FEDERAL-STATE RELATIONS COMMITTEE
Report on
1.0 This chapter explains the nature of Australia’s federal
system of government, and the important role played by intergovernmental
relations in the effective functioning of the Australian federation.
1.1 Australia adopted a federal form of government when it became a nation on January 1st 1901. The Imperial Commonwealth of Australia Constitution Act, which came into force on that date, transformed a group of self-governing British colonies into a single nation. The origins of Australia’s Constitution can be traced back to events in the late nineteenth century.
1.2 During the 1800s, Australia consisted of six colonies (Victoria, New South Wales, Tasmania, South Australia, Queensland and Western Australia). By 1860, each colony, except for Western Australia, had its own Governor and Constitution establishing responsible government according to the Westminster model. Western Australia was granted representative government in 1870, and responsible government in 1890. The colonial Constitutions established Parliaments with power to legislate for each colony, subject to overriding Imperial law.
1.3 By the late nineteenth century it had become clear that there were some areas of government - including defence, communications, railways, trade, and postal services - which could best be provided if they were administered for all the colonies by a common government. While recognising the advantages that national government might offer, the colonists were firm in their desire to maintain distinct identities and governments in areas where common action was not required.
1.4 In 1885, following a conference of New Zealand, Fiji and the six Australian colonies, Victoria, Tasmania, Queensland, Western Australia and Fiji formed the Federal Council of Australasia (South Australia briefly became a member, from 1889 to 1891). The Council was given legislative power over certain external affairs, including relations with the Pacific Islands, fisheries outside territorial limits and civil and criminal process outside the limits of a colony. At the request of a colony, the Council could also legislate in respect of that colony for defence, quarantine and certain areas of civil and commercial law. The Council had no executive or financial powers. Although some legislation was passed, the Council accomplished nothing significant.1
1.5 The growth of Australian nationalist sentiment contributed to the mood that was to make genuine federation possible. So did the economic depression of the 1890s, which led to a realisation of the economic advantages that would be provided by a single national market, larger than any individual colonial market. Australasian Federal Conventions were held in 1891, and again in 1897-1898.
1.6 The first Australasian Federal Convention met in 1891. The delegates included representatives of the six Australian colonies, including Governors and Members of Parliament, and representatives of the New Zealand Government. The Convention promoted the idea of federation, and the creation of a central government that would take over some powers of, but would not replace, the colonies. The colonies would continue to exist, with a significant degree of their powers preserved, as States of the federation.
1.7 At the session in Sydney in 1891 the Convention delegates agreed to a number of resolutions and the principles they embodied. The aim of these resolutions was to lay the foundation for an Australian federal government. The first of these resolutions read:
(1.) That the powers and privileges and territorial rights of the several existing colonies shall remain intact, except in respect to such surrenders as may be agreed upon as necessary and incidental to the power and authority of the National Federal Government.
The Convention agreed upon a draft Constitution, and referred it to the colonial Parliaments, intending that, once it had been adopted by three colonies, it would be referred to the United Kingdom Government. However, political developments in New South Wales resulted in the draft not being adopted in that colony. As federation without agreement from New South Wales was in practice impossible, this effectively ended consideration of the draft in the other colonies.2
1.8 A second series of Federal Conventions resulted from popular agitation by Federation Leagues. The Parliaments of New South Wales, Victoria, South Australia and Tasmania passed legislation which provided for Convention delegates to be elected, and for the draft Constitution issuing from the Conventions to be put to referendum. Election of Convention delegates took place in these four colonies in March of 1897. The Western Australian Parliament nominated delegates to the Conventions, but Queensland and New Zealand did not take part.3
1.9 The Conventions of 1897-98 produced a draft Constitution for an Australian federation. This Constitution was put to referendum in 1898 and 1899. In 1898 it was carried by strong majorities in Victoria, South Australia and Tasmania. However, while the Constitution received a majority of votes in New South Wales (71 595 votes in favour, to 66 228 votes against), the legislation in that colony enabling the Federal Conventions and the referendum required 80 000 votes in favour in order to carry the referendum. A further meeting of colonial Premiers therefore took place in 1899, producing a final draft more acceptable to New South Wales. This draft was put to referendum in every Australian colony except for Western Australia, and was carried by a sufficient majority of voters in all five colonies.
1.10 After some final modifications were made to the draft Constitution, at the insistence of the United Kingdom Government, the Imperial Parliament enacted the Commonwealth of Australia Constitution Act 1900 on July 8th 1900. Section 9 of that Act contains the text of the Australian Constitution. The Constitution reflects the ambivalence shown by Queensland and Western Australia during the Federal Conventions, containing special provisions to take effect if those States were part of the Commonwealth at its establishment.4
1.11 Section 3 of the Commonwealth of Australia Constitution Act reads:
It shall be lawful for the Queen, with the advice of the Privy Council, to declare by proclamation that, on and after a day therein appointed, not being later than one year after the passing of this Act, the people of New South Wales, Victoria, South Australia, Queensland and Tasmania, and also, if Her Majesty is satisfied that the people of Western Australia have agreed thereto, of Western Australia, shall be united in a Federal Commonwealth under the name of the Commonwealth of Australia.
Following the passage of this Act, a referendum was put in Western Australia, and a majority voted to join the federation. A proclamation under section 3 was then made on September 17th 1900, declaring
That on and after the first day of January, One thousand nine hundred and one, the people of New South Wales, Victoria, South Australia, Queensland, Tasmania and Western Australia shall be united in a Federal Commonwealth under the name of the Commonwealth of Australia.5
1.12 On January 1st 1901, the Commonwealth came into being, and the six colonies became the six States of Australia. To the slogan “A new nation for a new century”, the Australian federation was established.
1.13 Federalism is one of the defining characteristics of the Australian system of government. The Australian federal system entails the sharing between the Commonwealth and State Governments of their sovereignty over a common territory.
1.14 In contrast to unitary government, federalism promotes specific values. A federal system of government enables citizens to have a degree of local autonomy. The existence of distinct constituent governments allows for greater variety and diversity in responding to public problems, with sensitivity to regional needs in a continent-sized country. It creates a competitive environment for democratic and liberal values, and for public policy solutions.6 Federalism also provides citizens with multiple points of access to government, increasing popular participation in the political process. At the same time, the central government provides the means for the federal nation to achieve common purposes and greater unity.
1.15 Several witnesses advanced these points before the Committee. They included Professor Brian Galligan, Director of the Centre for Public Policy at the University of Melbourne:
My point, and I would like to emphasise this, it seems to me that through having a concurrent system that a democratic people can be better served. In other words, if the Tasmanians can’t get redress over protecting the wilderness areas, the greenies in Tasmania - I lived in Tasmania during the dam period - they can take it to the mainland. Also if the gay community in Tasmania can’t get this law overturned, they can also take it to the mainland or take it to the mainland via the international committee through which they operate to bring pressure to bear. Or if Aboriginal people are trying to get rights to various things, they might be able to achieve that say in South Australia, they mightn’t be able to in Western Australia, so they can go to the Commonwealth Government and, in a sense, if you like, have two bites of the cherry. . . You get better public policy, better service and two levels of government involved rather than one, but there are problems entailed in that. One has to work out how they are going to stay out of each other’s road, what are the appropriate roles and responsibilities within that policy area.7
[ S]tate policies assist economic development and growth and so on. The reason why he [Paul Peterson, author of The Price of Federalism8 ] suggests this is appropriate at the local and state level is that it is there that the trade-offs have to occur. If you are having a development in this local area then it is appropriate for various trade-offs between what opportunities there will be for business, for relocating and so on, that that is done against the political issues and that is best done within the confines of the group that is affected by them.
I t would be silly, according to this analysis, to have say the Department of Administrative Service - it doesn’t exist any more - designing the new park or freeway in Melbourne or the new underground tunnel bridge in Sydney. On the other hand, redistribution can’t be trusted and is not appropriately done at this local level but ought to be done once removed on a national basis at the centre.9
A ustralians like seven governments. What do people do in a democracy? They like to participate in politics. It would be inconceivable to me that the citizens of Melbourne in their wisdom would say we are quite happy to elect candidates to Canberra and have them deal with the greater metropolitan area of Melbourne. Who would support that? Certainly I wouldn’t.10
Professor Cheryl Saunders, Director of the Centre for Comparative Constitutional Studies at the University of Melbourne:
I cannot conceive this country being governed solely from Canberra.
D own in this corner of the continent we tend to think sometimes we could. But if you are in the west or Queensland or Tasmania it is inconceivable. Governments exist for people. If the people of Australia want to have their government a little closer to them than in Canberra it is incumbent on us to have a system of government that makes that work.11
The Honourable Wayne Goss, former Premier of Queensland:
The point I make is that people say, “Abolish the States”. Just look at education to see who is best placed to deliver it. Would some public servant in Canberra be in the best position to determine the education or curriculum for a student in Carlton, Cabramatta or Cunnamulla? I do not think so. So the Commonwealth does not do it. Do we give it to Australia’s 830 mayors and 10 000 councillors? If the mayors in your State are anything like the mayors in our State they are all international spokesmen of great intellect and courage! But I think they have enough on their plates and I think the last thing we need is 830 education departments.
U nder the principal of subsidiarity what do you need? You basically need a level of government that has a combination of critical mass and the proximity of people to deliver it. I do not think the States are perfect, but that is the level of government we have between the two extremes. So it seems to me it is the level you have to make work. Education is an area where I advocate the States have full responsibility and the Commonwealth should vacate the field.
I always like to give an example on the other side and I think a good one, particularly given the current climate, is Aboriginal affairs. Queensland has a pretty poor record under Labor and conservative governments in dealing with Aboriginal affairs. During my government we spent a lot of money, much more than was spent before, on many new programs and some good work was done, but we are seeking national reconciliation and it should be taken up on a national basis. You get too much small-minded state politics getting involved in this issue. It is a very tricky issue. I think the Commonwealth should take it over. That is one where I advocate it should go the other way.12
Professor Peter Howell of Flinders University, Chairman of the South Australian Constitutional Advisory Council:
[The South Australian Constitutional Advisory Council] certainly took a strong view that federalism was an important thing in Australia and worth encouraging because the States remain the direct providers of most of the public services that are used by Australian residents in their daily lives and are the first encounter in most government-citizen exchanges. Although the members of the Council had different views about the merits of the present system and everyone saw ways in which it could be reformed they thought the federal character of Australia’s constitutional arrangements ought to be maintained because it more than adequately sustains national unity and, although the Commonwealth’s financial dominance is so great, the States have remained strong enough to be most effective agents and organs for defending the needs of the people for each region that the State serves.
T he alternative is a system of regional governments in numbers ranging from 16 to 32 and even more have been proposed from time to time, but such regional arrangements with functions that were delegated to them by a central authority would mean those governments would not have anything like as much bargaining power as the present state governments can exert in policy making and the distribution of resources. Again, I believe no alternative arrangement permits the same degree of diversity, flexibility and experimentation in public policy as a federal system does.13
Professor Cliff Walsh, Director of the South Australian Centre for Economic Studies at the University of Adelaide:
It is an important part of democratic principles that all spheres of government have a legitimate interest in all things that influence the wellbeing of their citizen voters. It is necessary to find the mechanisms by which we manage most effectively the competition of policy that is always going to occur.14
T he Canadians have observed this in their own system where there is a much sharper separation in the constitutional structure than exists in ours. Australians should be worried about that. The day that the Australian system is separated is the day that Australians as individuals will have reduced access to service delivery, to policy influence and so on. Three-stop shopping might have some disadvantages but it seems to me that on the whole I would rather pay the cost associated with multiple access to government systems because I can see the benefits.15
and Mr Gary Sturgess, formerly Director-General of the Cabinet Office of New South Wales:
[Y]ou have a whole mass of people who hold all sorts of different views. They think that there are national elements to health - Medicare was a piece of political entrepreneurship; the Labor Party played a political game to articulate or define the value that we are all Australians - that in some sense we all ought to have an equal basic standard of health care, and that it was wrong that people elsewhere in Australia did not have access to basic health care when others did.
A mong such people there is also a feeling that, “I could move at some point in my life and live in another part of Australia, and I would like to think that if I lived in that other part of Australia, health care would be available to me on roughly the same basis." There is some sense there - and as political entrepreneurs, the Labor Party members tapped into this area, defined and focused this value - that there was some aspect of health service delivery or funding that we as Australians felt we all ought to have in common. That was the play, and it paid off; it is very popular.
O n the other hand, there are other aspects of health care about which people say, “I don’t think that bureaucrats in Canberra would understand my local needs. They would not understand that if you took a hospital out of my little town it would be more dangerous for my children and me. They would simply look at it in terms of economic rationalism or whatever and would not see why we needed a hospital in our community.” The other great anecdotal story is about Darwin hospital, which was designed by Canberra bureaucrats for snow - this is all a true story and well documented. They just rebuilt Woden hospital in Darwin. Now it has to be air-conditioned because it is not designed for the tropics. The Aboriginal people who come in cannot stand the air-conditioning so they spend their time sitting outside on the grass. It was an atrocious design because people in Canberra had no natural grasp of the fact that Darwin was a different world and some people’s bodies were not acclimatised to air-conditioning.
T here are tensions there, and I do not think there is a correct answer. At any moment in time I do not think there is a correct answer to the question of who should have responsibility for health. I think it is disparate and split and will remain split, and the boundary lines will shift over time.16
1.16 Federalism is a system for delivering more effective and responsive government. There is thus no single perfect federal model - the best models are those which meet the needs of particular political communities. It is therefore important that the virtues of federalism - regional autonomy and decentralised decision-making - not prevent the united political community from reaching common goals. Equally, the pursuit of the national interest ought not to eliminate the opportunity for diversity that federalism provides.
Finding 1:
Australia is a country of significant regional diversity. Federalism as a system of government serves Australia well and the virtues of federalism - a responsiveness to regional diversity through decentralised decision-making - must be enhanced and preserved. The States and the Commonwealth must co-operate to uphold the virtues of federalism.
1.17 The Federal Convention debates make it clear that the protection of State autonomy was foremost in the minds of the majority of delegates.17 While recognising the need for a national government, the framers of the Constitution were intent on preventing the federal balance from shifting too far in favour of the Commonwealth.
1.18 In spite of this clear intention, virtually from the time of federation there have been advocates of, and proposals put forward for, the abolition of the States.18 The most common proposal of those who advocate the abolition of the States is the replacement of Australia’s three tiers of government - Commonwealth, State and Local Government - with two tiers, of Commonwealth Government and regional government.19 The Committee received two submissions setting out a detailed model of regional government for Australia, premised on the abolition of the States.20
1.19 Abolishing the States would not be a simple matter. The States are fundamental constituents of the Australian system of government and public sector service delivery. Many laws, including most criminal laws, gain their force under State Constitutions. If the States were to be abolished, a tremendous amount of administrative and legal effort would be required in order to transfer the property and operations of the States to the Commonwealth, and to ensure that crucial laws and regulations were preserved.
1.20 In addition to these practical difficulties, abolition of the States would face major constitutional hurdles. Some academic commentators have suggested that it might be constitutionally impossible to abolish the States. The preamble to the Constitution establishes Australia as
one indissoluble Federal Commonwealth,
and there is some doubt as to whether such a wholesale change as abolition of the States would constitute an ’alteration’ of the Constitution within the meaning of section 128, which provides for alteration of the Constitution by referendum.21 Even if the scope of section 128 does extend to abolition of the States, that section contains express protection of State boundaries and identities:
No alteration . . . increasing, diminishing, or otherwise altering the limits of [any] State, or in any manner affecting the provisions of the Constitution in relation thereto, shall become law unless the majority of the electors voting in that State approve the proposed law.
A referendum to abolish the States would therefore require a majority of votes in every State in order to be carried.
1.21 There is some expense involved in maintaining eight State and Territory Governments in addition to the Commonwealth Government. This includes, most obviously, the cost of State Parliaments and of State Governors. The budgeted cost of operating the Victorian Parliament in the 1998-99 Budget Estimates is $103.4 million,22 and of supporting the Governor is $4.5 million.23 It is obvious that, were the States abolished, not all of this expenditure would be saved, as the workload of the Commonwealth Parliament and of the Governor-General would be correspondingly increased.
1.22 While there are other costs associated with overlap and duplication of activity between State and Commonwealth Governments,24 it is possible to make savings in these areas by pursuing more effective federal arrangements, rather than by abolishing the States. Any proposal to abolish the States would face both practical and constitutional difficulties, would result in uncertain moderate savings, and would bring to an end the political benefits conferred by federalism.
1.23 In a federal system, governmental power is shared. A constitution determines and guarantees the distribution of powers among the constituent and central governments, and provides a rule for resolving conflicts between the different governments.
1.24 In addition to the Commonwealth and the States, Australia has a third tier of government - Local Government. Local Government plays an important regulatory and service-delivery role at the community level. However, Local Government is not an autonomous tier of government in the way that the Commonwealth and the States are. In each State, Local Government is instituted by legislation enacted by the State Parliament, and remains subject to the overriding control of the State Government and of the State Parliament. The issues raised by the relations between Local Government and the other tiers of Australian government are therefore quite different to those that are raised when considering Commonwealth-State relations. For this reason, while recognising the importance of Local Government, this report does not consider in detail the place of Local Government in the Australian federal system.
1.25 Unlike Local Government, the Australian Constitution grants the States existence as autonomous governments. Australian federalism consists of a division of powers between the Commonwealth and six States. Commonwealth legislation also establishes two self-governing Territories: the Northern Territory25 and the Australian Capital Territory.26 Unless otherwise indicated, references in this report to the States are intended to refer also to these two Territories.
1.26 On August 11th 1998, Prime Minister Howard announced the intention of the Commonwealth Government that the Northern Territory become the seventh State of Australia on the centenary of federation, with statehood to be granted by Commonwealth legislation under section 121 of the Constitution.27 The Commonwealth intends the Territory to have the full legislative power of a State.28 A referendum on statehood was held in the Territory on October 3rd; the case for statehood was defeated by a vote of 51 per cent.29 The Commonwealth Government has not yet issued a response to this development.
1.27 The method adopted by the Australian Constitution to distribute power between the Commonwealth and the States was summarised before the Committee by Professor Saunders:
Australia followed the Constitution of the United States in the way in which it divides power between the Commonwealth and the States. The mechanism which is adopted is to specify the Commonwealth powers, and there are 40 of them listed in section 51 of the Constitution, and simply to leave the unspecified remainder to the States. Most of the Commonwealth powers are what we describe as concurrent powers, and that means that they can also be exercised by the States.
I f you have a rule of that kind, of course it figures that sooner or later they are both going to exercise the same power so you need a rule for dealing with inconsistency. The rule is quite a simple one. If there is an inconsistency between Commonwealth and State law, then the Commonwealth law will prevail and the State law will be invalid.30
1.28 The heads of Commonwealth legislative power are set forth in the Constitution. These heads of power can be divided into seven principal groups:31
Aboriginal affairs;32
Communications (including lighthouses, telegraphs, etc);33
Free internal trade (including uniform customs and excise duties, and the power to arbitrate and conciliate inter-state industrial disputes);34
International affairs, international trade and protection of Australian borders (including defence, immigration, etc);35
Recognition and enforcement of the juridical acts of the States throughout Australia;36
Social security;37
Uniform standards of measurment and classification (including the census, copyrights, legal tender, observatories, etc).38
The Commonwealth is also granted those powers needed for it to function as a governmental entity (including the powers to tax, to enforce its laws and to legislate for Commonwealth territories and the Commonwealth public service).39
1.29 The Constitution does not enumerate the powers of the States. Rather, they are residuary. Section 106 states that:
The Constitution of each State of the Commonwealth shall, subject to this Constitution, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State.
and section 107 reads:
Every power of the Parliament of a Colony which has become or becomes a State shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be.
1.30 Very few of the Commonwealth’s legislative powers are possessed by it exclusively. The Commonwealth has exclusive power to determine rates of customs and excise duties; the States may not raise or maintain armed forces without the consent of the Commonwealth; and the Commonwealth has exclusive power to legislate for Commonwealth territories and the Commonwealth public service.40
1.31 Although most of the Commonwealth’s legislative powers are shared with the States, in the event of any inconsistency between Commonwealth and State law it is Commonwealth law which prevails. The rule guaranteeing Commonwealth paramountcy is set out in section 109 of the Constitution:
When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.
1.32 Not all federations are alike in their distribution of powers among their constituent and central governments. Some federal constitutions institute a strict division of responsibilities between the two levels of government.41 This is known as co-ordinate federalism. Canada is an example of a federation that is co-ordinate to a relatively high degree.42 In contrast to the co-ordinate federal model, Australian federalism - in which the States and the Commonwealth share jurisdiction and responsibility in many fiscal and policy areas - is highly concurrent .43
1.33 Concurrence is a feature of most federal systems;44 that it is particularly strong in Australian federalism was emphasised by several witnesses before the Committee, including Professor Galligan:
[M]any of the Commonwealth powers, and if one takes into account as well the Commonwealth’s very substantial and flexible fiscal powers, many of the Commonwealth’s powers overlap with the States’ and we have specifically in the Constitution only a very few exclusive powers. Of course many others can be made exclusive by the Commonwealth either through passing legislation and then trumping the States as it were through the paramountcy clause section 109, or through the Commonwealth essentially occupying the field. We would expect that in areas obviously of defence and marriage regulation and so on where it is hard to see that you can have two governments involved in that sort of area, but in many other large policy areas like health, like education, like the environment, in one way or the other it is unrealistic not to expect the Commonwealth to be there as well as the States.45
and Professor Martin Painter, of the University of Sydney:
With regard to roles and responsibilities, the textbook models and metaphors of federalism often distinguish between the marble cake and the layer cake as [a] way of looking at the way federal-state relations are arranged. In the image of the marble cake everything is mixed up, jumbled together and intermingled, and you cannot distinguish the roles and responsibilities of different governments. We have interpenetration, overlap, dependency and, one would say, a great deal of confusion. In the image of the layer cake, the roles and responsibilities are clearly delineated and sharply defined. This [is] a sort of neat-and-tidy vision of federalism. It is the one most commentators and reformers turn to for inspiration when they look to remove waste and inefficiency.
T he problem with the layer cake image . . . is that it is unworkable, for two main reasons. First of all, the Constitution says we have a marble cake federation. We have concurrent jurisdictions, not co-ordinate or distinct jurisdictions, for most functions and activities of government. Governments have to co-operate, get together and intermingle their powers to get most things done in this federation.
T he second thing to say is that the activities and policies of government never fit themselves into neat compartments. Even if you could fix a neat and tidy division of roles on paper in, say, housing policy, difficulties would almost certainly arise because different housing groups or clients also have other related needs and interests and demands on government, and they would bring their demands to other levels of government that have other responsibilities. So we have confusion, overlap, buck-passing, cost shifting and so on, without fail.
H aving argued that roles and responsibilities are bound to be jumbled together and almost impossible to put into neat, separate boxes, I point out that the problem is not so much that it creates confusion and overlap and friction and cost shifting but that it is very difficult to solve or do anything about. The current federal system makes it very difficult to resolve these sorts of issues. The reason is that the essential character of the division of functions in the Australian constitution is concurrent - that is, it is jumbled together. But there are no constitutionalised mechanisms for governments pooling their executive authority to deal with these shared functions; they muddle along and try to co-operate in an ad hoc way to cope with these overlaps and duplications.46
1.34 The last of Professor Painter’s observations makes it clear that federal systems of government require systematic intergovernmental relations . Intergovernmental relations play a vital role in bringing governments together. In any federation, governments must co-operate if they are to deal with matters unforseen by the constitution. In a concurrent federation, governments will also need to determine the distribution of roles and responsibilities appropriate to the needs of the federation, and may wish to collaborate on joint policy and common or complementary programs.
Finding 2:
In a federation as concurrent in structure as Australia’s, effective intergovernmental relations are essential to the successful management of the inevitable overlap between the activities of governments.
1.35 Sections 101-104 of the Australian Constitution set out the functions, structure and powers of a body to be called the Inter-State Commission. Although section 101 opens with the words
There shall be an Inter-State Commission
the Commission does not now exist, and is unlikely to be established again.
1.36 Section 101 of the Constitution gives the Commission
such powers of adjudication and administration as the Parliament deems necessary for the execution and maintenance, within the Commonwealth, of the provisions of this Constitution relating to trade and commerce, and of all laws made thereunder.
Sections 102 and 104 give the Commission the power to determine the reasonableness both of rates for, and rules of preference or discrimination concerning, the carriage of goods on State railways.
1.37 Section 103 establishes the conditions of appointment of the members of the Commission. Like High Court and Federal Court Justices, members are to be appointed by the Governor-General in Council, and cannot be removed except by both Houses of Parliament, on grounds of proved misbehaviour or incapacity. Unlike Justices, however, the Commissioners are to serve a fixed term of seven years.
1.38 The Commission was first established in 1913, but lapsed in 1920 following a High Court decision in 1915.47 The High Court held that, as the Commission was not a court established under Chapter Three of the Constitution, its powers of adjudication could not extend to the determination of legal rights and liabilities. The limited term of appointment of Commissioners, in strong contrast to the lifetime appointment of Justices,48 was a significant influence on the Court’s decision that the Commission cannot exercise any powers of legal adjudication. The Court held that the powers of the Commission must be limited to administrative and executive functions.
1.39 In 1975, the Commission was reconstituted under legislation passed by the Whitlam Government, to inquire into transport issues. Whitlam argued that the Inter-State Commission could help resolve transport problems that had arisen as a result of the Australian federal structure. These included rates for Bass Strait freight, Victorian transport services to the Riverina, and the cancellation in 1975 of shipping services from Fremantle to the eastern States.49 Although the reconstituted Commission did not have any judicial powers, it did have powers of arbitration and adjudication as well as investigatory and administrative functions.
1.40 Until the election of the Hawke Government, the Commission was not active. In 1984, it was given the power to investigate any matter relating to inter-state transport. It investigated the Tasmanian Freight Equalisation Scheme and submitted recommendations.
1.41 The role of the Inter-State Commission came to an end in 1989, when its remaining functions were transferred to the Industry Commission, a statutory authority created under the Industry Commission Act 1989 , and responsible directly to the Commonwealth Government.
1.42 Professor Saunders explained to the Committee the reasons for the demise of the Inter-State Commission:
The last mechanism in the Constitution that I want to mention under this heading is the provisions in section 101 to 104 dealing with a body called the Inter-State Commission which you may never have heard of.
S ection 101 starts out by saying very firmly ‘There shall be an Inter-State Commission’, and then goes on to specify what the Inter-State Commission will do. In fact as far as the framers of the Constitution were concerned the Inter-State Commission was a very important watchdog body for supervising the mechanisms for creating an internal free trade within Australia, for example the Australian common market. But it has proved to be a white elephant. There hasn’t been an Inter-State Commission for much of the time since federation; there is not an Inter-State Commission now. I don’t think there will ever be an Inter-State Commission again, and those provisions can be taken out of the Constitution and so no one would notice they were gone. The fact they are there again can provide some food for thought about whether it would be useful to have a mechanism of this kind in the Constitution that did work.
I s there anything we can learn from the collapse of the Inter-State Commission? One thing that we might learn from the collapse of the Inter-State Commission is that the Inter-State Commission was established purely as a Commonwealth body. If you look at sections 101 to 104, appointments to the Commission were purely by the Commonwealth Government. The Commission was to be established purely by Commonwealth legislation. If you were to have a body that supervised the operations of the federation in any of those ways, should that body be more of an intergovernmental body with the appointments shared within the Commonwealth and the States with responsibility and accountability in relation to that body also shared between the levels of government?50
The Inter-State Commission was intended to be a quasi-judicial body appointed by the Commonwealth Government and controlled by the Commonwealth Parliament. In these respects, it was quite unlike the instruments of co-operation between executive governments that have evolved in Australia since federation, and it has not played a significant role in dealing with issues arising out of the Australian system of concurrent federalism.
1.43 The Senate is the Upper House of the Commonwealth Parliament. With the exception of laws appropriating revenue or imposing taxation, the two Houses have equal power.51
1.44 The Constitution provides that each Original State (ie each State which was a State at the time of federation) shall have at least six Senators, and that all shall have an equal number of Senators.52 The Commonwealth Parliament has the power to determine the precise number of Senators,53 but the Constitution requires that the number of Members of the House of Representatives be, as nearly as practicable, twice the number of Senators.54 As the Australian population has grown, so has the size of the House of Representatives, and with it the Senate. Currently, each State has twelve Senators,55 while the Northern Territory and the Australian Capital Territory are given two Senators each.56 The Northern Territory is likely to receive an additional Senator if it becomes a State.57 The Constitution also provides that
No alteration [to the Constitution] diminishing the proportionate representation of any State in either House of the Parliament . . . shall become law unless the majority of the electors voting in that State approve the proposed law.58
1.45 Together, these provisions make the Senate an important federal institution; each State is guaranteed an equal say in the decisions of one of two near-equal Houses of the Parliament. However, while the Senate is a federal institution, it is not an intergovernmental one. The Constitution provides that the Senators for each State shall be
directly chosen by the people of the State,59
which means that Senators do not represent State Governments, or even State interests construed more broadly. Rather, they are national politicians, responsive to the motivations of electors voting at national elections.
1.46 Several witnesses criticised the performance of the Senate as a States’ House. These included Professor Glyn Davis, of the Centre for Australian Public Sector Management at Griffith University, and a former Director-General of the Queensland Cabinet Office:
The role of the Senate allegedly is that it is a States’ House, but no-one contends that it is. You are all politically involved and know that it is not.60
Mr Ken Baxter, formerly Director-General of the New South Wales Premier’s Department and formerly Secretary to the Department of Premier and Cabinet in Victoria:
[M]y assessment of the Senate is that it is about time the farce that it is a States’ House was dropped, because that is very clearly not the case. Except on some peripheral issues like the Tasmanian Apple and Pear Levy Bill or when the Tasmanians are out to protect their own position, the protection of State interests is rarely raised
H aving observed the Senate over the past 20 or 30 years, I know the Senators have never voted on State lines with State interests as against voting on party lines. The States now have no reliance on the Senate as a House of review to protect their interests. It may act as a House of review to protect what the Members perceive to be their electorates’ interests, but I am not sure that it is fulfilling the States’ interests.61
Ms Kris Walker, of Melbourne University:
The problem is that the Senate has not operated as a States’ House, and I think it would be naive to assume that it would operate as a States’ House on this issue [treaty matters] when it has not done so with any other issue.62
and Professor Saunders:
[I]n practice the Senate has not played any significant role as a States’ House, and my experience has been that many Senators do not even understand the question when it is put to them.63
One of the main imbalances . . . is the imbalance in taxation resources and hence revenue available to the two levels of government. . . The fact that that situation exists is an indictment on the Senate’s role as a State’s House.64
I see very little prospect of turning the Senate into a genuine State House. One of the reasons for that being so is that it actually works quite well as a House of review in the sense that the lower House is a typical Westminster style parliament which is effectively a rubber stamp, so that the Senate has managed to capture people’s imagination by being a bit of a delaying agent and a House of review, however controversial the exercise of that role may be.
S o if we want to inject genuine federal considerations into national decision-making, I think we need to find other mechanisms to do it, and one mechanism may be through the intergovernmental network if it can be made to work better than it is now.65
1.47 The truth of these observations is borne out by the following extract from Senate Hansard:
Just a little while ago the minister said that the states have said that there is uncertainty, therefore, we need to act. The states have never wanted Mabo; they have never wanted a Native Title Act; they have always claimed there was uncertainty; and they have always wanted to extinguish native title interests. We do not always have to act when the states demand that we act. What we need to do is take a dispassionate overview and see when they are in the right and when they are in the wrong.66
1.48 An alternative view of the Senate’s role was put by Professor Galligan:
Could I just add, I think we have to be a bit careful even on your first premise, the Senate is a States’ House. The Senate . . . was the States’ prerequisite for federation. You have to have part of the federal legislature structured in that way. Some of them thought it would protect the States, but the better informed in the federation debates explained that it would not. They said take the issues when they arise. There will not be State ones. You know rabbits. Rabbits are a problem we are going to have to deal with, but rabbits run across State lines. Similarly most of the industrial issues of the day you know, trade, commerce, industrial relations, health, welfare, whatever, most of the things were not State issues but the States’ delegates required that structure in order to give some sort of a check on the populations and the representatives from the larger States, so in a sense it is a representational device which ensures that the people of the smaller States have a disproportion of representation as part of the national legislature.67
1.49 The disproportionate representation of the smaller States can become quite significant, as indicated in the following extract from Senate Hansard:
I referred to Senator Abetz earlier - and I do not need to look it up in Hansard; it is all burnt on my brain. He said, “The Northern Territory parliament exists only by the grace and favour of the Commonwealth parliament. What the Commonwealth parliament gives, it can also take away.” This is from a senator from a state with about twice the population of the Northern Territory’s, and five times its representation in the House of Representatives and six times its representation here in the Senate. When is that important? On conscience votes.68
While the Senate does not represent State interests understood in any narrow sense, it does allow the views of electors in the smaller States a greater degree of representation in the Commonwealth Parliament than they would receive were representation entirely proportional to population.
1.50 Professor Kenneth Wiltshire, of Queensland University, suggested to the Committee that the Senate ought to have a standing committee dealing with intergovernmental relations:
There is a debate whether the Senate is any longer a States’ House. The conventional wisdom in Australia is that the Senate is no longer a States’ House. By and large that is true, but there are a number of ways the Senate still performs something of a role as a States’ House. We could certainly restore it in some ways to a role as a States’ House. . . my answer is this: the Senate should create a permanent standing committee on federal-state relations, just like yours.
I find it odd that the Victorian Parliament can have a Federal-State Relations Committee but the Senate does not have one. My view would be for the Senate to have a permanent standing committee on intergovernmental relations which could perform a number of functions. Certainly treaties could be examined by that committee, but the decisions of Premiers conferences, Ministerial Councils and the whole gamut of federal-state relations could be tabled to be reviewed and analysed by a Senate standing committee on intergovernmental relations. If there were a particular key issue at the time on education, health or welfare on federal-state relations reforms they could be referred to the Senate standing committee.
T he whole aspect of federal-state relations in Australia in my estimate is that this accounts for one-third of the public sector in this country. There are more than 350 intergovernmental agreements and 27 Ministerial Councils and there is not enough accountability for this process. I think a Senate committee would provide a framework for some pattern of accountability for all the federal-state arrangements that take place, and what better place to do it than in the House that is meant to be a States’ House in the first place. I am not being utopian. It would not make the Senate a States’ House, but it will have the effect of making it revert a little more towards taking a further step towards that perspective. That is a broad outline of my own thoughts on these matters.69
1.51 Professor Saunders made the same suggestion:
I have thought for some time that it would be a very good idea for the Senate to establish a standing committee on Commonwealth-State relations. I think there is a big gap in the Senate standing committee system, and that that is a role that the Senate should play, given that it is designed as a States’ House, even though it has not necessarily performed in that way.70
1.52 Such a Committee would possibly increase the Senate’s awareness of matters of concern to the States and State Governments. But it seems no more likely that the Senate would focus on the concerns of the States rather than the Commonwealth in investigating intergovernmental relations, than in any other area of its activity.
1.53 It is unrealistic to expect Commonwealth officials and Commonwealth Parliamentarians to represent the interests of the State Governments against the interests of the Commonwealth Government. This can only be done by the State Governments themselves.
Finding 3:
The Constitution establishes two powerful federal institutions: the Inter-State Commission and the Senate. Neither of these has provided a forum for mediating between Commonwealth and State Governments. The Constitution mandates the Inter-State Commission as a body to be established and administered by the Commonwealth, without State participation; the Commission is no longer in operation. The Senate has its foundation in the States, but is not an institution for the resolution of concerns arising between levels of government. It is the Committee’s view that effective intergovernmental institutions must involve the Executive Governments of both the Commonwealth and the States.
1 R L Mathews and W R C Jay, Federal Finance: Australian Fiscal Federalism from Federation to McMahon, Thomas Nelson, Sydney, 1972, reprinted Centre for Strategic Economic Studies, Victoria University, Melbourne, 1997, p 22.
2 Ibid, p 26.
3 Ibid, pp 26-7.
4 Section 7, dealing with Queensland Senators, s 26, dealing with Western Australian Members of the House of Representatives, and s 95 staggering the elimination of Western Australian customs duties.
5 Commonwealth of Australia, Gazette, 1901, p 1.
6 D J Elazar, Exploring Federalism, University of Alabama Press, Tuscaloosa, 1987; Ronald Watts, Executive Federalism: A Comparative Analysis, Institute of Intergovernmental Relations, Queen’s University, Kingston, 1989.
7 Minutes of Evidence, FSRC, April 15th 1997, pp 354-5 (per Professor B Galligan).
8 The Brookings Institution, Washington, DC, 1995.
9 Minutes of Evidence, FSRC, April 15th 1997, pp 356-7 (per Professor B Galligan).
10 Ibid, p 375.
11 Minutes of Evidence, FSRC, April 15th 1997, p 376 (per Professor C Saunders).
12 Minutes of Evidence, FSRC, June 26th 1997, p 496 (per The Hon W Goss).
13 Minutes of Evidence, FSRC, July 3rd 1997, p 665 (per Professor P Howell).
14 Minutes of Evidence, FSRC, July 3rd 1997, p 703 (per Professor C Walsh).
15 Ibid, p 704.
16 Minutes of Evidence, FSRC, September 11th 1997, p 852 (per Mr G Sturgess).
17 James Warden, “Federalism & The Design of the Australian Constitution”, Australian Journal of Political Science, Vol 27, 1992, p 143.
18 Greg Craven, “Would the Abolition of the States be an Alteration of the Constitution under Section 128?” (1989) 18 Federal Law Review 85, 87.
19 See, for example, Ian McPhee, “Towards a Model for Two-Tier Government”, Australian Federalism: Future Directions, Structural Change, Conference held at the Centre for Comparative Constitutional Studies, University of Melbourne, July 15th 1994.
20 Submissions, FSRC, nos 22 and 24. The bulk of the first of these submissions is a document entitled The Case for the Abolition of State and Territory Governments and the Establishment of a Regional System of Government: A Report Prepared by Mark Drummond for the Office of Jim Snow, Federal Member for Eden Monaro, September 1995. The second of these submissions consists principally of a recent book by Rodney Hall, Abolish the States: A $30 Billion Answer to Our Tax Problems, Pan Macmillan Australia, Sydney, 1998, which includes a summary of the first document as an appendix. It can reasonably be doubted that the figure of $30 billion reflects the true savings that would result from abolition of the States.
The figure of $30 billion is arrived at by a series of calculations comparing the cost of government in the Australian Capital Territory (which has a single unicameral assembly performing the roles of both State and Local Government) to the average cost of State, Territory and Local Government in Australia. It is first assumed that the cost per capita of governing the Australian Capital Territory can be achieved nationwide. It is then assumed that no additional costs related to overlap and duplication would be incurred by replacing the current State, Territory and Local Governments with sixty Regional Governments (the population of Australia is approximately sixty times that of the Australian Capital Territory). Finally, a calculation is made of the savings to be achieved by reducing those sixty governments to thirty. This final calculation is based on an estimate of the costs of maintaining the Australian Capital Territory Government that are independent of the size of the population that it governs, and that therefore can be eliminated by merging two such governments into one government that governs a larger population.
The assumption that the cost per capita of governing the Australian Capital Territory, a relatively homogenous urban community, can be replicated across Australia is dubious (the first document considers this matter, and factors into its calculations the cost per capita of the Queensland Government). And there is a methodological tension in assuming that the eight State and Territory Governments can be increased to sixty while generating no additional cost, and then claiming savings based on the reduction of these sixty governments to thirty. This is indicative of a general difficulty with the calculations, which are completely abstract in nature. No attempt is made to identify the actual areas of State and Territory expenditure that represent the savings to be recouped by abolishing State Governments.
21 Ian McPhee, above n 20, p 15; Greg Craven, above n 19.
22 State of Victoria, Budget Estimates 1998-99, 1998-99 Budget Paper No 3, p 22.
23 Ibid, p 333.
24 In its consultancy undertaken for the Leaders’ Forum, ACIL estimated the cost of overlap and duplication in Australia, “measured in terms of additional administrative and overhead costs where two tiers of government are involved in service delivery and associated policy development,” to be of the order of one-half to one percent of total program expenditure: ACIL Economics and Policy Pty Ltd, Cost of Overlap and Duplication Between Different Levels of Government, The Institute of Public Affairs for State and Territory Governments, p xi. Given that total Commonwealth expenditure in 1998-99 is forecast to be $141.6 billion (Commonwealth of Australia, Budget Strategy and Outlook 1998-99, 1998-99 Budget Paper No 1, Table 1, p 4-3), the estimate by ACIL is that the cost to government of overlap and duplication in Australia is something like $1 billion annually.
25 Northern Territory (Self-Government) Act 1978.
26 Australian Capital Territory (Self-Government) Act 1988.
27 This section allows the Commonwealth to legislate to admit a new State to the federation.
28 Prime Minister the Hon John Howard and Chief Minister the Hon Shane Stone, Media Release, August 11th 1998.
29 As at October 15th, with all but postal votes counted, the results of the referendum were 51.3 per cent against, 47.6 per cent in favour and 1.1 per cent informal.
30 Minutes of Evidence, FSRC, April 15th 1997, p 360 (per Professor C Saunders).
31 Since federation, there have been only two significant additions to the Commonwealth’s legislative power: social services (s 51 (xxiiia), added by referendum in 1946) and Aboriginal affairs (the 1967 referendum lifted the restriction that s 51 (xxvi) had until then placed upon the Commonwealth enacting special laws for Aboriginal people, and repealed s 127, which excluded Aboriginal people from the census).
32 Section 51 (xxvi).
33 Section 51 (v), (vii), (xxxiii) , (xxxiv).
34 Section 51 (i), (ii), (iii), (xiii), (xiv), (xx), (xxxv), s 90.
35 Section 51 (i), (vi), (ix), (xix), (xx), (xxvii), (xxviii), (xxix), (xxx), (xxxii).
36 Section 51 (xxiv), (xxv).
37 Section 51 (xxiii), (xxiiia)
38 Section 51 (viii), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xviii), (xxi), (xxii).
39 Section 51 (ii), s 52 (i), (ii), s 77, s 78, s 79, s 80, s 120, s 122.
40 Section 52 (i), (ii), s 90, s 114, s 122.
41 K C Wheare, Federal Government (4th ed), Oxford University Press, Oxford, 1963.
42 Minutes of Evidence, FSRC, July 3rd 1997, p 704 (per Professor C Walsh).
43 Brian Galligan, A Federal Republic, Cambridge University Press, Cambridge, 1995, p 191.
44 Ibid.
45 Minutes of Evidence, FSRC, April 15th 1997, p 352 (per Professor B Galligan).
46 Minutes of Evidence, FSRC, November 5th 1997, pp 883-4 (per Professor M Painter).
47 New South Wales v Commonwealth (1915) 20 CLR 54.
48 The retirement of Justices at the age of seventy was introduced only following a referendum in 1977.
49 Russell Mathews and Bhajan Grewal, The Public Sector in Jeopardy: Australian Fiscal Federalism from Whitlam to Keating, Centre for Strategic Economic Studies, Victoria University, 1997, p 75.
50 Minutes of Evidence, FSRC, April 15th 1997, p 366 (per Professor C Saunders).
51 Constitution of Australia, s 53.
52 Section 7. The Northern Territory and the Australian Capital Territory are given two Senators each by the Commonwealth Electoral Act 1918, s 40 (1).
53 Sections 7, 51 (xxxvi).
54 Section 24.
55 Representation Act 1983 (Cth), s 3.
56 Commonwealth Electoral Act 1918, s 40 (1).
57 Prime Minister the Hon John Howard and Chief Minister the Hon Shane Stone, Media Release, August 11th 1998.
58 Section 128.
59 Section 7.
60 Minutes of Evidence, FSRC, June 26th 1997, p 474 (per Professor G Davis).
61 Minutes of Evidence, FSRC, April 21st 1997, p 412 (per Mr K Baxter).
62 Minutes of Evidence, FSRC, June 30th 1997, p 586 (per Ms K Walker).
63 Minutes of Evidence, FSRC, June 30th 1997, pp 577-8 (per Professor C Saunders).
64 Minutes of Evidence, FSRC, April 15th 1997, p 401 (per Professor C Saunders).
65 Ibid, p 402.
66 Parliament of Australia, Senate Hansard, December 2nd 1997, p 10178 (per Senator N Bolkus).
67 Minutes of Evidence, FSRC, April 15th 1997, p 402 (per Professor B Galligan).
68 Parliament of Australia, Senate Hansard, March 24th 1997, pp 2327-8 (per Senator the Hon B Collins).
69 Minutes of Evidence, FSRC, June 26th 1997, pp 512-3 (per Professor K Wiltshire).
70 Minutes of Evidence,
FSRC, June 30th 1997, p 579 (per Professor C Saunders).
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