Thursday, November 16, 2006

Australian Constitution & the High Court Decision on Work Choices

I have not had time to properly read the High Court's decision upholding the constitutional validity of the Commonwealth Government's industrial relations legislation. For the benefit of international readers, the legislation established a national industrial systems overriding State laws in significant areas.

While I have yet to read the judgement, I thought that I might make a very brief comment with links to source material.

The Australian Constitution was created by a 1900 Act of the British Parliament bringing together the previously separate Australian colonies into "one indissoluble Federal Commonwealth."

The passage of the Act was preceded by a long series of discussions, congresses together with referendums in individual colonies. All these colonies had been self-governing for a considerable period with full power in their own territories. A key issue therefore was what powers should be granted to the new Commonwealth and in what form.

The approach adopted was to cede (section 51) to the new Commonwealth Parliament power to make laws in specific areas, with all other powers remaining with the states. A High Court was established as a peak court to make judgements on matters relating to the constitution and federal law.

The initial effect of the constitution was to limit Commonwealth power leaving real power on most matters in the hands of the states. Further, while the constitution provided a mechanism for change through national referendum, the requirement for passage by a majority of the voters in a majority of the states meant in practice that very few constitutional change referendums have ever been passed.

Yet despite the limited initial allocation of powers and the voters unwillingness to formally change the constitution, the last seventy years has seen a remarkable expansion of Commonwealth power relative to the states.

Part of this expansion has come simply from the Commonwealth's greater financial power allowing it to make tied financial grants to the states imposing conditions as part of the grants. A greater part has come from the High Court's willingness over time to interpret constitutional provisions in a progressively wider way. Together, this has allowed Commonwealth powers to expand in a way that could hardly have been foreseen by the founding fathers.

The constitution does provide (Section 51 (xxxv.) that the Commonwealth Parliament shall have power for "Conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State". However, this power was too limited to provide a base for the new industrial relations legislation that the Howard Government wanted to introduce. Instead, the Commonwealth chose to rely on the corporations power.

Section 51(xx) of the constitution provided the Commonwealth Parliament with the power to make laws for " Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth."

Initially the effect of this clause was limited in two ways. First, at the time of Federation corporations were simply less important in economic terms. Secondly, the High Court itself initially adopted a cautious approach in interpreting the constitution so that Governments and policy advisers read this clause in narrow terms.

The decision by the Commonwealth Government to base its new industrial law especially on the corporations power represented a dramatic widening of the scope of that power leading to an appeal to the High Court to have the new law ruled unconstitutional. The majority decision by the Court to uphold the constitutional validity of the legislation, while not unexpected, has raised major issues in Australia about the Federal structure and the remaining powers of the states.

The Prime Minister's view is that these concerns are unfounded. The states should have no fears. The Commonwealth has no desire to take over state powers. It would only do so if it were in "the national interest" or to achieve a "public good".

Those on the other side of the fence point to the way that the Commonwealth has already intervened in a very wide variety of matters when expedient to do so from a public policy or political viewpoint. They suggest that now the power has been confirmed, the Commonwealth will do as it has done before, cherry pick issues of immediate concern, potentially creating an uncertain and chaotic situation.

From experience, I have absolutely no doubt that Commonwealth Governments of all political persuasions will attempt to use the now established power. It would be silly to think otherwise. The very words the Prime Minister uses - in the national interest, in the public good - indicate this since these matters are very much in the eye of the beholder.

The critical issue will become, I think, the way in which the Court subsequently interprets the words "trading and financial corporations." Some have suggested that this might apply in areas such as higher education now that all universities are engaged in one way or another in trade. I suspect that the Court would rule more narrowly than this.

A second important issue will be the nature of the coverage achieved. Even in the case of the new industrial relations legislation some 15 per cent of the workforce falls outside the scope of the legislation, remaining in the residual state IR system because people are employed by State Government departments and unicorporated businesses including partnerships.

I can see some interesting times ahead.


Anonymous said...

The Prime Minister says the Federal Government will only use the corp power if it were in "the national interest" or to achieve a "public good". Then how about they look at the inefficient public hospitals of the states and water resources; not likely!!!

Jim Belshaw said...

Thanks, Anon. It's good to have someone read an older post.

In a sense you have exactly captured the cherry picking point. They will spend the money where it gets greatest political points. This is not an anti-Government point, just a comment on politics.

Take the health sector. The public hospital system and supporting ancilliary services is the core of the system for the ordinary Australian. But it is also the most difficult in political terms.