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Chapter 8
External Affairs and the Australian Federation
Introduction
8.1 Australia is a federal state, and is one of only four federations
which have existed, as such, continuously from the beginning of this century.
Australia is expressly referred to as 'Federal' in the Commonwealth
of Australia Constitution Act 1900. The term appears in the Preamble
to the Constitution, which provides that the States 'have agreed to unite
in one indissoluble Federal Commonwealth under the Crown... and under
the Constitution hereby established'. The term 'Federal' is also used
in covering clause 3 of the Constitution, which provides that the Queen
may declare by proclamation that the States 'shall be united in a Federal
Commonwealth under the name of the Commonwealth of Australia'.
8.2 This Chapter briefly examines the issue of what kind of federation
Australia is at the end of the twentieth century. An understanding of
this issue is necessary to appreciate the concern which has been expressed
to the Committee that the use of the external affairs power is undermining
States' rights (or more appropriately 'States' responsibilities') and
Australia's federal system of Government. This issue relates to the Committee's
term of reference on the Parliament's role in the management of the treaty
process and its consistency with the spirit and intent of the Constitution.[2]
8.3 Concern about so-called 'States' rights' needs to be considered in
the context of the historical development of constitutional law by the
High Court and in particular, the rejection by that Court of the doctrine
of the reserved powers of the States.
8.4 For the first 20 years after federation, the doctrine of reserved
powers of the States was considered to be a central principle of constitutional
interpretation. The doctrine ensured that Commonwealth powers were, in
effect, interpreted narrowly to ensure that the States retained exclusive
power to legislate with respect to domestic affairs. For example, s. 51(i)
of the Constitution provides the Commonwealth with the power to legislate
with respect to interstate trade and commerce. On the basis of
the reserved powers doctrine, it was held that the trade and commerce
power indicated that domestic trade and commerce was reserved to
the States. Accordingly, other powers in the Constitution were not to
be interpreted so as to interfere with, or restrict, the State power to
deal with domestic trade and commerce.[3]
8.5 The doctrine of the reserved powers of the States was overturned
in the famous case, Amalgamated Society of Engineers v Adelaide Steamship
Co Ltd (Engineers Case),[4] in 1920. Since the Engineers case,
the Commonwealth's constitutional powers have been interpreted as plenary
powers, that is, powers that are unqualified by any implied reservation
of powers to the States. Accordingly, it is more appropriate to refer
to State and Territory areas of 'traditional responsibility', or State
and Territory 'jurisdiction', rather than to refer to 'States' rights'.
What is a federation?
8.6 A federal state comprises a central government and regional governments
which have a degree of independence or autonomy. A federal state is a
way of sharing power between the different levels of government. Like
the United States, the Australian Constitution:
- creates a central government and State governments;
- distributes power in the federation with the Federal government receiving
express grants of power in relation to particular subjects; and
- provides for the supremacy of federal laws over State laws in cases
of inconsistency.
8.7 There are various kinds of federal systems but it is useful to distinguish
between the classic form of federalism, often described as 'co-ordinate
federalism', and other forms of federalism, which may be called 'organic
federalism.'[6]
8.8 Professor Sawer argued that:
Coordinate federalism is an 'ideal type' of federalism which makes
theoretical demands which have never been met by any system, even in
principle. It would require Centre and Regions respectively to be completely
equipped for the business of government, without participating in each
other's affairs, and engaging in areas of activity so defined that while
conflict might occur - to be judicially resolved - there could be no
question of the policy of one being guided by reference to the policy
of the other. Proponents of co-ordinate federalism have also sometimes
made the non-theoretical demand that the area of activity allotted to
each of the federal units should be appreciable.[7]
The Framers' intention
8.9 There seems to be little doubt that the Framers of the Constitution
intended that the Commonwealth and the States would be largely distinct
and separate independent entities, each carrying out its constitutional
functions within its own sphere.[8] It is beyond the scope of this report
to review in detail the evidence of the Framers' intention on the federal
issue. Nevertheless it is worthwhile noting some of the comments during
the Convention debates.
8.10 One commentator, who has examined this issue in detail, Professor
Crommelin, commented that:
The participants in the Constitutional Conventions of the 1890s devoted
little time to articulation of the federal principle. Still, that principle
pervaded the Convention debates. Federalism required two levels of government,
each complete in itself, operating directly upon the people, with limited
powers, without the capacity alone to alter the allocation of powers.
Most elements of this principle were uncontroversial. The need for
a national legislature, executive and judiciary was stressed in the
Parkes resolutions of 1891 and the Barton resolutions of 1897. It was
underscored by the perceived inadequacies of the Federal Council of
Australasia. The direct relationship between each government and its
people was advocated first by Barton in Sydney in 1891: 'It must not
be forgotten that there is to be a double citizenship conferred by this
constitution upon every citizen of these states and of the great nation
which we hope to found'.[9]
8.11 Professor Crommelin noted that the issue of the question of whether
or how Commonwealth power should be limited created difficulty for the
delegates to the Constitutional Convention. The issue was raised by Mr
Higgins at the Adelaide Convention of 1897, who stated:
The truth is that the true protection for the small States lies in
the limitation of the power given to the Federal Parliament. The true
protection of the smaller States lies also in insisting that no subjects
which cannot be better dealt with by the Federation are to be given
to the Federation, and that all those subjects which can be best dealt
with by a colony, as a colony, should be still left to the colony.
Holder thought likewise:
... in dealing with this federal authority we should confer on it no
power which it cannot exercise more wisely and well and effectively
than the States can exercise those powers. I should go even further,
and lay down as the principle which should govern our conduct: to the
states all that is local and relating to one State, to the Federal power
everything that is national and of interstate importance.[10]
8.12 Although on the one hand intending to create a federation, the Framers
also intended that Australia would become one nation with the Commonwealth
being responsible for matters exterior to Australia. The ACTU submission
pointed to comments by Chamberlain, who was Secretary of State for the
Colonies during the period leading up to federation:
Chamberlain said that:
"everything which has to do with the exterior relations of the
six colonies concerned was a matter for the Commonwealth and not for
the individual governments" (Greenwood and Grimshaw 1977, p 6)
Later on Chamberlain wrote, that the result of the Constitution was
that:
"Australia became one single entity ... and the external responsibility
of Australia except in regard to matters in respect of which a later
date was fixed by the Constitution vested immediately in the Commonwealth
which was armed with paramount power necessary to discharge it".[11]
8.13 The Premier of Western Australia, Mr Richard Court, has summed up
the competing positions of federalism and unity as follows:
Our founding fathers recognised very clearly that a national government
was best placed to determine national priorities, but recognised equally
clearly that the State governments were far better placed to determine
local priorities, and far better placed to determine the most effective
way to deliver services to their citizens.[12]
A flexible form of federalism
8.14 The fact that the Framers did not reserve exclusive powers for the
States indicates that there was intended to be some flexibility in the
Constitution, to allow for its evolution.
8.15 Mr Alan Rose, President of the Australian Law Reform Commission,
rejected the suggestion that there are 'domains' of State power. He stated
that the Framers of the Constitution deliberately established an evolutionary
system:
They identified a very clear set - with unclear language in some cases
- of high priority things for the federal government. They were making
a nation and they identified a series, in section 51 in particular,
of important things - if you look at those heads of power - and they
left a residual, not nominated as in the British North America Act in
Canada's case, of legislative power in state parliaments and with state
executives. And a section 109 allowed an evolutionary process to follow,
that is, interpreted and importantly underpinning it, a judicial review
process that allowed two engines to drive it, federal politics and federal
judicial policy, and that is precisely what has happened.[13]
8.16 Professor Detmold, from the University of Adelaide, also considered
that the Constitution was designed in a manner that was intended to allow
its evolution. He stated in evidence before the Committee:
It is sometimes forgotten that the federalists, the Founding Fathers
as they are called, were essentially centralists. They created a growing
Constitution - the Constitution was intended to grow. Australia was
intended to become a nation - it was intended to become active internationally
in its own right, and the accretion to the external affairs power in
the last 15 or 20 years seems to me to be a completely natural development
of that essentially federalist spirit. Nothing that the High Court has
done seems to me to be unprincipled or out of accordance with that spirit.[14]
8.17 Sir Robert Menzies recognised that our federal system involves flexibility
and change, commenting:
[I]n a federal system there may be shifts in power, alterations in
the balance of power, which are quite independent of actual amendments
to the constitutional document itself. There may also be new interpretations
of old powers which would not have been anticipated by the draftsmen
of our Constitution of 1900.[15]
Federalism and the development of Australia from the 1890s to the
1990s
8.18 That flexibility in the Constitution has been essential to allow
it to successfully adapt to the changes in the world since the 1890s.
The revolution in transport and communications, as well as the greater
international co-operation and growth of treaties, have impacted upon
Australian federalism. Treaties, themselves, are quite different in nature
today from those contemplated by the Framers of the Constitution. In the
1890s, treaties mainly concerned trade and commerce, shipping, extradition,
political and military alliances and the rules of warfare. They did not
cover the broad subjects of the environment and human rights, which treaties
address today.
8.19 Sir Anthony Mason, the then Chief Justice of the High Court, stated,
in the context of discussion of the trade and commerce power, that the
High Court has not been responsible for the destruction of the 'federal
balance':
At Federation, the States were separate communities with their own
economies. Interstate trade did not loom so large. But now, with the
advent of rapid transportation and communications and modern technology,
trade within each State has become intricately integrated with interstate
trade and overseas trade. As a result, the economic concept of interstate
trade which might be distinguished in a meaningful way from local interstate
trade at the turn of the century has necessarily expanded to embrace
activities and transactions formally having local significance only.[16]
8.20 Justice Stephen, in his judgment in Koowarta v Bjelke-Petersen,
observed that international treaties have assumed a more extensive
role this century. Treaties, he noted:
prescribe... standards of conduct for both government and individuals
having wide application domestically in areas of primarily regional
concern, the very areas which, in federations, have tended to be entrusted
to the legislative competence of the regional units of governments.
This has necessarily exacerbated the problem which federations encounter
in the implementation of international treaties while emphasising the
need for regional units in federations to recognise the legitimacy of
national governments' increased concern regarding domestic observance
of internationally agreed norms of conduct.[17]
8.21 More recently, former Governor-General Sir Ninian Stephen pointed
to the unprecedented increase in the number of treaties. He stated:
Whatever you may think of recent decisions of the High Court, it is
wrong, I believe, to view their Honours' decisions on the external affairs
power as itself symptomatic of some devilish desire to extend Commonwealth
legislative power at the expense of state legislative power. What has
had that effect, and in a quite dramatic way, has been the impact of
this plethora of international treaty-making upon the originally modest
power of the Commonwealth to legislate with respect to 'external affairs'.[18]
8.22 Dr Colin Howard also agreed that the essence of the problem of the
external affairs power was the number of treaties and what he termed unparalleled
internationalism in the conduct of world affairs:
The essence of the problem has been that the end of the Second World
War in 1945 heralded the ushering in of an era of unparalleled internationalism
in the conduct of world affairs and governmental regulation of domestic
affairs... This development has not exactly met with universal approval.
In practice it has accorded to any country, however tinpot and oppressive,
the right to interfere in the domestic policies of any other country
however advanced, by exerting political and moral pressure through rhetorical
declarations of purportedly binding rights... Internationalisation of
nearly everything has become practicable because the old barriers of
time, distance and ignorance have been broken down at a great rate.[19]
8.23 Justice Samuels in a recent article entitled, 'The end of Federalism',
pointed to a certain inevitability in the emergence of the dominance of
the federal Government. His Honour stated:
For my own part, .... I find it impossible to avoid the conclusion
that it is the persistence of the discredited doctrine of states' rights
that continues to fuel controversy [of the end of federalism]. If one
acknowledges that the doctrine has been authoritatively interred, without
hope of resurrection, it follows that there exists a substantial, but
not infinite, area of legislative activity which the Commonwealth may
legitimately occupy as and when the occasion arises.[20]
8.24 In conclusion, His Honour quoted from a judgment of Justice Windeyer
which he considered suggested that for 'The end of Federalism' one could
substitute 'The beginning of Nationhood'. The quote was as follows:
The Colonies which in 1901 became States in the new Commonwealth were
not before then sovereign bodies in any strict legal sense; and certainly
the Constitution did not make them so. They were self-governing colonies
which, when the Commonwealth came into existence as a new Dominion of
the Crown, lost some of their former powers and gained no new powers.
They became components of a federation, the Commonwealth of Australia.
It became a nation. Its nationhood was in the course of time to be consolidated
in war, by economic and commercial integration, by the unifying influence
of federal law, by the decline of dependence upon British naval and
military power and by a recognition and acceptance of external interests
and obligations. With these developments the position of the Commonwealth,
the Federal Government, has waxed; and that of the State has waned.
In law that is a result of the paramount position of the Commonwealth
Parliament in matters of concurrent power. And this legal supremacy
has been reinforced in fact by financial dominance. That the Commonwealth
would, as time went on, enter progressively, directly or indirectly,
into fields that had formerly been occupied by the States, was from
an early date seen as likely to occur. This was greatly aided after
the decision in the Engineers' Case [(1920) 28 CLR 129], which diverted
the flow of constitutional law into new channels. I have never thought
it right to regard the discarding of the doctrine of the implied immunity
of the States and other results of the Engineers' Case as the correction
of antecedent errors or as the uprooting of heresy. To return today
to the discarded theories would indeed be an error and the adoption
of a heresy. But that is because in 1920 the Constitution was read in
a new light, a light reflected from events that had, over twenty years,
led to a growing realisation that Australians were now one people and
Australia one country and that national laws might meet national needs.[21]
The Commonwealth's financial dominance of the Federation
8.25 Another important factor has been the 'vertical fiscal imbalance'
and the ability of the Commonwealth to make grants to the States upon
condition. Vertical fiscal imbalance has been termed the 'least satisfactory'
aspect of Australian federalism and is attributable to two factors:
First, the Commonwealth has continued the monopoly over income taxation
that was established in 1942[22]... Second, the states are unable to
levy alternative broad-based consumption or general sales taxes because
of the High Court's broad interpretation of 'excise duties', which the
Constitution (s.90) precludes the states from levying.[23]
8.26 Professor Saunders observed that:
Conditional funding provides a mechanism through which the Commonwealth
can influence [State] government action in areas over which it has no
other direct constitutional authority.[24]
8.27 Professor Saunders concluded:
Considered purely from the standpoint of a federal system, the financial
arrangements between the Commonwealth and the Australian States are
bizarre.... In consequence, in 1989-90 $13 billion raised in taxation
by the Commonwealth will be spent by State governments... A comparable
sum, also raised by the Commonwealth will be spent by State governments
under conditional grant programmes...[25]
8.28 The Premier of Queensland, Mr Wayne Goss was recently reported as
saying:
[I]f we are serious about a modern Australian Federation capable of
providing effective governance for the nation, we need to squarely address
its fiscal and functional future.
First and foremost, the Australian Federation for the 21st century
must be one in which expenditure responsibilities for the States and
Territories are commensurate with their revenue-raising capacity. In
other words, the problem of vertical fiscal imbalance must move back
from the backburner to the front burner.[26]
8.29 The former Attorney-General Peter Durack QC also saw that it was
in fact the Commonwealth's use of its financial dominance, rather than
its use of the external affairs power, which has had the greatest impact
on the Australian federal system. He stated:
It is interesting to contrast the impact of the external affairs power
on the operation of the federal structure in Australia with the impact
on it of the financial powers of the Commonwealth. Since the uniform
taxation scheme in 1942 at least, the Commonwealth has been slowly widening
its influence on a whole range of State responsibilities such as health,
education, housing and roads by the power of the purse. The combined
effect of its taxation power and its power to make grants to the Sates
on any terms it thinks fit (section 96) has totally changed the way
our federal system operates. No such claim can yet be made about the
external affairs power. How seriously, then, should its potential be
rated?[27]
8.30 Mr Alan Rose, President of the Australian Law Reform Commission,
has also noted that it is not only the external affairs power which has
been a source of expansion in federal powers. In response to the question
of whether the external affairs power has increased the Commonwealth's
legislative power, he replied:
Yes, but if I was to line the tax power beside it, and the ability
to have the Parliament approve the spending of money, and the corporations
power - I mean, it is a Melbourne Cup field there - you can set the
odds as to which one is driving this process faster than the other.
I am not disagreeing that the external affairs power is important in
that process but each one of the others I have mentioned has been j
Endnotes:
1. Quoted in H.P.Lee, 'The High Court and the External Affairs Power
in H.P.Lee and G Winterton (eds.) Australian Constitutional Perspectives,
Law Book Co., 1992: p.61-62.
2. The Committee's term of reference (b) is: 'the Commonwealth Parliament's
role in ensuring that the management of such treaties and conventions
by the Executive is consistent with the spirit and intent of the Constitution.'
3. L.Zines, The High Court and the Constitution, 3rd ed., Butterworths,
1992:pp.4-7.
4. (1920) 28CLR 129. See L.Zines, The High court and the Constitution,
3rd ed., Butterworths, 1992:pp. 6-15. See Constitutional Commission, Final
Report of the Constitutional Commission, Vol 1, AGPS, Canberra, p.63.
5. Constitutional Commission, Final Report of the Constitutional Commission,
Vol 1, AGPS, Canberra, 1988, p.53
6. Professor Wiltshire defined organic federalism to mean 'dynamic federalism
and literally anything that is not co-ordinate federalism including co-operative,
coercive or co-ordinative federalism': K.Wiltshire, 'Administrative criteria
for the allocation of functions between levels of government in a federation'
in Advisory Council for Inter-government Relations, Information Paper
No. 9, Towards Adaptive Federalism; A Search for Responsibility Sharing
in a Federal System, 1981:p 67.
7. G. Sawer, Modern Federalism, CA Watts and Co Ltd, London, 1969:p 65
8. L.Zines, 'The Federal Balance and the Position of the States' in G.
Craven (ed) The Convention Debates 1891-1898: Commentaries, Indices and
Guide, Legal Books, Sydney, 1986: p 81. M. Crommelin, 'The Federal Model',
in G. Craven (ed), Australian Federation: Towards the Second Century,
Melbourne University Press, 1992: pp36-39.
9. M. Crommelin, 'The Federal Model', in G. Craven (ed), Australian Federation:
Towards the Second Century, Melbourne University Press, 1992: pp36-39.
10. M. Crommelin, 'The Federal Model', in G. Craven (ed), Australian Federation:
Towards the Second Century, Melbourne University Press, 1992: p38.
11. ACTU, Submission No.76, Vol 4, pp.754-755.
12. R. Court, Rebuilding the Federation, February 1994, p.7.
13. Hansard, SLCRC, 25 July 1995, p.831
14. Hansard, SLCRC, 25 July 1995, p.792
15. Quoted by H.P.Lee, 'The High Court and the External Affairs Power
in H.P.Lee and G Winterton (eds.) Australian Constitutional Perspectives,
Law Book Co., 1992: p.60.
16. Sir Anthony Mason, 'The Australian Constitution 1901-1988' (1988)
62 Australian Law Journal 755
17. Koowarta v Bjelke-Petersen (1982) 153 CLR 168, 215-6.
18. Sir Ninian Stephen, 'Making rules for the World' (1995) Vol 30(2)
Australian Lawyer 13
19. C. Howard, 'The Explosive Implications of the External Affairs Power',
IPA Review, Vol 42, No.2, August-October 1988, p.8
20. G Samuels, 'The end of Federalism', The Australian Quarterly, Autumn
1984, Vol.56, No.1 p.17.
21. Victoria v The Commonwealth (the Pay-roll Tax Case) (1991) 122 CLR
353 at 395-6.
22. Since the case South Australia v Commonwealth (the First Uniform Tax
case) (1942) 65 CLR 373, the States have been effectively unable to levy
income tax.
23. B. Galligan and C.Walsh, 'Australian Federalism: Developments and
Prospects' (19900 Vol 20.No.4 Publius, The Journal of Federalism, p 7.
24. C. Saunders, 'Fiscal Federalism - A General and Unholy Scramble' in
G. Craven (ed), Australian Federation: Towards the Second Century, Melbourne
University Press. 1992: p 117.
25. C. Saunders, 'Fiscal Federalism - A General and Unholy Scramble' in
G. Craven (ed), Australian Federation: Towards the Second Century, Melbourne
University Press. 1992: p 122.
26. The Australian, 11 July 1995, p 17.
27. P. Durack, The External Affairs Power, Institute of Public Affairs,
Perth, 1994:p 7. See J. Hyde, Submission No.15, Vol.1, p 185, from the
Institute of Public Affairs.
28. Hansard, SLCRC, 25 July 1995, pp 829-830, per Mr A Rose.
29. C. Howard, Australia's Constitution: What it means and How it works,
(1985), p xi and p 101; G. Sawer, The Australian Constitution, AGPS, Canberra,
1975, pp 34, 91-96, 157; and L. Zines, 'The State of Constitutional Interpretation'
14 Federal Law Review 277.
30. Subject to express or implied Constitutional guarantees and the matters
discussed in Chapter5.
31. Professor G. Winterton, Submission No.89, Vol 5, p 1065.
32. See Statement by the Commonwealth to the
33. Professor G. Winterton, Submission No.89, Vol 5, p 1065. Others would
argue, however, that the fact the legislation was enacted shows that the
external affairs power will be used despite the wishes of the States.
34. Mr K. Baxter, Submission No.111, Vol 7, p 1463.
35. See also the Hon. P. D. Connolly QC, Submission No.98, Vol 6, p 1242.
36. The Commonwealth v Tasmania (The Tasmanian Dams case) (1983) 158 CLR
1, at 100, per Gibbs CJ.
37. Hansard, SLCRC, 2 May 1995, pp 143, per Mr J Daley.
38. L Zines, 'Federal Theory and Australian Federalism, A Legal Perspective',
in B. Galligan (ed) Australian Federalism, 1989 pp 26-27.
39. See Chapter 5.
40. See Chapter 11.
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