Before Federation (prior to 1901), Australia was not a nation; each of the British colonies was its own self-ruling state. Each had separate laws and regulations and functioned effectively as a separate country. Those colonies were: New South Wales, Victoria, Queensland, South Australia, Tasmania and Western Australia, the last one to join (Singleton et al. 2013, pp.55-56). According to “Federation 1890-1910” published by the government of Western Australia (n.d.), that state had delayed its decision because it had seen such rapid changes in the previous decade, including the discovery of gold and a population increase from 50,000 to near 200,000. It is suggested that Australian federalism has changed dramatically since its inception in 1901. This essay seeks to critically assess the validity of that opinion and to determine the extent to which power has shifted from the 1901 structure.
The idea of establishing a national government was first proposed by Henry Parkes, Premier of New South Wales, as early as 1889 (“The Road to Federation 1889-1901” Australian Electoral Commission, 2001). The first Federal system was developed by a number of politicians who wanted to preserve their own identities and their autonomy (Heywood, 2002, p.161). However, the division of power between the central, federal government and the individual state governments has since been modified.
According to Brown and Bellamy (Eds.) (2007), institutional reform of the Australian federal system of government has been debated for many years, and now “dramatic shifts are occurring in the way in which power and responsibility are shared between federal, state and local governments, and in the emergence of an increasingly important ‘fourth sphere’ of governance at the regional level of Australian society” (p.3). An important factor in the perceived need for further reform is that the present degree of centralisation of Australia’s government has arisen from a whole series of incremental changes and previous reforms that have occurred since 1901 “in an ad hoc, largely unplanned way” (Brown and Bellamy (Eds.) (2007), Appendix: “Reform of Australia’s Federal System Identifying the Benefits: (2006-2007) p.1). As a consequence, according to their discussion paper, more nationally uniform centralised federal power has resulted in part, but in numerous and important aspects gains achieved are not complete or are “constitutionally fragile” (p.1).
Sadly, many Australians are unaware of how the Australian federal system has changed since 1901, and even the form of government itself (Williams, 2011). He states that a survey found that 47 percent were unaware of a written Constitution. Just 18 percent have an idea of what it comprises, and only 40 percent could name both Australian Houses of Parliament. Some younger Australians knew more about America’s Constitution.
Regarding the changes that have occurred over the years, Bennett and Webb published “Chronology of Australian federalism” (updated May 2007). The online version is maintained up-to-date. The preamble includes the comment that the Australian federal system has in recent times been increasingly criticized as being not only outdated, but potentially harmful to the future of Australia.
As background to the original 1901 Constitution, Bennett and Webb remind readers that the Australian federal system was derived from a system based on colonial parliaments, each possessing extensive autonomous powers. Hence those involved in drafting the Constitution were eager to see that their six home colonies (now individual states) retained legislative power.
The Chronology lists the main events affecting the division of powers between the central government (referred to as the Commonwealth) and the individual states of Australia. Some of the more significant items listed by Bennett and Webb in that Chronology are listed below:
1908: The government to pay surplus revenues into trust accounts. That affected Constitution Section 94.
1910: The Commonwealth can take over State debts. Ending of provision to reimburse customs & excise revenues to the States. Commonwealth imposes land taxes, thus sharing State tax.
1911: South Australia cedes Northern Territory control to the Commonwealth.
1914-1915: Commonwealth levies estate duties and starts income tax system.
1920: Commonwealth can exercise full powers irrespective of any State powers.
1926 & 1927: Government funding and borrowing now under central control.
1942: Commonwealth gains full control of income taxation.
1945: Education Act: new Universities Commission & Office of Education.
1967: Commonwealth granted powers reference Aboriginals in the States.
1978: Northern Territory now self-governing.
1986: Towards Australian independence from the UK; States can now repeal or amend any pertinent UK legislation affecting them.
Most published opinion appears to echo the view that the trend is towards more central government power, at the expense of fiscal and policy powers formerly wielded by the States. Carling (2010) takes that position in his Australian Financial Review article “Continental drift: inching away from federalism.” He also states that whilst individual changes have not been major, cumulatively they have resulted in “a huge shift of political power and policy control from the states to the Commonwealth.”
A similar sentiment is expressed by Moon and Sharman (2003) in their book Australian Politics and Government: The Commonwealth, The States and The Territories. In the book’s Introduction (p.1), the authors note that although the States continue to provide their citizens with almost all government services, central government now has considerable influence in most areas of public policies, largely due to its fiscal control over State revenues and partly due to previous High Court decisions in interpreting aspects of the Constitution.
Fenna (2012) covers similar ground in his journal article The Character of Australian Federalism, in which he refers to the “character” of Australian federalism as being “the interaction between constitutional design, judicial interpretation, economic and social change, and political processes over the past century” (p.12).
Fenna also sees the Australian model of federalism as one designed for a situation that has since changed with time, so that considerable change and adaptation has been needed, to match today’s social and economic needs (p.12). Further, he accepts that those changes have increased the centralization of power (p.12).
In the original Constitution, Fenna notes that the States were intended to hold exclusive responsibility for domestic policies including “infrastructure; resources; the environment; education; health; policing; criminal and civil law” (p.13). He points out that whilst most attempts to amend the Constitution have failed (only eight of 44 proposed Amendments succeeded); the interpretation of its measures has in practice allowed much centralizing change (p.15).
Of all the changes that have occurred since 1901, Fenna picks out three as being of greatest significance. These occurred in 1920, 1926 and 1942, ultimately giving the Commonwealth full control over Australia’s most important taxes, effectively reversing the originally intended relationship between the States and central government (p.15-16).
Saunders (2013) claims that the “meaning and operation of the Constitution has changed dramatically since federation, through judicial interpretation in response to political action” (p.392). She is referring to the High Court decisions that have occurred since 1920, from when their interpretations of the Constitution’s clauses appear to have changed.
Regarding the effects of federal reform in specific policy areas, education reform has been ongoing for almost 40 years, yet there are still numerous problems needing addressing such as achievement disparities, low success rates for indigenous students, fragmented school governance policies, diverse curriculums and more (Caldwell, 2011 p.2).
In terms of school funding, the effect of those reform efforts is that Commonwealth involvement in education has increased so much that – although in Constitutional terms it is a State responsibility – it is today known as a shared responsibility (between central government and the States) (Hinz 2010, p.2).
Hinz notes that the current complex funding arrangements for schooling are the result of “hundreds of complex agreements between federal and state authorities made through intergovernmental forums that have no formal authority under the Australian constitution” (p.3).
Under the present arrangements, because each State still has responsibility in both legislative and regulatory terms for their education and training, there are effectively eight separate systems of public schools, whereas the Commonwealth is predominantly responsible for private schools (Hinz, p.5).
According to “The Future of Schooling in Australia” (2007) published by the Council for the Australian Federation (CAF), keys to the future of Australian schooling are the establishment of a shared, high quality curriculum, an integrated student testing plan, improved performance reporting, raising workforce quality (teachers and others, including standardizing teacher registrations), and reducing bureaucracy (pp.31-35).
Health policy is primarily set by central government, effectively having moved a long way away from the original 1901 Constitution (Banting & Corbett, 2008). In 1946 the Commonwealth extended its powers by Constitutional amendment “to include laws on pharmaceutical, sickness and hospital benefits, and medical and dental services” (p.12). Because of that change, the Australian national Medicare system that started in 1984 comprises two parts – one entirely federal, and the other one part federal and part State-controlled. The government part provides nationwide access to doctors, medications and care homes via the Medical and Pharmaceutical Benefits schemes. The second part covers care in public hospitals and is subject to federal and State authority agreements, renegotiated on a five-yearly basis. However, through its influence and measures such as performance targets, the federal government ensures that the system has a national feel and character (p.12).
Anderson and Sanders (1996) discuss the effects of federalism reforms on Aboriginal health in their discussion paper entitled: “Aboriginal health and institutional reform within Australian federalism.” As mentioned by others, they note that when the Constitution was first established in 1901, health care was the constitutional responsibility of each State (p.1). Then the Labour government of the 1940s passed the Commonwealth of Australia Constitution Act which amended the Constitution (p.2). The result was increased Commonwealth funding to the States for health care, both in payments to medical professionals for their services and in the form of health-related grants to the States (p.2).
Funding was increased substantially in the 1970s and 1980s when Medibank and Medicare were introduced (Anderson and Sanders, p.2). Subsequently, little progress is yet to be made in terms of needed reforms to the system (p.3). As regards Aboriginal health, the authors report there was pressure on the Commonwealth to take an expanded role in Aboriginal affairs. Section 51 of the Constitution was amended in 1967 following a referendum (p.3-4). Thereafter the government’s new Office of Aboriginal Affairs made “Aboriginal advancement” grants to the States, used partly to provide Aboriginal health units (p.4).
Notwithstanding that the Whitlam Labour government and the subsequent Fraser Coalition government improved Aboriginal health services further, Anderson and Sanders observe that a 1979 report suggested “little progress” had been made and that Aboriginal health was still “far lower than that of the majority of Australians” (p.5). It was 1996 before real progress and improvements had been secured (p.7-16).
Hancock (2008) reports that health in Australia is “high on the political agenda.” Because of the shared responsibility between central and State governments, it is the subject of ongoing conflicts between the Commonwealth and the States (p.107). She notes that under Section 96 of the Constitution, the Commonwealth government may grant funding to the States “on its own terms and conditions”, clearly giving central government the advantage, especially as over time the fiscal imbalance between the Commonwealth and the States has been engineered by the Commonwealth to be increasingly in its favour (p.110).
That move to increasing centralization of power is also stated in “Australian Federalism” (2011), which mentions the Engineers Case of 1926 in the Australian High Court, which set a precedent in giving the Commonwealth “pre-eminence” over the States. Commenting upon how much federalism in Australia has changed, the article concludes by suggesting that “The long term success, indeed survival, of Australian federalism, appears dependent upon a return to a mutually beneficial form of collaborative federalism.”
Allan and Aroney (1998-2008) also focus on Australia’s High Court decisions as the source of today’s flawed version of Australian federalism. Whilst each individual ruling of the High Court over the years in interpreting clauses of the Constitution seemed – in isolation – quite reasonable, in sum they have resulted in what the authors call “a most uncommon body of constitutional law, generated by a most uncommon court” (p.246).
Essentially, those who drafted the rules of the Constitution way back at the beginning of the 20th century “would never have envisaged they would be used or interpreted in this way” (Allan and Aroney, p.246). For example, the Constitution founders would never have envisaged the Commonwealth controlling industrial relations. A significant shift in the power over industrial relations came via the Workplace Relations Amendment (Work Choices) Act 2005 (Wooden, 2006). The Act was intended by the government to modernise Australia’s workplace relations, but was opposed by the labour unions in the various States because it weakened their power, and placed a tighter control on wage increases and employee rights, in the pursuit of higher productivity. At a stroke, labour relations came under central government control.
Grewal and Sheehan (2003) discuss the evolution of Australian federalism since it was first established in the Constitution of 1901. They note that “The current distribution of powers of legislative power is vastly different from the original design” and that it “has become highly centralized at the Commonwealth level” (p.2). Further, that this centralizing of power has for the most part happened without formal changes to the Constitution and therefore without “the express approval of the majority of voters in majority of States, as originally required” (p.2).
Also key to the growing power of the commonwealth at the expense of the States were the four federal statutes that were passed individually in 1942 (at the same time), and which in combination resulted in the States losing the power to levy and collect income tax (Allan and Aroney, p.247).
In fiscal terms, according to Grewal and Sheehan, whereas the States and local authorities collected 87 percent of tax revenues in 1901, that percentage had fallen to just 18 percent by 2001-2, meaning that the States have become heavily dependent on funding from Commonwealth sources. In addition, almost half of those funds are specific purpose payments; i.e. the money must be spent according to imposed directions / conditions (p.3).
As mentioned by others, Grewal and Sheehan observe that most of the changes that have dramatically changed the fiscal balance between the Commonwealth and the States have occurred without amendment to the Constitution, instead being the outcome of interpretations by the Australian High Court of Constitutional instruments. Those interpretations were in response to challenges of the validity of existing laws; i.e. changes initiated by the central government, shifting the balance of power in their direction (p.6).
That view offered by Grewal and Sheehan that the High Court was not actually the instigator of the interpretations that changed Australian federalism is echoed by Selway and Williams (2005), who state that the High Court decisions have “provided a framework for the development of the Australian federation over the last century in increasing the relative importance of the federal government at the cost of the state governments.” However, they suggest those decisions reflected rather than created the consequent changes.
Andrews (2010) also places the blame with the High Court for the shift of federalism towards central government. He cites the government’s ploy in 1913 of increasing the Court strength from five to seven judges, with the extra two being known centralists, as the first step towards loading the court in the Commonwealth’s favour.
Jellis (2012) mentions similar manipulations when he reports that the Howard government replaced most of the High Court judges during its 11-year term in office from 1996, as well as appointing a new Chief Justice. These changes were seen as a “return of a more orthodox approach to judging.” However, many see the decline of federalism nonetheless continuing unabated.
In a report published by the Business Council of Australia in 2006 (“Reshaping Australia’s Federation: A New Contract for Federal-State Relations”), the existing fiscal arrangements between the Commonwealth and the states are seen as “among the most contentious issues within federal relations” (p.40). The report notes that the Commonwealth raises 80 percent of taxation revenues and spends 54 percent of all the government’s expenditure, but the states raise only 16 percent of taxation revenues yet spend circa 40 percent (p.40). So there is a clear need to correct this imbalance.
That has resulted in the States losing much of their power and autonomy, particularly with regards to fiscal matters, but indirectly in many other areas too, due to central government being in control of the funding (e.g. for health and education).
Without question, Australian federalism has changed dramatically since 1901.
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