GEOFFREY SAWER

The Australian Commonwealth and the Australian States

Since the First World War, a frequent cry of Australian state political leaders, especially those from the non-Labor parties, has been that the power of the Commonwealth, as it was always called until 1972—the center government in the federal system—has increased, is increasing, and ought to be diminished. The methods and rate of increase have varied a great deal and have depended partly on parliamentary politics, partly on judicial politics, and partly on the occurrence of economic crises, wars, and the threats of war substantially outside any Australian control. All federal parties and governments have contributed to the increase—the non-Labor parties more than Labor. Because of the demands of office, they have increased it pragmatically, sometimes in the teeth of official party policy. The Australian Labor party (ALP), on the other hand, while likewise much influenced in the timing of particular federal expansions by immediate needs and demands, can gracefully yield to such pressures because in any event it has a long-standing commitment to strengthening the central authority; in the minds of ALP federal leaders, the creation of a powerful single “national” parliament, government—and since 1972 judiciary as well—has long been an ideological imperative, whereas the concessions to state-rights sentiment and the preservation of a federal devolution have been seen as the pragmatic requirement. Prime Minister Gough Whitlam, leader of the ALP government which achieved power at the center in December 1972 and the most sophisticated and aggressive “centralizer” in the country’s political history, illustrated the trend when he insisted on replacing, as far as he could, the expression “Australian” for the expression “Commonwealth” to describe the institutions of the center—“Australian” Parliament, government, and so forth; it is a usage which leads to ambiguity in some contexts, however, so in this essay the older “Commonwealth” is retained. In any event, the Fraser Liberal-Country government which succeeded the ALP in late 1975 has since been—slowly, as one might expect—restoring “Commonwealth” to official use. Regardless of labels, the course of constitutional development has been irregular and in many details surprising.

In 1919 Australia’s constitutional system could still be described with substantial accuracy as complying with the vision of coordinate federalism set out in James Bryce’s American Commonwealth;¹ that work had been the bible of Australia’s federal fathers, including the first chief justice (Samuel Griffith) and the first two puisne judges (Edmund Barton and Richard O’Connor) of the High Court of Australia. Probably Bryce’s book underestimated the extent of federal cooperation in America even when he originally wrote it, and certainly the Australians had by 1919, through Premiers’ Conferences and other extraconstitutional measures, started to develop in a cooperative direction. As far as judicial interpretation was concerned, however, there were no fundamental differences between the view of federalism entertained on the U.S. Supreme Court in 1919 and that entertained on the High Court of Australia, even though the characteristic “federal implications” doctrines developed by the three original High Court justices had been coming under increasing attack by subsequent appointees, notably Isaac Isaacs and H. B. Higgins, who were also federal fathers.

It was characteristic of the Australian legal and, in particular, the judicial establishment, so much closer to the outlook of British nineteenth-century legal traditions than were the Americans, that in Australia the generalized political theory of coordinate federalism had been transmuted by the first High Court into two specific constitutional principles: the doctrine of “immunity of instrumentalities” (corresponding to the looser set of U.S. rules concerning “intergovernmental immunities”) and the doctrine of “implied prohibitions” (similar to but wider than the U.S. doctrine of state “police powers”). The Australian immunities doctrine prohibited the Commonwealth government and the states from interfering with each other’s governmental activities, and the “prohibitions” doctrine required Commonwealth powers to be narrowly construed so as to preserve a substantial area for state residual power under s.107 of the constitution.² As late as June 1919, the High Court in Australian Workers’ Union v. The Adelaide Milling Co. Ltd.³ applied the immunities doctrine so as to prevent the Commonwealth Court of Conciliation and Arbitration, operating under s.51 (xxxv) of the constitution, from settling an industrial dispute between two state wheat marketing authorities and their employees; the majority included Isaacs, one of the leading critics of federal implications as a means of constitutional interpretation.

By the end of 1920, an American observer of the Australian scene—such as Hartley Grattan—might well have prophesied that the future of Australian federalism was going to be markedly different from what in fact occurred. He might have prophesied that there was going to occur in Australia, largely through changes in judicial interpretation, a broad expansion of Commonwealth legislative and corresponding administrative competence and activity. On the other hand, he might have forecast that by an irony of history this accretion of normative power to the Commonwealth, would be accompanied by a growth of fiscal resources available to the states, tending to make them less subject to center influence, based upon fiscal superiority, than the Australian founders had anticipated and feared. Looking at the then contemporary political situation, he would have noted that the Nationalist party government under Prime Minister William Morris Hughes, although formed in 1917 by merging a small leaven of former ALP, Commonwealth-rights “bolters” with a large mass of state-rights Liberal party supporters, still possessed a certain amount of the Commonwealth-aggrandizing impetus of the Fisher-Hughes ALP government of 1910–1914; that government had fostered a slowly growing electoral support for constitutional change to expand Commonwealth powers, until absorption in the First World War ended such activities. Hence, it would have seemed not improbable that a Hughes-led Nationalist government, inclined to make use of opportunities for Commonwealth self-assertion, might coincide with encouragement to such activity from High Court decisions. Since the coincidental growth in state fiscal resources involved no diminution of Commonwealth fiscal resources, this need not have deterred our prophet from foreseeing for Australia something like the revolution that occurred in the federalism of the U.S. between 1936 and 1945.

This forecast about the course of constitutional interpretation would have been based on the following details. In 1920 the High Court embarked on what then appeared to be a decisively new course in constitutional construction, one predicated not on coordinate and reciprocal stasis but on “progressive” development, tending in practice to encourage the growth of central power. O’Connor died in 1912 and Barton in January 1920. Chief Justice Griffith retired in 1919; he was succeeded by Chief Justice Sir Adrian Knox. In general terms, Knox was if anything a more conservative man that Griffith. But he had not been a founding father, had no special set of theories about the nature of a federal polity, and had achieved eminence at the Sydney bar as a competent legal technician who was at home with traditional Anglo-Australian methods of statutory interpretation. He presided over a Court containing no survivor of the original three justices. Of this Court, Isaacs (appointed in 1906) had an ideological commitment to the “nationalist” view of the constitution as a stage in Australian development; Charles Powers (appointed 1913) had similar inclinations but little reputation as a jurist; Higgins (appointed 1906) was specifically committed to a maximum expansion of central power in industry and commerce, though in some respects he had state-rights inclinations—an ideological schizophrenia later exemplified by H. V. Evatt; George Rich (appointed 1913) and H. E. Starke (appointed 1920), like Knox, had played no part in federation and were inclined to regard constitutional interpretation as mainly an exercise in statutory construction. Ironically, the principal state-rights voice now on the court was that of Gavan Duffy, who had been appointed in 1913 by the Fisher-Hughes Labor government under the pathetic illusion that because of his radical Irish background he might favor broad constructions of central power.

Hence, it was not a matter for undue surprise when in the Engineers’ case (1920)⁴ a strong majority of the Court (only Gavan Duffy dissenting) made a frontal attack on the “federal implications” doctrines hitherto followed and substituted the principle that the constitution should be interpreted by the positivistic and literal methods usually applied to statutory construction in Australian and English courts. The practical effect of this was to require reasonably broad interpretations of specific grants of power and to avoid implications (whether of restrictions on power or of grants of power), or at least implications based not on textual analysis but on some general theory about the structure and purposes of federations. This pronouncement was made the more dramatic because it was not at all necessary for the Court to take such a course in order to determine the case. The only question was whether the Commonwealth Court of Conciliation and Arbitration could settle a dispute between the Western Australian government and employees in state-owned sawmills and engineering works; a plain answer would have been (applying both Australian and American doctrine) that the function was trading, not governmental, and accordingly “implied immunity” restrictions on the federal competence had no application. Instead, the Court dealt with the “immunity of instrumentalities” doctrine as a whole; it went even further by criticizing as well the “implied prohibition” doctrine which was not involved in the case at all.⁵ Then, in McArthur’s case (1920),⁶ a similarly strong majority of the Court held (Gavan Duffy again dissenting) that s.92 of the constitution, guaranteeing freedom of interstate trade, did not bind the center at all but applied to the states in a very stringent fashion, so as virtually to exclude them from any power to regulate interstate commerce as such—an approximation to the U.S. position on this topic. These two decisions provided a solid foundation for a possible course of decision leading to a predominance of Commonwealth authority in the commercial life of the country, comparable to that achieved by the U.S. Congress after 1936.

On the other hand, our 1920 observer would have been optimistic about the fiscal future of the states chiefly because the Australian people, after strong initial resistance, had become accustomed to the payment of income tax. By 1907 every state had introduced this form of taxation; the Commonwealth followed in 1915; and by 1920 a pattern had been established in which the states imposed tax at higher rates than the Commonwealth and the Commonwealth regarded itself as the residuary claimant to this form of revenue. For example, the Commonwealth treated state tax payments as deductions for its purposes—not vice versa. Discussions between Commonwealth and states with a view to achieving some uniformity in assessment principles and some sharing of administration had already begun, and in 1932 a royal commission appointed by the Commonwealth recommended both a uniform assessment act and joint administration, and the latter was actually achieved in 1936. This was a notable exercise in cooperative federalism. Insufficient attention has been paid, however, to the fact that it was a cooperation in which the states bargained from strength, because no one had as yet contended that the Commonwealth could by any means short of constitutional change exclude the states from the income tax field (as they were excluded from customs and excise by s.90 of the constitution).

The declining importance of Commonwealth grants to the states was an important factor in the successful negotiation of the 1927 agreement on public loan raisings, given constitutional blessing in 1928 by the insertion of s.105A in the constitution and the consequent establishment of the Australian Loan Council. That agreement had the effect, among others, of converting the Commonwealth per capita payments to the states, introduced in 1910, to a payment via the Loan Council toward interest and sinking funds for state indebtedness, thus freezing this kind of Commonwealth subsidy at its 1927 level. This freezing operation was accepted by the states with comparative equanimity, precisely because of the declining importance of what used to be considered their “share” of the customs and excise revenue in their budgets. The “claimant states” (Western Australia, South Australia, and Tasmania) in effect still needed to obtain transfers from the three wealthier states (New South Wales, Victoria, and Queensland) via the Commonwealth Treasury. The ad hoc system for insuring this (begun in 1910) was stabilized and rationalized by setting up the Commonwealth Grants Commission in 1933, and this added to the fiscal strength of the states as a whole by removing the special grievances of the poorer states from the regular attention of federal politicians.⁷

The same American observer might now look back and ask “where did my prophecy go wrong?” He would have had to reply somewhat as follows: first, the story of judicial interpretation did not follow the course suggested by the Engineers’ and McArthur’s cases, and it failed to do so for a mixture of judicial and political reasons.

Politically, the Bruce-Page, Nationalist-Country party coalition government which held office from 1923 to 1929 was quite prepared to extend Commonwealth powers to their limit in defense of capitalism. Indeed, their long-drawn-out war with the trade unions was the eventual cause of their downfall; but they were not so keen on the business of regulating capitalism and were happy enough to leave to the states the major share of economic development and such meager expansion of welfare services as occurred.⁸ The absence of frequent occasions for testing the validity of Commonwealth legislation in the sphere of commercial and industrial control, apart from controls over industrial strife, contributed materially to what occurred in the area of judicial decision. Although the language of the Engineers’ and McArthur’s cases was adopted by strong majorities of the High Court, its implications needed to be developed by prompt legislative and administrative action on the part of the Commonwealth and given subsequent judicial blessing so as to convert what could be regarded as mere obiter dicta into accepted constitutional jurisprudence.

On the judicial side, the basic difficulty was that only Sir Isaac Isaacs was committed without qualification to the principles of the majority judgments in the Engineers’ case and McArthur’s case—as a program for making the Commonwealth both the main instrument of an emerging Australian nationhood and the commercial policy leader for both external and domestic purposes. Higgins had reservations about Commonwealth supremacy, probably accentuated by his bad personal relations with W. M. Hughes. Knox, Rich, and Starke preferred an Engineers -style approach mainly for technical reasons—it saved them from speculations about the general nature of the constitution, which to them smacked of politics, and it avoided the apparent logical trap of treating the “residual” gift to the states under s.107 as if it contained a “specific” gift as well. Gavan Duffy rejected the Engineers approach. There are grounds for thinking that Isaacs alone fully understood the reasoning and implications of the McArthur judgment; certainly, that decision was never squarely applied in its own particular field, namely, the meaning and application of s.92, the guarantee of interstate free trade. In such contexts, the case was habitually cited with unctuous respect and then was ignored. The proposition that the Commonwealth was not bound by s.92 was repudiated by Evatt soon after his appointment in 1930, abandoned by the Commonwealth itself in Vizzard’s case (1933),⁹ and pronounced bad law by the Privy Council in fames v. Commonwealth (1936)¹⁰; thus the possibility that the Commonwealth would not only be empowered but in practice be compelled to provide a national code of commercial law for interstate commerce accordingly disappeared. Critics of the Engineers’ case appeared. Owen Dixon (appointed 1929) soon established a reputation as the greatest Australian jurist of all time and one of the greatest common law judges of this century; he disliked its style even more than its contents. But even as to its contents, he joined Evatt in the view that literal interpretation could not solve all problems and that some general conception of federalism ought to enter into judicial reasoning about the Australian federal constitution.¹¹ It was not surprising that Justice Dixon should have criticized the Engineers’ case and sought to narrow its application, since he was a conservative, brought up in a Victorian atmosphere which accepted almost without thinking the state-rights view of the constitutional structure, and he had never regarded the views of the first three justices as manifestly wrong.

It seems today more surprising that Evatt should likewise have regarded the Engineers’ case with suspicion. Indeed, on some subjects, generally speaking the construction of positive Commonwealth powers, Evatt accepted an Engineers’ case approach. Even before going into Commonwealth politics, he supported the extension of Commonwealth competence, especially in the international field. Like many middle-class socialists of his generation, however, Evatt had grown up in an atmosphere of state politics. He expected more immediate and positive results from social reformers at state levels than he did from the Commonwealth—partly because of the Commonwealth’s restricted competence in social welfare fields and partly because of the relatively conservative bias of Commonwealth politics, which was derived from the political demography of the continent as a whole. It was that attitude that had caused the Labor parties in general to oppose federation in the first place. My personal impression of Evatt was that he remained a politician, in the narrower sense of “politics,” even while on the High Court. It seems that his opinions on constitutional matters were guided more by the immediate contemporary trend of politics than by any long-term views about the structure and working of constitutional systems. Through the 1920s he had seen the dominance of the right-wing parties in federal politics, while at the same time Labor had a fair share of government in New South Wales and Queensland and a respectable record of carrying out social reforms. His appointment to the High Court in 1930 was entirely due to the ALP federal election victory of 1929. It was already apparent by 1930, however, that James Scullin’s ALP government was in deep internal trouble and was not prepared for frontal battle with the overwhelmingly hostile Senate. Thus by 1931 Evatt had good reason to suppose that the future pattern of Australian politics was going to be much like what it had been ever since the break-up of the ALP under Hughes in 1916. Therefore, he did not change the outlook which dictated a desire to preserve a considerable degree of power and autonomy for the states. It was also an Evatt characteristic that in constitutional matters he appeared as advocate for cases in which he believed, not readily changing the views which he had developed as advocate. He had been on the losing side in the Engineers’ case, and it was probably of more than symbolic significance that his successful opponent was R. G. Menzies.

Dixon and Evatt were the outstanding intellectual influences on the Court between 1930 and 1936, when Sir John Latham was appointed chief justice. Latham may not have been of quite the same caliber as a jurist, but he had far greater experience and understanding of politics and the conduct of government. Moreover, he had a positivist bent of mind which inclined him strongly toward the Engineers’ case viewpoint. On constitutional questions, he had an influence comparable to that of Dixon and Evatt. On the other hand, Latham was also a conservative in his general political outlook and was not disposed toward the construction of Commonwealth powers in such a way as seriously to abridge the position of the states.¹²

The consequence was that after 1936, and even after the departure of Evatt from the bench in 1940, the Court as a whole pursued a somewhat wavering path. The Engineers’ case continued to be the basis for interpreting Commonwealth powers in a more generous spirit than they had been interpreted before 1920; but the defense power was treated in a less generous way than Isaacs had treated it in 1916;¹³ and the ghost of “federal immunities” continued to appear in some of the wartime decisions.¹⁴ The Uniform Tax case (1942)¹⁵ beautifully illustrated these clashing influences and provided a bridge from the judicial to the fiscal theme, which was the second one to develop in ways not easily predictable in 1919.

The fiscal autonomy which income taxation and economic expansion were bringing to the state through the 1920s did not appear to be immediately prejudiced by the financial agreement of 1927, even though the Loan Council machinery for handling the public debts of the seven governments to a considerable extent bypassed all seven parliaments. This was because the agreement gave the states a voting majority on the Loan Council. Although at the time a revolutionary step in cooperative federalism, it was again the sort of cooperative federalism which rested upon at least equality of bargaining power between center and regions. It was accepted from the first that Loan Council decisions would be carried into effect by the Commonwealth, but even this was not seen at the time as a special threat to the states. However, the circumstances of the world depression, already apparent in Australia by late 1929, rapidly produced conditions under which the Loan Council system became in practice an important instrument of financial domination by the Commonwealth as against the states.

Through 1930–1931, the politics of this was seen in the “battle of the plans.” Premiers’ Conferences and Loan Council meetings (almost indistinguishable in personnel and responsibilities) settled for deflationary policies which in turn brought about even greater fissions in the ALP than those caused by military conscription in 1916–1917.¹⁶ The Scullin government was defeated at the polls in 1931, and the Lyons-Latham Commonwealth government which succeeded it proceeded at once to make vigorous use of several Commonwealth powers—including those created by s.105 A of the constitution—to coerce and drive from office the only remaining Labor government prepared to defy the “premiers’ plan.” That was the Lang government in New South Wales; when it endeavored to suspend debt servicing, its revenues in banks were frozen or seized by the Commonwealth—a course held constitutionally valid by the High Court in the three Garnishee cases (1931).¹⁷ Those decisions were in a sense logical applications of Engineers’ case principles. Gavan Duffy, now chief justice, dissented because he was a genuine state-righter, and Evatt dissented because he disliked coercion of this particular state by this particular Commonwealth government. Dixon went with a majority against the general trend of his constitutional thinking, ostensibly because of the overriding effects of s.105 A and probably also because of a sense of national emergency. Thus the economic, political, and judicial events of 1929–1932 established that the Loan Council system was likely in practice to be an instrument of Commonwealth ascendancy in this aspect of public finance. The Commonwealth’s position was strengthened by the financing of the Second World War, by the banking policies initiated by the Curtin-Chifley governments in 1941–1949, and, in basic principles, continued by subsequent Liberal-Country party governments. These insured that the Commonwealth government could exercise a veto on Loan Council decisions because it could prevent the council from establishing any direct relations with the loan market, domestic or overseas.

Having thus collared the field of loan finance, the Commonwealth proceeded to obtain a de facto monopoly of income tax by a combination of legal and political pressures and a de lege monopoly of indirect taxation, mainly through judicial decision.

The income tax monopoly obtained in 1941–1942 was immediately occasioned by the fiscal consequences of the Second World War, in particular the enormous expenditures made necessary by the Japanese entry into that war and the real threat of a Japanese occupation of north and northwestern Australia. Even before December 1941, however, it had become apparent that some means for equalizing the tax burden in Australia had become essential because of the increasing magnitude of that burden. The technical obstacle was the requirement in s.51(2) and s.99 of the constitution that federal taxation should be uniform. State income taxes were at many different levels. In particular Victoria had become a low-tax, low-expenditure state, while New South Wales was a high-tax and high-expenditure state. Those states had the bulk of population and industry. The only radical solution to the problem was to end state income taxes and substitute a uniform Commonwealth tax at a very high rate. The Menzies-Fadden governments of 1939–1941 had not been prepared to face up to the politics of this. The Curtin-Chifley governments of 1941–1945 did have the necessary political fortitude and expressed it in four interlinked acts. Four states immediately challenged the acts in a High Court of five—Dixon being absent as minister in Washington—but they were all held valid by varying majorities. The main basis was the Commonwealth’s ability to make conditional grants under s.96, applicable in peace as in war. By 1945 the so-called uniform tax scheme—which should have been called the Commonwealth monopoly of income taxation scheme—had become so well entrenched and so much liked by the electors and by some of the state governments that Ben Chifley had no difficulty in carrying it on through postwar reconstruction to 1949. The Menzies-Fadden government elected in 1949 was pledged to an attempt at returning income tax to the states. From the point of view of legal theory, there was nothing to stop the states from reimposing income taxes at any time, at least after 1957 when the High Court, while dismissing a further challenge to the scheme,¹⁸ held invalid during peacetime the tough priority-in-collection provision that had been upheld in 1942. In 1959 the Commonwealth even removed the provision in the Grants Act imposing a condition of abstention from income taxes on its reimbursement payments to states. The obstacles to state resumption of income taxes were by then wholly political, economic, electoral, and fortitudinal. Nonetheless, they were effective.

Meanwhile, the High Court, initially under the mischievous influence of Dixon, had gratuitously embarked on a course of expanding the scope of the “excise duties” which by reason of s.90 of the constitution were denied to the states. This development was completed by 1970, when it was held that all sales and purchase taxes were outside state competence.¹⁹ From 1966 on, several states had been endeavoring to build up a tax system based on the notion of a “stamp duty” on various kinds of receipts, and some of these were undoubtedly valid, in particular the taxes on the receipt of salaries and wages. However, it was difficult to manage such taxes without approaching in substance a sort of income tax, which successive Commonwealth governments increasingly resisted after the retirement of Menzies in 1966. It was also difficult to avoid regressive incidence. In 1971 the states finally abandoned these attempts and accepted instead another installment of reimbursement offered by the Gorton Commonwealth government. As a result, the states have come to rely on Commonwealth grants for more than half of their current revenues. Through the Menzies regime (1949–1966), less than 30 percent of these Commonwealth grants were conditional, and less than 20 percent were conditional in a sense tending to reduce state policy autonomy. Thereafter, the number of conditional grants steadily increased, and their terms and the kinds of administrative oversight developed by the Commonwealth made them increasingly restrictive of state autonomy. In 1972 the Whitlam ALP government adopted a systematic strategy for developing this aspect of “cooperative federalism” as an instrument of Commonwealth policy control. In 1974 the proportion of conditional grants had risen to over 40 percent of all Commonwealth revenue grants to states. In 1973 Whitlam made an offer to the states to cede them some powers of imposing sales taxes, which would have required constitutional amendment; it was an amendment most unlikely to be endorsed by the electors. In 1974 the High Court held valid a form of state consumption tax suggested by the present writer, but by a majority of one this was accompanied by crippling conditions on the mode of administration.²⁰ The same decision validated a form of state franchise tax by states in order to tax petrol and tobacco sales. However, it was characteristic of state behavior in this field that Tasmania, which pioneered the taxes just mentioned, abandoned them in 1974 in return for a special federal grant. By 1975 the possibility of the states’ recovering anything like fiscal autonomy seemed to have disappeared. The Fraser New Federalism of 1976 offered once again a limited state competence in the personal income tax field, but the constitutional and political obstacles to its successful application appeared in 1977 to be formidable. The states will do anything to get more money, except to take the responsibility for imposing fresh taxes.

However, it remains characteristic of Australian federalism that the center has to struggle to get its way—by a combination of fiscal pressure and political persuasion—because it remained true in 1977 that the High Court was, on American standards, niggardly in its approach to central powers. We should mention that, from the beginning, the High Court and not the Judicial Committee of the Privy Council has been the chief judicial instrument for interpreting and adapting the constitution. Privy Council decisions have been important on only one topic—the guarantee of freedom of interstate trade under s.92 of the constitution—and in 1968 the possibility of further constitutional appeals to the Privy Council was removed.²¹ Even on s.92, the Privy Council has but palely reflected the course of doctrinal change in the High Court. It is sufficient to say that the course of decision on that topic since McArthur in 1920 has produced a doctrine, binding Commonwealth and states alike, which permits “reasonable regulation” of interstate trade but no more—making it a Herbert Spencerian sort of due-process clause which benefits only interstate trade, on a fairly narrow understanding of both “trade” and “interstateness.”²² The section killed the Chifley bank nationalization scheme in 1947–1950 but provided no restraints at all on the plans of the Whitlam ALP government. More serious for that government was the narrow High Court reading of the Australian interstate trade power—constitution s.51(i)—compared with the meaning given interstate commerce by the U.S. Supreme Court. The paradigm decision is the Airlines of New South Wales case (1965),²³ in which the High Court unanimously declined to treat a feeder airline in New South Wales as a part of interstate trade for constitutional purposes. The Supreme Court of the United States would have treated this service as interstate, long before the adventures of 1937, under the doctrine of the “interstate journey,” and since then in cases like Wickard v. Filburn,²⁴ under the theory of a passage or throat through which interstate commerce moved.²⁵

The great constitutional possibility of the future in Australia, as far as judicial interpretation is concerned, arises not under the interstate trade power but under the corporations power—s.51(xx). This is because in the Concrete Pipes case (1971),²⁶ the High Court, in an unaccustomed burst of judicial enterprise and inventiveness, overruled an old decision which placed a very narrow construction on that power. It treated the power to make laws with respect to “foreign corporations, and trading or financial corporations formed within the Commonwealth” as adequate to support Commonwealth regulation of restrictive trade practices and monopolies in corporate business. The Whitlam government relied heavily on this power for much of its legislation in the economic field, but in 1977 the limits of the power remained to be drawn by the courts.

Another power which the High Court has interpreted with some generosity is that with respect to “external affairs”—s.51(xxix). The main expansive interpretation occurred in 1936,²⁷ and subsequent references in the cases have been guarded. The Whitlam government endeavored to use international agreements as a basis for legislation on human rights and other matters otherwise beyond Commonwealth power. Senate obstruction hindered the program, however, and no decisive cases reached the High Court. On one matter, the High Court has given the Commonwealth a very wide freedom of action: when international agreements and s.51(xxix) might, between them, have been expected to create restrictions on its competence—namely, policy with respect to territories held under United Nations trusteeship agreements or otherwise subject to UN surveillance as colonies. The High Court held that such territories were controlled by the Commonwealth, not under the external affairs power (the view which Evatt, as justice and as politican, preferred), but under the power in s.122 of the constitution to provide for the government of territories.²⁸

A corollary of this decision was that Commonwealth legislative and executive acts in relation to Papua–New Guinea were from the domestic point of view quite unaffected by the UN Charter or by trusteeship agreements. This assisted conservative Commonwealth governments to pursue policies of gradualism in the political development of Papua–New Guinea through the 1950s. In the early 1960s Prime Minister Menzies announced that the winds of change must blow in those parts as well. In one sense, therefore, Australia’s position as a colonial power has had virtually no influence on its domestic constitutional law. In another sense, however, once Canberra under Labor had decided to use every effort to rid itself of the Papua–New Guinea colonial appendage, the lack of constitutional inhibitions made the process, legally speaking, extremely easy and smooth. Papua might have raised the objection that since it was part of Australia—and its people both British subjects and Australian citizens—there was no way of compelling it to accept independence. But its indigenous politicians chose to follow the different course of trying to get either separate independence or better terms for its inclusion in an independent Papua–New Guinea, which was finally set up in 1975.

Although the corporations power provides the only striking example of judicial interpretation especially favorable to the Commonwealth during the period since the Uniform Tax case, there have been subsidiary developments in that time advantageous to the Commonwealth—at least if one takes as a point of comparison the other choices argumentatively open to the High Court. The Dixonian revolt against Engineers reached its maximum development in the State Banking case (1947),²⁹ when a majority held that the Commonwealth could not require states to bank with a government (as distinct from a privately owned) bank. In so doing, it appeared to revive the doctrine of immunity of state instrumentalities from Commonwealth regulation, at least in a modified form. But there has been no clear later application of that decision. The Payroll Tax case (1971),³⁰ which upheld the application of Commonwealth payroll tax to states in respect of the employment of public servants, went some distance toward “distinguishing” the State Banking case out of existence. In the Professional Engineers’ case (1959),³¹ even Dixon, then the chief justice, joined in a ringing reaffirmation of the rejection of “implied prohibitions” as an approach to constitutional interpretation. In Victoria v. Commonwealth (1957),³² the second uniform tax case, the Court declined to permit any implied restrictions, implied by federalism or anything else, on the kinds of conditions which the Commonwealth might impose on grants to the states under s.96 of the constitution.

The net result of the decisions of the period has been to encourage Commonwealth use of its fiscal dominance in order to coerce or at least persuade the states to accept its policy leadership, both by upholding its fiscal dominance and by declining to construct doctrines which might have restricted the use of its dominance as a weapon against the states. On the other hand, the Court has also tended to force the Commonwealth into using the states as an instrument for administering its policies—by raising doubts as to the Commonwealth’s capacity to spend directly on purposes outside its other powers (Pharmaceutical Benefits case [1946])³³ and by its cautious handling of positive Commonwealth legislative powers.

The course of cooperative federalism thus judicially indicated suited reasonably well the political policy and style of the Liberal-Country party governments which held federal office from 1949 to 1972. It was less well suited to the plans of the Whitlam ALP government which took office in December 1972. That government attempted to reconstruct Australian federalism by four parallel strategies. The first was to appoint to the High Court judges who might be prepared to take a fresh look at constitutional interpretation. Two opportunities occurred and, consequently, Kenneth S. Jacobs and Lionel K. Murphy add an occasional radical voice to High Court discourse. The second was legislation designed to test at their limit the heads of power which might yet be capable of expansion by judicial decision, such as the external affairs, corporations, and spending powers. The third was to try to build up a new type of federal structure, to some extent exemplified by U.S. practice, in which the Commonwealth establishes direct relations with local government, particularly in the metropolitan cities where about 70 percent of Australians live, thus removing the need for mediating its urban social policies through state governments with different views on goals and priorities. This would probably require formal constitutional amendment to be completely effective. The fourth was to launch proposals for formal amendment of the constitution by referendum pursuant to s.128, including proposals for amending the amendment procedure itself to make amendment politically easier. Four such proposals put to the electors in 1974 were defeated, partly because they were related to immediate political issues rather than to any long-term constitutional restructuring.

Perhaps more promising from the point of view of Labor policy was a development in 1974 concerning relations between the two federal houses. Since the introduction of proportional representation for the Senate by the Chifley Labor government in 1949—a disastrous error for such a government—it had become very difficult for any major party to gain decisive control of that house, and especially difficult for the ALP. The Whitlam government was continually frustrated by adverse Senate voting, and in 1974 it obtained a dissolution of both houses under s.57 of the constitution. This was only the third such dissolution in federal history, and for the first time the government obtained it in respect, not merely of one bill which the Senate had rejected, but of several. Whitlam was returned to power, with a reduced majority in the House of Representatives and still no majority in the Senate, but with sufficient numbers in both to have an overall majority at a joint sitting of the two houses, which was promptly convened under the terms of s.57 of the constitution—the first such meeting ever held. The procedure was duly challenged in the High Court, which held valid both the double dissolution and the holding of a joint sitting in respect of more than one deadlocked bill.³⁴ Thus the way was opened for a government based on a reasonably reliable popular and hence House of Representatives majority to save up a batch of measures rejected by the Senate (with appropriate accompanying financial measures) and put the lot to the people at a double-dissolution election under s.57, which will also be in effect a plebiscite on those measures, followed by enactment at a joint sitting under s.57. In 1974, however, the batch of measures was not well planned nor was it accompanied by financial provisions.

In the end, the Senate destroyed the Whitlam government, aided by the unanticipated intervention of Governor General Sir John Kerr. By October 1975, electoral opinion was running strongly against the government, and the Senate majority against it had increased as a result of the fact that two departed ALP senators³⁵ were replaced, contrary to long-observed practice, by non-Labor temporary appointees chosen by non-Labor state governments. The Senate majority deferred supply on October 16, 1975, in order to compel Whitlam to dissolve one or both houses—there being ample deadlocked bills to justify a double dissolution as in 1974. Although questioned by some eminent lawyers, the Senate’s legal power to pursue such a course is not open to reasonable doubt; the most that could be said, as with the casual vacancy episodes, is that long-continued practice to the contrary was ignored. After a period of bluff and counterbluff, the governor general on November 11, relying on his “reserve” or residuary legal power to appoint and dismiss ministers and obtain different advice, dismissed Whitlam and his cabinet and appointed the opposition leader, J. M. Fraser, to lead a caretaker government pending the holding of a double-dissolution election. At the election on December 13, 1975, Fraser won a landslide victory in both houses.

In the commotion and bitterness that followed, the main stress was on the exercise of the reserve power of the governor general. His action was without direct precedent. In the opinion of some (including this writer) but by no means all constitutional commentators, it was based on a wrong principle and was taken prematurely and without observing fair procedure. It is beyond question, however, that a crisis had arisen and that failure to obtain lawful appropriation acts authorizing government expenditure would have compelled Sir John Kerr’s intervention within a short time, unless one or other of the contestants had meanwhile weakened or a compromise had been reached.³⁶ Kerr’s action, however, had no connection with the federal nature of the constitution,-it flowed from the principles of Westminster—that is, the system of monarchical-democratic, responsible, cabinet government as transplanted to Australia. So far as the result has led to cries for a republic—more strident and widespread than at any time since the 1890s—it may turn out in the long run to be the chief consequence of the Whitlam regime.

In the shorter run, however, the Kerr episode is less important than what caused the crisis—the Senate’s action—and that was a consequence of the federal structure. The Senate derives its considerable political power base and legislative competence, including power as to money bills, from its theoretical position as the protector of the states. Federation would not have occurred in the 1890s if the Senate had not been given such a position. Actually it has always been primarily an extension of the politics of the lower house, used as such by all parties having control in the Senate, most particularly when they lacked a majority in the lower house. The ALP has been the most consistent sufferer from the electoral basis of the Senate—equal representation for all states. Nevertheless, the ALP has obtained majorities in that house, and Whitlam’s trouble basically was political, not constitutional. He failed to gain sufficient political following in the states, other than New South Wales and Victoria. The Australian federal system, because of the electoral basis of the Senate, requires a radical reformer to carry both an electoral majority for the House of Representatives and separately an electoral majority for the Senate in four states. That is the same sort of double majority as that required for amending the constitution.

The pervasive conservatism of Australian politics has been a matter of concern and curiosity to scholars over a long period. The above sketch demonstrates how well the Australian scene illustrates A. V. Dicey’s views on the relation between conservatism and federalism. In many respects, Australia’s major political parties and their platforms are well to the left of corresponding parties in the U.S. Certainly “socialism,” if only as a myth or symbol, figures much more largely in Australian political debate than it does across the Pacific. Correspondingly, the constitutional law and the institutional structure based on it in Australia have played a greater and more continuous role in restraining or obstructing political plans than has been the case in the U.S. since the great reversals of Supreme Court doctrine in the 1930s. Central power has increased greatly in Australia, absolutely and relatively, but the states have been able to put up rearguard actions, hold chosen positions, bargain, and at times simply obstruct—and this often more from positions of constitutional strength than because of the sort of political demand for the preservation of local influence and autonomy that has remained powerful in the U.S. After the surges of central initiative in 1928–1934 and 1942–1949, it proved impossible to return to the status quo ante, and it will probably prove equally impossible to do so after the Whitlam-led surge of 1972–1975. In each such instance, however, the new federal relationship is found to be less new than reforming leaders wanted or than the mass electorate was prepared to endorse, and that is chiefly because of the constitutional structure.

Notes

1	James Bryce, American Commonwealth (2 vols., London, 1888); see especially vol. 1, p. 432.
2	The logical effect was like that achieved by the Canadian listing of exclusive dominion and exclusive provincial powers in British North America Act, 1867, ss.91 and 92.
3	26 Commonwealth Law Reports 460.
4	28 CLR 129.
5	R. G. Menzies, later Sir Robert Menzies, prime minister 1939–1941, 1949–1965, appeared for the trade union seeking center arbitration; Dr. H. V Evatt, later a justice of the High Court, minister in ALP governments (1941–1949) and leader of the ALP in opposition (1951–1960), appeared for the government of New South Wales to resist the plaintiff union and uphold state rights.
6	28 CLR 530.
7	A. H. Birch, Federalism, Finance and Social Legislation (Oxford: Clarendon Press, 1955), chap. 4.
8	G. Sawer, Australian Federal Politics and Law, 1901–1929 (Melbourne: Melbourne University Press, 1956), vol. 1, chaps. 10–12.
9	50 CLR 30.
10	55 CLR 1.
11	G. Sawer, Australian Federalism in the Courts (Melbourne: Melbourne University Press, 1967), 132 ff.; L. Zines, “Mr. Justice Evatt and the Constitution” (1969), 3 Federal Law Reports 153; idem, “Sir Owen Dixon’s Theory of Federalism” (1965), 1 FLR 221.
12	See the forthcoming notice of Latham by G. Sawer in the Supplement to the (U.K.) Dictionary of National Biography.
13	E.g. in Gratwick v. Johnson (1945), 70 CLR 1.
14	E.g. in R. v. Commonwealth Court ex Victoria (1942), 66 CLR 488.
15	65 CLR 373.
16	G. Sawer, Australian Federal Politics and Law, 1929–1949, chap. 1.
17	46 CLR 155.
18	Victoria v. Commonwealth, 99 CLR 575.
19	W.A. v. Chamberlain Industries (1970), 44, Australian Law Journal Reports, 93.
20	Dickinson’s Arcade Pty. Ltd. v. Tasmania (1974), 48 ALJR 96.
21	Partly by the Privy Council (Limitation of Appeals) Act 1968 and partly by High Court policy, on which see W.A. v. Hamersley Iron (No. 2), 120 CLR 42. In 1975, all appeals from High Court to Privy Council were abolished.
22	Sawer, Australian Federalism, 185–194.
23	113 CLR 54.
24	(1942) 317 U.S. 111.
25	E.g. Stafford v. Wallace (1922), 258 U.S. 495.
26	124 CLR 486.
27	R. v. Burgess, 55 CLR 608.
28	Fishwick v. Clelend (1960), 106 CLR 186. See also Tau v. Commonwealth (1969), 119 CLR 564. Dr. Evatt wanted trust territories to be regarded as held under the external affairs power so as to insure that Australia gave effect to the terms of the mandate.
29	74 CLR 31.
30	122 CLR 353.
31	107 CLR 268.
32	See note 18.
33	71 CLR 237. The question was again left in doubt by the sole decision on the point in the Whitlam period—namely the Australian Assistance Plan case (1975), 50 ALJR 157.
34	Cormack v. Cope (1974), 131 CLR 432; Victoria v. Commonwealth (1975), 7 Australian Law Reports 1; W.A. v. Commonwealth (1975), 7 ALR 159.
35	One by appointment to the High Court, one by death.
36	The many legal and conventional points involved are discussed in Geoffrey Sawer, Federation under Strain (Melbourne: Melbourne University Press, 1977).