Reforming Federalism

A DISCUSSION PAPER

Paper presented to the Annual National Republican Convention, 2003

By Dean Jaensch
Professor
School of Political and International Studies
Flinders University

The Australian federal structure, embodied in the Constitution, has remained all but unchanged for 101 years. As a result, slowly at first, but more rapidly as the Australian polity developed, the formal structure has become anachronistic.

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The political processes have been forced to find a way around the Constitution, at times to ignore or contradict it, to establish means for the application of reasonable and rational public policy. Despite the massive changes – social, economic, demographic, cultural – in the Australian society, the Constitution, as the supreme law of the federal system, has remained almost the same as when it was written in the 1890s.

The planners sought to create a structure and process of government which reflected their dominant interests. The agricultural and commercial elites of the then colonies viewed the inauguration of a national parliament and government as a threat. As a result, the federal Constitution established a national government with strictly limited powers, authorities and functions, and with powerful constraints against any wider development. The “dual” federalism was deliberate, leaving residual powers with the States, and the amendment process was designed to keep things that way. As a social document, the Constitution was “permeated by the conservatism, parochialism, and pettiness that characterised the Australian colonies at the end of the nineteenth century” (Encel 1977:43). 

An examination of the structure and processes of Australian federalism provides a practical application of the important differences between authority and power, and between law and political practice. There has been little change in the formal words of the Constitution – the planners’ design intended that result – and little change in the original federal compact. Hence the Commonwealth and the States broadly retain the authority given to them in 1901. Section 51 is still the same as it was in 1901, except for the effect of the 1967 referendum. 

But the power equation has radically shifted. As the Commonwealth gradually gained control of the finances of the federal nation, especially after the 1942 Tax Act, the power of the states to carry out their constitutional functions became limited. The reliance of the States on the federal coffers has meant that the real powers of policy-making have increasingly moved to Canberra.

The disjunction between law and practice has increased over time, as the formal document became increasingly “behind the times”, or did not recognise developments, or was simply inimical to rational progress. The planners could not have foreseen the developments which took place after 1901. But they still designed a Constitution which allowed for very little “room to move” for their successors. 

For example, the legislative authority over the development of air travel and electronic communication through radio, TV and, later, computer technology, faced a vacuum in the Constitution. In such instances, it was seen as logical that the Commonwealth should oversee a uniform system. But the formal basis of the Constitution would, without a referendum, place these matters in the hands of the states. The Snowy Mountain Scheme and the CSIRO (as just two examples), were built only because the governments of the day ignored the Constitution. 

There are many similar cases where developments in the polity, society and economy have required decisions as to which of Commonwealth or States should have authority. Because the Constitution has not “moved with the times”, such decisions have had to be based on consensus, often by ignoring the Constitution. The decisions have had to be made on the basis of expediency. Should they be? Or should the federal Constitution be transformed so that it reflects better the nature and the demands of the modern Australian polity?

A caveat should be noted. The founding fathers did deliberately design a rigid Constitution. But this has been compounded by partisan politics and party confrontation over federalism. It is a truism that constitutional reform is all but impossible in the absence of bi-partisanship. The extent to which that is hard to achieve is shown by the campaigns for the 1988 referendums, where the Liberal party campaigned for a “no” vote on two issues where its own platform was in favour (fair and democratic elections and the status of local government).

In summary, the Constitution established a dual federalism, in which the national and state governments would have separate “spheres” of activity, and be sovereign within them. It also established a limited central government, with restricted authority, and carefully delineated areas of activity and policy-making authority.

In 2003, the situation is markedly different, although the formal division of powers has remained virtually unchanged. Today, there is overlap, duplication, and intervention by the Commonwealth matched by resistance from the states. The Commonwealth has grown in size, expanded in influence, and burgeoned in power. Among the present roles of the Commonwealth, formally restricted to the States in the Constitution,  are education, social security, health, transport, agriculture, mineral development, and housing. There is an increasing reliance on inter-dependence and inter-governmental co-operation (rather than the formal independence), joint activity, negotiation, bargaining and, occasionally, consensus.

All of these activities, not based on the Constitution, are logical and necessary. But there is a powerful voice of the “states-righters”, whose attitude is that the original compact should be adhered to, epitomised by the statement by Queensland Premier Bjelke-Petersen:

Every parent in this country will need to consider very carefully whether any extension of federal power, any denigration of the crown’s role and functions in our particular form of Federal democracy will not within our children’s lifetime lead to a system of government involving fear and the midnight doorknock (cited in Maddox 1973:95).

A centripetal trend of power was inevitable in the Australian federal system. This is especially the case when the political structure of federalism did not rest on any clear social federalism. The Federal map involves artificial delineations within an increasingly national society. The expansion of national functions and national power has occurred under both Labor and Liberal administrations. It has occurred because society and the economic structures and processes have changed. The “tyrrany of distance” has been overcome.

This trend has been inexorable, and it has resulted in different reactions. The “states’ righters” have demanded a return to the original compact, with the States regaining their former power (they have retained the authority). The Whitlam Labor government sought to use the creation of a fourth tier (regions) as a temporary measure in a plan to create a two-tier federation. The Fraser government had a rhetoric of a new role for the States, but its policies continued the centralism. Nick Greiner introduced the “new Liberal” policy on federalism in 1990, a plea that his party drop its obsession with “states’ rights”, and urged another “new federalism” – agreeing with Bob Hawke that Australia must move to a “single market, a single economy and, indeed, a single nation”.

The “disadvantages” of as federal system, outlined by DeVos (1975:177) have become patently obvious in Australia: 

  • may promote spoils and inefficient administration
  • may allow waste and unequal development
  • may allow non-uniform protection of rights …
  • may promote disunity
  • may create confusion as to what level of government has authority and responsibility
  • may make the political system vulnerable to pressure politics that can use state and local governments as vestiges of interests.

A comment is needed about the status of local government. The constitutional planners considered this sector, despite it preceding even the formation of the colonial governments in the 1850s, as too unimportant to be given any formal place in the Constitution. As a result, local government has remained a “creature” of the state parliament, subject to it and the state government, in all matters. An attempt in 1988 to grant merely constitutional recognition of existence to local government was defeated.

But local government was the planned vehicle for the Whitlam attempt to generate a new federalism, the vehicle which would result in a two-tier federal structure based on a national government and regional governments. Any reform of federalism will have to take into account the roles and functions of local government.

The “pro-federal” literature makes claims for the “positive” effects of the 1901 model of federalism:

  • stop concentration of power in Canberra;
  • reflect the large, different, sparse population;
  • protect individual freedom;
  • “small is beautiful”;
  • limit big government and big bureaucracy;
  • decentralisation;
  • closer to the people; and
  • protect minorities.

None of these is achieved by the current structures and processes of federalism.

Towards Reform?

It is easy to conclude that the current structure of federalism is outdated, anachronistic, not producing what was claimed for it, and must be changed. But the question then applies: reform by whom; under what principles; to what end?

There have been a number of proposals for reform of the Constitution and its federal structure. Formal major attempts have been:

  • the 1929 Royal Commission proposed major changes – never carried through;
  • a 1959 Joint Parliamentary Committee proposed major reforms – abandoned;
  • a Constitutional Convention began work in 1973 and, despite being faced with partisan divisions, did result in three (minor) questions put to referendum, and carried, in 1977: federal judges to retire at 70; the filling of a casual      vacancy in the Senate; and granting a right to vote to Territory electors in a referendum. In 1985, the internal divisions had become so strident that the Convention was abandoned.
  • in 1985-8 a Constitutional Commission carried out a major study and made a proposal for a new Constitution. A small section formed the basis of the 1988 referendums, all of which were defeated.

The issue of “under what principles?” has been best stated by Colin Howard (1980:23).

A constitution is likely to be successful and influential only to the extent that it reflects the basic assumptions and attitudes of the society to which it applies. In doing so, however, it affords also a valuable measure of protection to those same attitudes and assumptions. It provides a text to which people can point if and when any of the basic values for which their society stands come under attack.

Here, then, is the first, key issue. The Australian Constitution has little concern with values: the Founding Fathers were essentially concerned with mechanics. This needs to be a first step: to decide what the Constitution should say, at the level of principle, about a federal system, a division of powers, the authorities of the parliaments, representation, responsible government, the judiciary, the role of the executive, and the role of the people. In the USA, these principles flow from the initial statement – “We the People” –  which makes absolutely clear who “owns” the Constitution.

A second key issue is whether the Constitution should include a Bill of Rights. Here, I would suggest that the models for discussion be the Canadian and the South African Constitutions. 

A third key issue is to decide on the means of amendment of the Constitution. It should be a compromise between rigidity and popular democracy.

The issue of “reform by whom?” needs answering from the beginning. If the issue is left to the political parties (as at present), then the potential for any reform at all is very low, and the potential for real reform almost non-existent. But how is it planned to involve the wider society in the process? Australians are notoriously apathetic, especially about constitutional reform.

Which “model” of “federalism”?

The question of  “to what end” is the prime issue. The choice of overall structure appears to be that between a unitary and a federal nation.

There are many factors which mitigate against acceptance of a unitary structure: the geographical, social, and political complexity of the society; the fact that unitary nations such as the UK are slowly developing decentralisation to the point of quasi-federalism; the existing culture of “states rights” which would mean that any such proposal would have no hope of acceptance.

If the only solution is some form of federalism, then key questions follow. 

Should the federal structure be based on the existing three “spheres”? That is, on Commonwealth, State and Local? Or should the federal structure be based on two “spheres”?

If the former is selected, then a series of questions follow. On what principles will the division of powers be based? Will the Constitution recognise local government, and include this sector in the division?  Will the division of powers be relatively exclusive; or will it allow “overlap” to encourage co-operation? How will the essential issue of finance be established? The question of which “sphere”, or which “spheres” have access to the growth component of income tax will be the key question here. What co-ordinating structures will be established? What system will be put into place to amend the division of power?

If the structure is based on a two-“sphere” structure, subsidiary questions need answers. Which existing “sphere” will be abandoned – state or local? What divisions of power will be applicable? Will the national “sphere” have set powers, and the other “sphere” the residual powers? Or will both “spheres” be granted specific and relatively exclusive powers? If so, what financial arrangements will be put in place? What co-operation and co-ordination structures will be established?

Further, will the non-national “sphere” have a policy-making authority, or will it be essentially an administrative “sphere”? That is, does the structure establish that the essential national policies will be made at the national level, and that the second “sphere” has the responsibility for administering the policies with an input from the different requirements and needs of the specific local area? 

There is a wide range of issues – at the levels of principles, structures and practical requirements – which will have to be resolved before any reform of federalism can be considered as an improvement. Above all, the public must be kept “in the loop” from the beginning of the process: for any reform to succeed, it must first pass the gauntlet of a referendum of the people. 

REFORMING FEDERALISM?

 

 

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