operation on the rights, duties and powers of trading, financial and foreign corporations. The fact that it might also fairly be described as a law on industrial relations and would be outside s 51 (xxxv) in that capacity was simply irrelevant.
A further accession of federal power has resulted from the decision that the power over external affairs (s 51 [xxix]) entitles the federal legislature to make laws for implementing any treaty to which Australia is a party. Indeed, an earlier Labour government had made laws on industrial relations under this power, relying on agreements entered into under the aegis of the International Labour Organisation, and thus also bypassed the limited power on industrial relations expressly granted by s 51 (xxxv).21 The matter has progressed to such an extent that Sir Gerard Brennan, a former Chief Justice of the High Court of Australia, has been moved to say recently, without much exaggeration, that '[t]he only practical limitation on the subjects of Commonwealth expenditure and regulation is a political one. The constitutional division of legislative powers between Commonwealth and States, though relevant, has become of secondary importance.'22 That is not to say that these limits are of no account. The States are firmly entrenched in the political mindset of Australian voters, particularly those in the smaller outlying States of South Australia, Western Australia and Tasmania; in those outlying States in particular, the idea of having everything decided in Canberra would have very little appeal indeed. An attempt at a full-blown takeover of everything on the part of the federal government using its full legal powers is very unlikely to occur, and would be even less likely to succeed politically.
Federal dominance has been greatly reinforced by decisions on the sparse financial provisions of the federal Constitution. There are three chief sources of federal power here : its power over taxation (s 51 [ii]), the exclusive nature of its power over duties of customs and excise (s 90) and its power to make grants of money to the States upon conditions (s 96).
Being in s 51, the federal power over taxation is – with the exception of the customs and excise duties mentioned in s 90 – concurrent rather than exclusive. It was so operated until the middle of the Second World War : as today in Canada, there were both federal and State income taxes. In 1942, however, with Japanese bombs falling on Darwin and Japanese submarines in Sydney Harbour, the federal government decided to centralise all income taxation of both individuals and companies in its hands. It had Parliament pass a series of laws : first, federal income taxation was raised to a level which engulfed State income taxation; secondly, it prohibited the payment of State income taxes until federal income taxes were paid; thirdly, it compulsorily acquired the States' departments of taxation (using its power of compulsory acquisition under s 51 [xxxi]); and finally it provided for grants of money under s 96 to the States – conditional upon their not levying income taxes. In the First Uniform Taxation Case,23 an extraordinarily literalist and unimaginative decision which can be attributed largely to the absence of one of Australia's greatest Judges (Sir Owen Dixon) on diplomatic duties in Washington, this scheme was upheld in full. Trying again in 1957 after the return of Sir Owen Dixon to the Bench and his elevation to Chief Justice, the precedent set in 1942 was felt too strong to be overruled in any significant way.24
The result of this – together, it must be said, with States governments' reluctance to take on the politically odious task of re-introducing State income taxation – is that the most lucrative source of taxation is wholly in the hands of the federal government. It has a vast surplus of money compared to its needs, and fortunately for it there is a ready use that can be found for it that further increases its degree of control : it makes grants to the States under s 96 subject, in many cases, to extraordinarily detailed conditions about the use to which they might be put. It is currently the law that a condition under s 96 need not be authorised by a legislative power under s 51;25 in other words, s 96 is a free-standing power to make conditions regardless of whether the federal legislature could pass laws directly imposing the rules which it attaches to the State grants. Thus, whole fields of legislative activity, entirely unmentioned in s 51, have fallen under the federal sway via conditional grants. These include such significant fields as hospitals, roads and education and research at all levels. Another field for federal expansion is cities : on 27 October 2009, the Prime Minister announced that the federal government intended 'to take a much greater national responsibility for improving the long-term planning of our major cities'26 by means of attaching conditions about city planning to money granted to the States for improving infrastructure in cities.
From the point of view of the States, the constitutional arrangements and Court decisions have given them insufficient income to match their vast de facto responsibilities (including expensive, labour-intensive items such as schools, hospitals and roads). This leads them to undue dependence upon federal grants and to reliance on out-of-date, inefficient or even socially harmful forms of taxation such as gambling revenue.27
The conservative government in office from 1996 to 2007 did something to ameliorate this situation, however. It introduced a goods and services tax, fixed at 10%, and provided for the money so raised to be granted without conditions to the States as if it were their own revenue.28 This has reduced the level of "vertical fiscal imbalance", to use the technical term, but not eliminated it entirely. As a matter of law, of course, the States are dependent on the goodwill of the federal legislature for the continuation of this scheme, as it rests solely on federal legislation.29 Another way in which State dependence even in this field comes to the fore is the regular disputes among the States governments about how much of the revenue in question should be allocated to each State. The States' complaints and requests about the formula for dividing up the money raised by the goods and services tax among the States must be addressed to the federal government as the States' benefactor and sole master in this field.30
Finally, there is s 90 of the Constitution, which makes excise duties exclusive to the federal government and thus prohibits the States from raising them. The difficulty was long felt in this area that "excise" has no accepted meaning in the law, nor does the Constitution provide a definition of it. The definitional task was therefore remitted to the High Court of Australia. After decades of doubt and much case law, in 1997 Ha v. New South Wales established that an excise was to be seen as 'an inland tax on a step in production, manufacture, sale or distribution of goods'.31 (Taxes on goods entering Australia – customs duties – are clearly denied to the States by another provision in s 90, which has the obvious purpose of preventing the balkanisation of the Australian customs regime and outlawing pre-Federation customs duties levied among the colonies themselves.) Thus the taxation of goods is also denied to the States, and this of course is the reason why they were not able to impose a goods and services tax of their own but had rather to rely upon the federal Parliament to do it for them and are dependent on the federal government for a share of revenue produced by the tax.
One further remarkable feature of the Australian Constitution deserves mention, and that is the difficulty of amending it.
As was mentioned above, the Constitution was originally approved by referenda of the people of the Australian colonies, as they then were. It was only natural, therefore, that the same method should be chosen for amendment. Section 128 of the Constitution requires an amendment to be passed by a referendum. The proposed amendment must be approved by a majority of the voters but also – to ensure that the rights of the smaller States were not trampled upon – a majority of people in a majority of States. A majority of six being four, a proposed amendment thus needs to be endorsed by an overall national majority and by majorities in at least four of the States.
The Australian people have been extraordinarily conservative in approving amendments to their Constitution. Of forty-four proposals submitted to the people since 1901, only eight have succeeded. The last success was in 1977,32 and the text of the Constitution has remained unaltered since then. Needless to say, defects in some of the proposals may be to blame for this record. It is not the case that every proposed amendment was without flaws. Nevertheless, the fact remains that by international standards Australia's Constitution has proved extraordinarily stable.
Of the eight changes made, only three have affected federal powers. In 1929, just in time for the Great Depression, s 105A was added to the Constitution permitting the federal and State government to make arrangements for their joint public debt. This has become the basis of an agreement between all Australian governments about the levels of and procedures for borrowing to which all are subject.33 In 1946, a limited endorsement was given to the welfare state : s 51 (xxiiiA) was added, giving the federal Parliament power over various pensions, unemployment benefit, student and family allowances and also medical and dental services. In 1967, finally, the federal legislature received a concurrent power to make laws about Aborigines (s 51 [xxvi]), who had originally been expressly excluded from federal law-making power and thus included within the realm of the States' legislative powers alone.
On the whole, however, the division of power conceived in 1901 has remained untouched as far as the text is concerned – while being subject to the great pro-federal revolution in interpretation beginning with the Engineers' Case in 1920 and continuing to this day. It may well be thought that the judicial revolution in interpretation could hardly be avoided given the great changes in society and communications since the drafting of the Constitution in the late 1890s. Given that the text was virtually impossible to amend, something had to give, and that something was the original States-friendly interpretation of federal powers. In Australia there was, moreover, no Quebec to put a brake on this process.
Thus the process for amendment, while appearing impeccably democratic, has in fact resulted, paradoxically, in a series of silent amendments to the Constitution augmenting federal power that have been made by a process no more democratic than is involved in the voting among the seven Justices of the High Court of Australia. In so many respects, the history of the Australian Constitution is a study in unintended consequences. But in that it does not differ from many other human endeavours.
Greg Taylor LLD, LLM, LLB(Hons), BA(Hons) is Associate Professor at the Monash University Law School, Melbourne (Australia).
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