July 27

Federalism and the election

Most pollsters and bookmakers are predicting the government will be returned on 21 August.  These are national predictions, and they may not take into sufficient account one factor which could make a crucial difference. Something long dormant in the Australian psyche may well have been revived this year, something which those from the Melbourne- Sydney- Canberra power triangle have long assumed was well and truly dead and buried.

Federalism, expressed in the code that the states are sovereign, has been given a new lease of life in the recent super profits and resource rent tax controversies.

ACM has of course no position on the worthiness or not of either. Nor is it in the habit of advising supporters on which parties they should prefer.

ACM seeks instead to inform voters as to candidates’ views on the constitutional system and the flag. And as defenders of our constitutional system, this column has been pointing out what seem to be serious constitutional flaws in processes and proposals, most recently in relation to the super profits tax.

…who owns the minerals…


The basis for the super profits tax was the claim that the minerals belong to the people of Australia. So is the basis for the successor tax, the minerals rent resource tax (MRRT).

But a perusal of just about any land grant will show that minerals have always been under the jurisdiction of the states, and not the Commonwealth.  To many in the outlying states, the tax proposals are is being seen as an attempt by the federal government to commandeer their resources.

As a result, the federation genie is out of the bottle, challenging the current centralist fashion. The view that the federal government knows best is nevertheless widespread in political and media circles.

…committed federalists…


Committed federalists find intellectual sustenance and mutual support principally in the Samuel Griffith Society. (Incidentally, the Society will be holding its annual national conference in Perth on 27 to 29 August 2010. Details can be seen on the Society’s excellent site, www.samuelgriffith.org.au . A personal disclosure- I am on the Board)

 Although the great majority of our Founding Fathers were federalists, there are not many left among our politicians and media commentators. Indeed, the more centralist among them, say Sir Isaac Isaacs would today been seen as more federalist than most.

There is an absence of not only a federalist philosphy among our elites. Lamentably there is an absence of an understanding of the raison d’être for federalism.

The 1999 referendum demonstrated that the rank and file better understand the virtues of our crowned republic. Similarly there is a latent but unformulated federalist tendency among Australians at large, especially those living away from the inner city electorates.

Not only media commentators but also governments, Labor and Coalition, should take more notice of federalists.

…Work Choices..


 The Howard government made the mistake of not heeding the federalists’ counsel not to effect whatever work place reforms it proposed through the draconian Work Choices model. The objection was not against the principle of workplace reform which is another issue. It was against the “big bang” approach based on an extended meaning to the constitutional corporations’ power.

Federalists warned that the legislation would only have been supported under this power if the High Court were to agree to an even more centralist interpretation of that power. Such an interpretation would be bad in itself they said, and would constitute an undesirable precedent.

The subsequent constitutional challenge to Work Choices did not succeed, although two judges held that the legislation was unconstitutional. They were interestingly, Justices Kirby and Callinan. One is seen as small”l” liberal and progressive, the other is seen as conservative. 


...did the States run dead in Work Choices?



 Julian Leeser was an ACM elected delegate to the 1999 Constitutional Convention. He was also the youngest delegate. Now the Director of the Menzies Institute, he argued that the reason the Work Choices case failed was because the States ran dead on the issue of the corporations power. This was because the politicians involved supported an extended interpretation of the corporations power . This would suit their ultimate political agenda.

Of course Mr. Leeser was right, although some of the barristers involved play this down.  So why did not  judges, apart from Justice Kirby and Justice Callinan agree.

Judges will not normally come to a conclusion without hearing argument on that point. Indeed when the court handed down the Mabo decision, it was much criticised on this very point. In my opinion, had the States argued against an expanded interpretation of the corporations power – as they should have – other judges would have been persuaded to join the dissenting judges. There may have been a majority. 

Had the states challenged the constitutional basis of the legislation, it is likely that more judges would have ruled against it, perhaps a majority. Found to be valid, Work Choices was to become a key issue in the 2007 election.

…national standards…



There a widespread belief in political circles that the best solution to many issues is through uniform national policies. This assumes no centralist approach could ever be wrong. This is not something limited to the Australian intelligentsia. French education ministers were once want to boast that at say, 3:00 pm every child in the nation aged ten was studying Latin.

This centralism has gone a step further with the formation of the European Union, with its trade distorting standards.  The story that Brussels had decreed the degree to which a banana might curve, if not true, illustrates the widespread perception of excessive EU interference in the market.

There is a simplistic attraction in the declaration of national standards. This has its limits. While wheelie bins look much the same, is there any advantage in declaring a national Australian wheelie bin standard? (For all I know such a standard may well exist or be on the drawing board.). But national standards in everything would be a mistake – the politicians and bureaucrats are not omniscient, they cannot foresee all of the problems.

If different states have different policies, there can be a competition among them to see what is best. This can be effective, doing what is impossible outside of a federation. We would still have that detested tax, death duties, were it not for the initiative of the Bjelke Petersen government in abolishing them.

…the MRRT…



A crucial question in the coming election will be whether the Gillard government has sufficiently neutralised federalism through the son of the super profits tax, the MRRT.

Once again the process of introducing it offended if not the letter then the spirit of the constitution with no opportunity for Parliament to debate the issue.  Instead the tax was formulated behind closed doors with the three biggest foreign miners.

The tax will apply only to iron ore and coal, but these are state assets. While some sort of credit for state royalties will be allowed, are they to be frozen or are they at some later stage to be taken over as was originally proposed?

…reopen the Seas and Submerged Lands case?


The suspicion that other state owned resources might one day be taxed will be reinforced by the extension of the Petroleum Resource Rent Tax (PRRT) to onshore oil and gas, clearly the property of the States. Indeed, this   extension may well encourage the States to try to reopen the 1975 ruling that offshore oil and gas are not theirs.

That decision was based on nineteenth century British legislation, which British and Australian legislation repealed in 1986.  The jurisdiction of the states now extends beyond the old three mile limit; perhaps the offshore resources are theirs.

…federalism revived….

Federalism has been revived in a way undreamed of.

Benefits can flow from this. At the time of Work Choices many leading Coalition politicians argued it was too late to go back to federalism as the Founders planned it.

 At Federation it was assumed that the States would continue to rely on taxes they raised and to face the electors and account to them how they had spent their money. Our Founders were well aware of the fundamental point made by the American Founders, that:

"In a federation, the individual States should possess an independent and uncontrollable authority to raise their own revenues for the supply of their own wants." (The Federalist Papers)

If our Federation is to work well, this principle that the States have their own income and answer to the electorate as to how they spend it is fundamental. 





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