Centralising tendencies of the federal balance of power

Factors

1. CW financial power

2. Design of the constitution- vagueness of state power

3. s109- ability to override state legislation

4. HC interpretations of the constitution that expand CW power

5. Cross vesting legislation

6. Failure of the senate to act as a states’ house

CW financial power

• s90

• s96

Vertical fiscal imbalance

describes the disproportionate taxing powers and spending obligations of the CW and states

s90

• Section 90 — customs, bounties and excise (an exclusive power)

  • a significant reason for federation was to achieve free trade between states

  • con. gives financial power exclusively to CW to prevent states introducing inefficient protectionist trade taxes

  • the exclusivity of these taxes meant the states lost a lucrative source of revenue, with the CW collecting surplus revenues while states are in permanent deficits.

  • this perpetuates the vertical fiscal imablance

s96

• the grants power “the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit.”

• is a transfer mechanism for CW surplus revenue to the states, since the founding fathers knew the VFI would exist

Grants

• administered by the commonwealth Grants Comission and enacted as a statute

• CGC monitors spending of grants according to conditions attached to them

• allow CW to interfere with residual powers through conditions

Tied grants

• grants require compliance with CW conditions

• spending and compliance is monitored

Coercive

• CW can dictate terms to the states and extend its reach into their residual powers

• CW can use these grants to achieve national aims using state powers

• Example

• Schooling — a residual (state) power.

• In 1957 — during the Cold War — the Soviet Union launched the world’s first satellite.

• Fearing the Soviet Union was gaining an advantage in science, the Menzies Government made tied grants to the states, forcing them to build science laboratories in state high schools.

Incentive payments

• these grants provide incentives for states to perform specific actions specified by the CW

• they are made after states have proven they have met the conditions

Example

• Need for national economic reform :

• The National Competition Policy (NCP) of the Keating-era (1991–1996) reformed state-controlled energy, gas and water markets.

• The Keating Government sought to force the states to privatise their assets by selling them to private companies.

• The NCP was an early incentive payment scheme which saw states rewarded with Commonwealth grants if they sold their assets to private companies. The NCP was coercive because it dictated narrow goals to the states.

National Partnership Payments

made to states to achieve agreed National Projects negotiated by Commonwealth and state governments under the National Reform Agenda (NRA) and Intergovernmental Agreement on Federal Financial Relations (IGAFFR) (2009)

Process

1. two levels of government enter into national agreements

2. under the five national agreements, they enter into national partnerships (CW- state partnership)

3. specific National Projects are then agreed and worked on by both levels of government.

4. CW provides funds through National Partnership Payments while states provide legislative power and human resources

Example:

• Auslink is a shared investment in infrastructure developed by both levels of government

• NDIS - requires CW funds, but scheme relies on state health and resources to deliver gov’t services to the disabled

Coercion

• used to push states toward a national standard, such as in education, health, or infrastructure, forcing states to align with federal priorities to receive the funds

Expiry of s87- the “Braddon blot”

• another mechanism intended to transfer funds from CW to states

• refers the Commonwealth to pay the states 75 per cent of the revenue it collects from Section 90 (customs, bounties and excise.)

• had a 10 year time limit after which the CW could decide to continue or not- CW ended the payments ASAP

• time limited sections — like Section 87 — are termed ‘spent sections’. Once the time limit expires, they cease to operate unless the parliament wishes to continue the provision.

s109

CW can override state legislation in areas of common power, and can ‘ cover the field’ of concurrent powers to exclude states

• s109 was initially interpreted narrowly, but is now interpreted broadly and expands the CW’s legislative power

• the High Court accepted that within the wording of the statute, the CW can specify that it’s meant to be “the only law” in that area, invalidating all state laws in that field because the inconsistency is effectively 100%.

Design of the consititution

• constitution doesn’t specify state powers so HC can’t interpret or defend them

• protection of “state parliaments” in s107 is vague, protection in general terms not for specific legislative power.

• con’s wording has left open the possibility of broad interpretations of CW legislative and financial powers

High Court interpretations

• Doctrines of interpretation which reserved and protected state power (created by early High Court judges who knew intent of con. to reserve state powers even though it wasn’t expressed) were abandoned by the 1920s.

  • doctrine of reserved powers- protected states’ s51 concurrent powers e.g. narrowly interpreting s109

    • Peterswald v Bartley- Early High Court case where Griffith CJ suggested the Constitution was a federal compact and that general Commonwealth powers should be read in a way that preserves State autonomy

  • doctrine of implied immunities of instrumentalities (state owned business) - implied state power should be immune from the CW.

    • Railway Servants Case (1906) – extended a immunity to State railway employees from Commonwealth industrial law, protecting State enterprises from Commonwealth interference

• These doctrines were abandoned in 1920 when the Engineers Case overruled the Peterswald and Railway Servants cases

  • Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920): The High Court rejected both reserved powers and implied immunities doctrines.

  • Implication: The Court shifted to a more literal interpretation of the Constitution, expanding Commonwealth legislative and financial power.

  • Result: This marked a move toward coercive federalism and reduced the constitutional protection previously given to State power.

• High court decisions/ interpretations of con. can redefine powers and change the balance of power

Cross vesting legislation

• Definition: Cross-vesting allows jurisdiction (legal authority to hear cases) to be shared between federal and state courts.

• Commonwealth legislation (valid):

  • Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth)

  • Allows state courts to exercise federal jurisdiction.

  • Purpose: reduces cost, delay, and inconvenience for parties by avoiding multiple proceedings.

• State cross-vesting (reverse direction):

  • States attempted to vest state jurisdiction in federal courts.

• Background (corporations law issue):

  • New South Wales v Commonwealth (1990) → Commonwealth lacked full power over corporations’ formation.

  • States responded by:

    • legislating corporations law themselves, and

    • cross-vesting jurisdiction to the Federal Court to maintain a national system.

• Key case — Re Wakim; Ex parte McNally (1999):

  • Issue: validity of state laws vesting jurisdiction in federal courts.

  • Facts: Federal Court decided company law cases using cross-vested state power.

  • Argument: Federal Court lacked constitutional authority to exercise state jurisdiction.

  • High Court decision:

    • State cross-vesting laws were invalid.

    • Federal courts cannot exercise state jurisdiction unless authorised by the Constitution.

• Effect of Wakim:

  • Struck down state → federal cross-vesting.

  • Limited ability to create a fully integrated national court system through this method.

• What remains valid:

  • Commonwealth law allowing federal → state cross-vesting still stands.

  • State courts can continue exercising federal jurisdiction.

• Impact on federal balance:

  • Centralising- breaks strict separation between state and federal judicial systems, encouraging the uniform application of national law over diverse state laws and often favoring the jurisdiction of federal courts

  • Cross-vesting legislation overall has had minor impact on shifting power between Commonwealth and states.

Impact of high court on the federal balance of power

• more coercive by:

  • expanding the Commonwealth’s lawmaking power;

  • expanding the Commonwealth’s taxing and spending powers; and

  • removing implied protections of state power.

Failure of the Senate to act as a states’ house

partisan house where senators vote along party lines not according to state interests, resulting in Senate acting as a house of review, not simply a protector of states

the states’ house concept was never realized because senators have almost never voted in state blocs because state issues aren’t distinct from national political party lines

• strong party discipline- unity, career progression, re-election, organisational resources