Professor George Williams AO - A Guide to Our Constitution

Professor George Williams AO

The following paper was presented by Professor George Williams AO at the National Archives of Australia in Canberra on 10 July 2011.

Thanks for the invitation to speak today.

I thought today I would talk about why we have a constitution, how we got ours, and then focus in on one area of great contemporary importance, our broken federal system.

I thought today I would provide you with a perspective from a constitutional lawyer about our federal system and its impact upon things like our schools and hospitals. I want to explain how our Constitution affects something as basic as the quality of education our kids receive and the treatment we receive in hospitals. Rather than being distanced from our lives, the Constitution has a profound impact upon our quality of life and future prosperity.

Australians possess an appalling lack of knowledge about their system of government.

A 1987 survey conducted for the Australian Constitution Commission found that 47 per cent of Australians were unaware that Australia has a written Constitution. In the 1994 report on citizenship by the Civics Expert Group:

Only 18 per cent of Australians have some understanding of what their Constitution contains.
Only 40 per cent can correctly name both Houses of the Federal Parliament.
More than a quarter of those surveyed nominated the Supreme Court, rather than the High Court, as the 'top' court in Australia.
Some Australians, particularly younger Australians, even demonstrated a greater awareness of the United States Constitution than the Australian Constitution.
62 per cent think we have a national Bill of Rights.

First, though, I want to say a little bit about why we have a constitution in the first place, and how we achieved ours.

Why do we have a constitution?

  1. What governments can do
  2. What they cannot do (but no Bill of Rights)
  3. What we aspire to as a people and a nation (preamble, but no WA!)

Back then to the beginning

The Australian Constitution was drafted at two constitutional Conventions in the 1890s.

The main issues at the Conventions were the financial and trade issues arising from federation and how best to weigh the interests of the small states against those of the more populous states in the new federal Parliament. The Constitution was not viewed by its drafters as a compact of the people of the six colonies. Instead, 'the Constitution was mainly conceived by its framers as a treaty between States'.

The first Convention was held in Sydney in 1891 and was attended by representatives of the colonial parliaments. The Convention did not include any women, Indigenous peoples or members of ethnic communities.

The draft constitution adopted by the 1891 Convention was to be put to a referendum in each colony with a view to it than being enacted for Australia by the Imperial Parliament. The proposal faltered when it lapsed in New South Wales without having gone to a referendum.

The Convention process began afresh in 1895. The premiers of the colonies agreed to establish a popularly elected Convention to produce a further draft constitution to be put to the people in each colony at referenda. This Convention met in Adelaide and Sydney in 1897 and in Melbourne in 1898. Queensland was not represented at the Convention and Western Australia sent parliamentary representatives rather than popularly elected delegates.

There was a low turnout for the election of the delegates to this second Convention, with 139,850 people out of 260,000 enrolled electors voting in New South Wales and 99,108 out of 238,000 enrolled electors voting in Victoria.

William Trenwith, a member of the Victorian Parliament and former bootmaker and trade union organiser, was the only representative of the Labour movement at the Convention. As in 1891, there were no female or Aboriginal delegates; '[i]t was for the most part the big men of the established political and economic order, the men of property or their trusted allies, who moulded the federal Constitution Bill'.

Rather than making a fresh start, the delegates to the 1897–98 Convention revised the draft constitution endorsed by the 1891 Convention. Under the Leadership of Edmund Barton, later Australia's first prime minister and one of the first members of the High Court, the Convention refined the document to incorporate later compromises.

This revised draft constitution was put to the people of New South Wales, South Australia, Tasmania and Victoria. No referendum was held in Queensland or Western Australia. The draft constitution received majority support in each of the four colonies holding referenda, but was nevertheless unsuccessful in New South Wales because the number of people that voted for the draft did not reach the 80,000 required by the New South Wales Parliament.

The draft constitution was then amended at an 1899 conference attended by the Premiers of all six colonies. In 1899 and 1900 it was again put to the voters in the colonies, this time also in Queensland and Western Australia. At the referenda of 1899 and 1900 the draft constitution was supported by a majority of voters in each colony. Voting was voluntary, with only 60 per cent of the people eligible to vote at the referenda doing so. Large sections of the community were also excluded from voting, including most women and many of Australia’s Aboriginal peoples. Overall, only a small percentage of Australians actually cast a vote in favour of the draft constitution. In New South Wales, Queensland and Tasmania the figure was below 10 per cent.

In the absence of revolution or other severing of ties with Britain, the Imperial Parliament still exercised ultimate power over the Australian colonies. So, after the referendums of 1899 and 1900, a delegation representing the Australian colonies was sent to London to have the draft Constitution enacted by the British Parliament.

However, the British Colonial Office and the Secretary of State for the Colonies, Joseph Chamberlain, were not prepared to have the Imperial Parliament pass the draft Constitution in the form presented by the Australian colonies. Concern centred on clause 74, which restricted appeals from the proposed High Court to the Privy Council.

Following Colonial Office changes to clause 74 to allow greater scope for appeals, the draft Constitution was introduced into the House of Commons. The Bill completed its passage through the Parliament on July 5, 1900, was given assent by the Queen on July 9, 1900, and came into force on January 1, 1901. Entitled the Commonwealth of Australia Constitution Act 1900, s 9 of the Act reads 'The Constitution of the Commonwealth shall be as follows:' and thereafter contains the entire text of the Australian Constitution.

The Constitution as enacted

The Constitution as drafted:

  • Federal system, separation of powers, representative and responsible government and an independent High Court.
  • The Australian Constitution was not written as a people’s constitution. It was a compact between the Australian colonies primarily designed to meet the needs of trade and commerce and defence. According to Manning Clarke, the drafters 'wanted a Constitution that would make capitalist society hum'.
  • No bill of rights.
  • Negative references to Australia's Aboriginal peoples. Section 127 provided: 'In reckoning the numbers of the people of the Commonwealth, or of a State or other part of the Commonwealth, aboriginal natives shall not be counted'. And the races power.

The problem

I believe that Australia should have a federal system of government. Although in many areas I recognise the need for centralised policies and programs, there is nonetheless an important role to be played by at least one lower tier of government.

International evidence and the Australian experience demonstrate that some services are best delivered and organised by a tier of government closer to the people.

Centralised control across the whole of the nation is often not the best way to go. National control may appear to be the way of delivering services at a lower cost, and people are often attracted to uniformity, but there are many areas where these are outweighed by the ability to tailor services more closely to the needs of the local population. There is also the problem of diseconomies of scale produced by attempting to run services from Canberra for the whole of the nation.

The problem then is not that we have a federal system, but that the one we have is broken.

This can be seen in the way that the federal system distorts government priorities and policy outcomes.

Things such a service delivery are often determined not by which tier of government can do the job best, but which tier of government has managed to raise the funds to do so. In this respect, the financial dominance of the Commonwealth is all pervasive. In our system of government, who has the money matters more than who can do the job best. It is often just a matter of good fortune if the two happen to coincide.

The result is a system that can fail to deliver services in the most efficient way, and so as a result either delivers too few services or services at too high a cost.

This has a major financial impact. One recent study has found that problems with our federal system mean that every Australian family pays an unnecessary $1100 in tax every year. This is wasted money. Overall, we are taxed a pointless $9 billion. This is the amount being used to prop up the Australian federal system.

The figure is the conservative estimate of the Business Council of Australia. It is how much the community pays for the duplication of services, buck-passing and inefficiency that bedevils the relationship between our federal and state governments.

Even this understates the true cost. It is only the amount of extra tax we pay and does not include the money lost to businesses in having to comply with unnecessary red tape and extra regulation from multiple layers of government.

Taking some of these other costs into account, it has been estimated that the duplication and extra coordination costs in Australia’s federation are an astonishing $20 billion a year, or 9 per cent of all general government expenses or 3 per cent of GDP.

This is an enormous strain upon the economy and the public purse. It also represents a massive lost opportunity. A federal system will never operate at peak efficiency, but even if some of this money could be clawed back through better practices, it would represent an enormous pool of money that could be directed to things like the better delivery of community services.

Hence, the problem is not just a financial one. Our dysfunctional federal system necessarily impacts upon the quality of government services. It means, for example, that we all end up with lower standards in health and education services that we might otherwise be able to attain.

This is not a function of who is in government. It is a price that every government must pay until our system of government is fixed.

Before I speak more about options for reform, let me say a little about how we got here.

How we got there

When Australia became a nation on 1 January 1901 it also became a federation. As stated in the opening pre­amble to the Constitution, the people of the colonies agreed to 'unite in one indissoluble Federal Commonwealth'.

This system of federalism involves two tiers of govern­ment in which power is divided between the Commonwealth and the states. Although Australia also has local governments, they are not mentioned in the Constitution.

Power to pass laws

Our federal system was based on the idea that the greater body of power should lie with the state governments. Indeed, it was intended by most of the framers that in the new nation the states would be the dominant partner.

This is reflected in how power is divided by the Constitution. The Constitution grants the Commonwealth power over 40 areas. What was significant was that the States were left with everything else.

It was thought that, by restricting the Commonwealth to specific areas and leaving the remainder to the states, the states would have the greater responsibilities.

The topics granted to the Commonwealth by the Constitution range from areas like marriage to corporations to defence. On the other hand, the list of Commonwealth powers does not refer to major areas like health, education or industrial relations.

For the first two decades of the new nation, the High Court interpreted the Constitution in a way that maintained the position of the states and limited the growth of Commonwealth power.

This changed in 1920 when the High Court dictated a new approach in the famous Engineers case that favoured a broad reading of Commonwealth power. With it, the idea of a 'federal balance', like 'states' rights', became constitutional heresy. Today, they are nothing more than political slogans.

This broad reading has enabled the specific list of federal powers to be interpreted so as to extend matters not intended by the framers. For example, a broad reading of the corporations power has enabled it to regulate not just matters of corporate law, but indeed a broad range of activities in which corporations are engaged.

This enabled the Howard government to have the Work Choices law passed to provide a comprehensive scheme of regulation for corporations. Today, it is the basis upon which the Gillard government is seeking to pass legislation that will bring about a new national regulator for Australia's universities (which just happen to be corporations).

The Engineers case was a major blow to the states, the 2006 Work Choices case was another.

The Work Choices case confirmed the High Court's long­standing approach to federalism. In upholding the validity of the Commonwealth's industrial laws based on a wide view of the corporations power in section 51(20) of the Constitution, it also amounts to a further, major centralisation of government power in Australia.

The possibilities for Common­wealth regulation are as wide and varied as the work of corporations, which are the normal way of carrying on a business in Australia. As Justice Callinan warned: 'The reach of the corporations power, as validated by the majority, has the capacity to obliterate powers of the State hitherto unquestioned'.

This is borne out by the proliferation of corporations in the provision of goods and services in Australia, most of which would be a trading or financial corporation for the purposes of section 51(20).

A corporation is a straightforward, well understood form of doing business that, through the creation of a separate entity, allows people to limit their liability in the event of a loss to the value of the shares they have purchased in the company.

These corporations affect almost every aspect of Australian life. This includes many areas currently in state control that might now be the subject of Commonwealth regulation.

In education, for example, universities are typically corporations created by state law. Private primary and high schools may also be run by corporations. Indeed, NSW Board of Studies policy documents provide that in that state the 'proprietor of a registered individual non-government school must be a corporation or other form of legal entity approved by the Minister'.

Corporations are involved with the care of even the youngest children, including childcare centres run both by small private operators and massive businesses.

As in the field of industrial relations, the corporations power could not be used to take control of all aspects of education and childcare because significant parts of these sectors are run by non-corporate bodies. Nonetheless, federal law might now be extended to many childcare centres and pre-schools, through to private primary and high schools through to, most probably, all universities.

In these and many other areas, the Work Choices case gave Prime Minister John Howard and his successors a tool with which to expand the reach of the federal government. It has no regard as to which tier of government would be best to run an area. So far the corporations power has been applied to override state industrial laws. In the future, other areas now run by the states could fall into federal hands.

On the day of the High Court decision, Howard rejected such uses of the power. But he and his successors will find the power hard to resist. In battles with the states over history teaching and report cards in schools or over hospitals or universities, it will take self-restraint versus constitutional limits on power to ignore an opportunity that could ensure that, wherever a constitutional corporation is involved, the will of the prime minister will prevail over that of state governments.

But federal power is wide, but not complete: not all work is done through corporations. This leads to problems over who responsible for what. For example, the Murray–Darling battle and the water plan and others to come over climate change. With whom does the buck stop?

As things stand, it is hard for an Australian citizen to know which government is responsible for what. Should the federal or the State governments answer to voters on issues like housing affordability and our ageing population? Instead of clear lines of responsibility, leaders at both levels can continue to seek credit for successes but run a mile or blame someone else when faced with failure.

Money

The broad and generous reading of federal power has been a major blow to the states. Another equally significant loss was in the area of tax. In federal systems, who controls the purse strings can matter even more than who has the power to pass laws. Without money to fund programs and services, laws have little effect.

The Constitution was meant to secure the states' financial position and independence. At Federation in 1901, it was the states and not the Commonwealth that levied income tax. However, the demands of two world wars and changes to the economy, as well as some canny manoeuvring by the Commonwealth, have left the states with no revenue from income taxation.

The High Court decisions in the Uniform Tax Cases of 1942 and 1957 upheld a Commonwealth takeover of the income tax system. Not only that, the decisions also gave a wide interpretation to the ability of the Commonwealth to attach conditions to money granted to the states. Section 96 of the Constitution allows the Commonwealth to make grants on 'such terms and conditions' as it thinks fit.

The financial problems of the states were also compounded by the more recent decision of the High Court in Ha in 1997. In that case the High Court struck down excise duties levied by the states over alcohol and tobacco, thereby stripping them of around $5 billion in annual revenue.

As a result of these decisions, the states today do not raise income taxes. Nor can they impose their own indirect taxes on goods like a GST. In short, their financial position is dire because they cannot raise anywhere near the revenue they need.

As a result, the states have turned to new sources of taxation, such as on gambling (though even this is now under threat as part of the proposed pokies reforms). But they remain heavily dependent on Commonwealth grants, including many billions in GST money.

The catch for the states is that when the Commonwealth grants them money it often does so with strings attached as a Specific Purpose Payment. It may require that certain state taxes be abolished or even that schools in a state use a specific type of student report card or history syllabus. The states have no real choice but to accept the money, even at the cost of doing the Commonwealth’s bidding.

It was thought that a new financial agreement (the Intergovernmental Agreement on Federal Financial Relations which came into effect on 1 January 2009) between the Commonwealth and the states would change this, and provide greater amounts of money to the states without strings attached. However, the gains are not proving to be long-standing, and the temptation remains for the Commonwealth to attach conditions for political and other reasons, and indeed this is now again occurring through the new National Partnership Payments.

The framers' vision has broken down. The federal compact of 1901 has unravelled.

Options

Australian federalism is dysfunctional because it is based on rules that no longer match the reality of how power is exercised in Australia. Based on a Constitution in which the States were to be the master, Australia now has one of the most centralised systems of government in the world.

Our federal system was conceived in the 1890s, the age of the horse and buggy. We are in the mess we are today because our system of government has passed its used-by date. It was created in 1901 and has not been modernised to meet the challenges facing us a century later.

We face a stark choice: to continue to pay extra tax for second-rate services, or to accept the challenge and opportunity of reform and fix the system of government by a proper allocation of tax revenue and a more appropriate division of power over areas of responsibility.

The answer is not to abolish the Australian territories and states. That would be unrealistic and bad policy. Few local problems can be solved by unilateral action from a national government. At least one lower tier of government is needed to help develop regional solutions and deliver services.

Problems of legitimacy are another reason why federal systems evolved. People in Western Australian were the last to accept federation and, at a time of unprecedented economic success, are as unlikely to accept rule by a single government in Canberra.

We must bring about a modern division of power between the states and the Commonwealth, and develop a fairer and more efficient system of distributing money between governments. We need to rebuild the federal system.

The work of the Council of Australian Governments over recent years has been an important start, but there is much more to do at a structural level. In the longer term, the text of the Australian Constitution will also need to change. If the rules are not reformed, bad habits will resurface and blockages re-emerge. There is a need for a revised set of rules to accommodate the changes of the past century and to prepare for the next. This needs to be part of a new deal for Australia’s federal system.

To rebuild federalism we must approach change not from the 'top down' with the view that 'we know best' but from the 'people up'. Change must occur in a way that generates support across the community and that involves real popular ownership.

For federalism, the challenge will be to find a way through the maze of conflicting aspirations and entrenched self-interest. There is also a need for caution to ensure that the interests of smaller states like Tasmania are protected by a fair settlement.

Federal reform in Australia has been put off for too long. While we have achieved profound changes in the economy and social policy, we have not applied the same energy and commitment to improving our system of government.

We should begin by holding a convention on the future of the federation (supported by all the states). Conventions were the way that the Constitution and Australian federalism were drafted in the first place. A convention would be the way to revisit these same issues by bringing together a wide range of interests and perspectives from both within and outside of government. It is the right place to start.

Copyright National Archives of Australia 2016