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Federations Magazine Article
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Australia’s Commonwealth government ends blame game
AP Photo/Sunda y Alamba
JUNE | JULY 2008 Federations
Australia’s Commonwealth government
ends blame game
Window of opportunity opens for co-operative federalism
By Anne Twome y
Anne Twomey is an Australian constitutional lawyer and an Associate Professor of Law at the
University of Sydney. She was a member of the Governance Group at the 2020 Summit.
Australian Premier Kevin Rudd, left, joins a planning and brainstorming session in April 2008.
f it were a horse , you ’d put it
This was Queensland
Labo r Premi e r Pe t e r
Beattie’s view of the Australian federal
system in August 2007.
Like many other state premiers, he
was in despair over the expansion of legislat
ive power of the cent ral or
Commonwealth government and the
erosion of state powers allowed by the
High Court of Australia, which rules on
constitutional matters.
Beattie and his counterparts were also
concerned about the increasing federal
incursions into state areas of responsibility
and the centralist philosophy of the
John Howard Liberal Government at that
time. Howard was defeated in December
2007 after 11 years in power.
But instead of giving up on federalism,
the state premiers united and performed
reconstructive surgery. They formed the
Council for the Australian Federation in
October 2006 creating a structure for the
states to negotiate with the federal
government, and also achieve harmonization
of laws where needed.
In 2007 all the state premiers, through
the council, called for a constitutional
convention to be held in 2008. They
wanted to reform the operation of the
federation by reconsidering the allocation
of powers and responsibilities
between the different tiers of government
and revising federal-state financial
Under the Australian Constitution, 40
specific powers are given to the federal
Parliament, with residual powers left to
the states. The expectation was that, by
creating a federal government with
apparently limited powers, state governments
would be left with the lion’s share
of powers. The flaw was that the
Constitution did not reserve any specific
powers for the states.
The consequence of having no specified
powers for the states has been that
the High Court of Australia has interpreted
the defined federal powers
increasingly widely, allowing them to
expand into the areas that were traditionally
left to the states.
Diminishing states’ powers
In 2006, the High Court expanded its
interpretation of the federal “corporations
power,” effectively giving the federal
Parliament power to enact laws that not
only control the actions of trading and
financial corporations but also their relations
with employees, suppliers and
consumers. Justice Michael Kirby, dissenting,
pointed out that the effect of this
judgment would be “radically to reduce
the application of state laws in many
fields that, for more than a century, have
been the subject of the states’ principal
governmental activities.”
As most bodies such as universities,
hospitals, schools and even local councils
are incorporated, the federal
government’s power to intervene in state
areas such as health and education using
the “corporations power” is now extensive.
Professor Greg Craven called the
2006 High Court decision the “constitutional
equivalent of a dirty bomb.”
Emboldened by its wide legislative
powers and its even greater financial
ascendancy over the states, the federal
government shifted from a model of cooperat
ive federal i sm to one of
opportunistic federalism, which it called
“aspirational nationalism.” It picked and
chose the state areas in which it intervened
on political or ideological grounds,
without any systematic approach. For
example, it took control of a single
Tasmanian hospital, while the rest continued
to be run by the state. The
economic inefficiency of such action and
the resulting degradation of the federal
system caused widespread alarm.
The Business Council of Australia
called for the holding of a constitutional
convention and federalism reform. Its
president, Michael Chaney, said the
“gradual, arbitrary decay of the federal
system” was costly to business. The
Business Council estimated that inefficiencies
in the operation of the federal
system cost Australians at least $9 billion
Australian ($8.52 billion Canadian) a year.
Local government bodies were also
concerned. The president of the Local
Government Association of Queensland,
Counci l lor Paul Bel l , made thi s
“Local government does not want to
make a claim for more responsibilities –
we have more than enough now. Nor do
we want to abolish the states. What councils
do want is greater certainty and
clarity on who does what to whom, where
and when. What we have now is a moving
feast, subject to political whims of the
governments of the day…”
Rudd aims to end ‘blame game’
But, in November 2007, the political
landscape changed in Australia with the
election of a new federal government
after 11 years of conservative rule.
Kevin Rudd’s Labor Government was
elected on a policy of restoring co-operative
federalism and “ending the blame
game.” While the Rudd Government
obtained a comfortable majority in the
House of Representatives, it did not gain
control of the Senate and will need the
support of the Greens Party and independents
to pass legislation. At the
inter-governmental level, however, it was
more fortunate.
For the first time, Labor governments
held office nationally and in all states and
JUNE | JULY 2008 Federations
Aboriginal leader Patrick Dodson (centre) participates in Australia’s 2020 Summit in Canberra on April 20, 2008. He is flanked by two other
participants of the Australian thinkfest.
Austra lian Government , Department of the Prime Minister and Cabinet
JUNE | JULY 2008 Federations
territories. This opened up a window of
opportunity for real reform on a co-operative
basis. It also changed the dynamic
between federal and state governments.
The proposal for a constitutional convention
had been a state reaction to
incursions by a hostile federal government.
Whether the states continue to
pursue this proposal after the recent federal
election of a Labor government
remains to be seen.
The Rudd Government called a “2020
Summit” on April 19-20, 2008, at which
1,002 Australians, chosen for their expertise,
were asked to develop ideas and
strategies for Australia’s long-term development
in 10 different fields, including
the future of Australia’s governance. The
Governance Group at the summit recommended
holding a plebiscite on
whether Australia should become a
republic, adopting a bill of rights or a
charter of rights, including recognition of
indigenous Australians in the preamble
to the Constitution and increasing civic
participation in government.
Fixing Australian federalism
The Governance Group also made two
major recommendations concerning the
federal system. First, it recommended a
review of the allocation of powers and
functions across all levels of governance.
This was to be achieved by a three-stage
process: an expert commission which
would conduct the necessary research
and analysis and prepare proposals; a
constitutional convention involving the
broader public which would deliberate
on those proposals; and implementation
of the convention’s recommendations
through inter-governmental co-operation
or a referendum. Its second
recommendation was to establish an
ongoing commission that would register
intergovernmental agreements, monitor
their implementation and assist in
resolving intergovernmental disputes.
The Economy Group at the Summit
also recommended the establishment of
a Federation Commission, although it
was to have a stronger policy role than
the governance group recommended.
This commission would also be the vehicle
for revising the allocation of powers
and functions between the three tiers of
When the Prime Minister received the
summit’s interim report, he stated on
national television that “Australian
federalism must be fixed.” He has not yet
responded in detail to the summit’s
Since the election of the Rudd
Government, the main forum for federalism
reform has been the Council of
Australian Governments (comprising the
prime minister and all state premiers).
The Council has identified seven areas
requiring reform: health and aging, productivity,
climate change and water,
infrastructure, business regulation and
competition, housing, and indigenous
affairs. It has established working groups
of officials, overseen by federal and state
ministers, in each of these areas, and
required them to deliver implementation
plans. The Council will meet more
often than previously and will actively
push reforms.
Council plays key role
In March 2008, the Council agreed on
reforms to “close the gap on indigenous
disadvantage.” These will focus on halving
indigenous disadvantage in the field
of employment. It also announced
actions to improve the lives of indigenous
Australians in terms of health,
dental services, housing and water supply.
The Council’s Indigenous Reform
Working Group has been instructed to
prepare sustainable reform proposals on
early childhood development, remote
service delivery, economic participation,
active welfare – where the receipt of benefits
is conditional on the participation in
assistance programs – and security from
violence for indigenous parents and children.
One of the problems faced by
indigenous Australians has been the lack
of co-ordination of federal and state programs
and an absence of long-term
The Council also agreed on revised
federal-state funding arrangements. One
of the main causes of duplication and
inefficiency in the Australian federal system
has been the use of tied grants by the
federal government. States were given
funding for schools or hospitals only if
they met specific policy and accountability
conditions. This not only allowed the
federal government to intervene in areas
of state policy, but frequently resulted in
the over-funding of some areas and
under-funding of others, excessive levels
of administration and perverse incentives
for inefficiency. The federal
government has agreed to change the
way these grants operate, focusing on
outcomes rather than inputs, and providing
incentives for efficiency.
An intergovernmental agreement on
federal-state financial relations is being
negotiated and is expected to come into
effect at the end of 2008.
Achieving reform
Much can be achieved in federalism
reform in Australia without undertaking
formal constitutional amendment.
Where the federal government is lacking
in power, states can refer matters within
their jurisdiction to it under an existing
constitutional mechanism. Where matters
should be returned to state control,
the federal government could simply
vacate the field by choosing not to legislate
on the subject and not placing policy
conditions on its funding. Federal-state
financial arrangements could also be
readjusted in a manner that ensures the
states have adequate sources of funding,
but must also take full responsibility for
the manner in which they spend those
The benefit of constitutional reform,
however, is that it will last beyond any
short-term political consensus. The
problem is that it is difficult to achieve.
Constitutional amendments in Australia
must be approved in a referendum by a
majority of voters overall, and a majority
of voters in a majority of states. Only
eight out of 44 referenda to amend the
Australian Constitution have succeeded.
While many reasons have been given for
this failure, one is that only the federal
Parliament can initiate a referendum,
leading to public suspicions that referendum
proposals are about aggrandizing
federal power at the expense of the states
and the people.
Reforming federalism in Australia is
no easy task, but at least there now is a
will to set about doing this. Whether the
means chosen is a constitutional convention
or co-operative reform of specific
areas of overlapping jurisdiction, the
improvement of the operation of the federal
system will be beneficial for all