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Australia's Fiscal Crisis: the High Court's Erosion of State Autonomy

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Australia's Fiscal Crisis: the High Court's Erosion of State Autonomy Murdoch University School of Law Australia’s Fiscal Crisis: The High Court’s Erosion of State Autonomy Lyndsay Barrett This thesis is submitted in fulfillment of the requirement for a Degree of Honours at Murdoch University Word Count: 19, 790 November 2015 DECLARATION This thesis contains no material which has been accepted for the award of any other degree or diploma in any other University and, to the best of my knowledge or belief, contains no material previously published or written by another person, except when due reference is made in the text. ________________________________ Lyndsay Elizabeth Barrett 2 ABSTRACT In drafting the Constitution, the Framers were conscious about the need to maintain the division of powers between the central government and the regions (which later became known as States) so that each level of government would be equal to one another. Australia has since seen a gradual erosion of State autonomy as a result of a series of unsatisfactory decisions of the High Court. The erosion of State legislative and financial powers began when Isaacs and Higgins JJ were appointed to the High Court in 1906. Following this, the High Court has demonstrated a willingness to interpret Commonwealth powers broadly, at the expense of the States. This expansive, literalist approach to interpreting the Constitution enunciated in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (‘Engineers’) (1920) was later used to expand the Commonwealth’s financial power in the cases of South Australia v Commonwealth (‘First Uniform Tax Case’) (1942), Victoria v Commonwealth (‘Second Uniform Tax Case’) (1971) and Ha v New South Wales (1997). The culmination of these decisions effectively precluded the States from levying income tax, and rendered all State franchise fees on petroleum, tobacco and alcohol constitutionally invalid. This thesis will illustrate the fundamental decisions in the centralisation of Commonwealth legislative and financial powers. In doing so, it will argue that the High Court has failed in its duty to protect the Constitution, and instead has allowed the Commonwealth to increase its powers, thus undermining Australian federalism. This thesis will conclude by examining Australia’s current financial situation, and will propose specific solutions to restore Australia’s fiscal federal balance to the framework that was envisioned by the Framers in 1890. 3 TABLE OF CONTENTS ABSTRACT ........................................................................................................... 3 TABLE OF CONTENTS ...................................................................................... 4 ACKNOWLEDGMENTS .................................................................................... 6 CHAPTER 1: INTRODUCTION ........................................................................ 7 CHAPTER 2: THE HIGH COURT AND FEDERALISM ............................. 10 I MEANING OF A FEDERATION .......................................................................... 11 A Essential Characteristics of Federalism ............................................................ 12 B Advantages and Disadvantages of Federalism ................................................. 15 II THE HIGH COURT AND THE CONSTITUTION ............................................. 19 A Approaches to Constitutional Interpretation .................................................... 20 IV THE EARLY HIGH COURT .............................................................................. 23 A Federal Implications ......................................................................................... 24 V THE ENGINEERS HIGH COURT....................................................................... 28 A Abandoning Federal Implications .................................................................... 30 B Departure from Precedent ................................................................................. 31 VI THE HIGH COURT POST-ENGINEERS ......................................................... 32 A The Melbourne Corporation Principle ............................................................. 33 B Expansion of Commonwealth Power ............................................................... 35 VII CONCLUDING REMARKS .............................................................................. 40 CHAPTER 3: AUSTRALIA’S FINANCIAL SITUATION ............................ 43 I THE EROSION OF STATE FISCAL AUTONOMY: TAXATION POWER ... 45 A Meaning of a Tax ............................................................................................. 47 B The Uniform Tax Cases .................................................................................... 50 II THE EROSION OF STATE FISCAL AUTONOMY: EXCISE DUTIES ........ 54 A Criterion of Liability ........................................................................................ 58 B Substantive Approach ....................................................................................... 60 III FEDERAL FINANCIAL RELATIONS ............................................................. 63 A Fiscal-Federal Relations ................................................................................... 64 B Current Fiscal Situation .................................................................................... 66 IV COMMONWEALTH GRANTS .......................................................................... 68 A Grants the Commonwealth Can Make ............................................................. 70 B Encroachment on State Legislative Powers ...................................................... 70 V CONCLUDING REMARKS ................................................................................. 73 CHAPTER 4: RESOLVING AUSTRALIA’S FISCAL CRISIS .................... 76 I CONSTITUTIONAL REFORMS .......................................................................... 76 A Brief History of State-Federal Financial Relations .......................................... 77 B Reallocating Powers and Responsibilities Between Governments .................. 79 1 Principles For Reallocating Roles ......................................................................... 79 2 Formal Constitutional Amendment....................................................................... 81 C Inserting an Express Provision to Recognise Federalism ................................. 82 1 Limitations on Constitutional Amendment ........................................................... 83 D Giving States the Right to Propose Referendums ............................................ 84 1 Practical Difficulties With Introducing State Referenda ...................................... 84 E Re-Introducing State Income Tax ..................................................................... 85 1 Practical Limitations on Re-Introducing State Income Tax .................................. 86 F Removing Tied Grants ...................................................................................... 87 1 Practical Limitations on Removing Tied Grants ................................................... 88 2 Guidelines for Making Tied Grants ...................................................................... 88 II PROCEDURAL REFORMS ................................................................................. 89 4 A Sharing Taxation Revenue ............................................................................... 89 1 How Can Revenue Sharing be Achieved? ............................................................ 90 B Increasing the Range of State Revenue ............................................................ 91 1 Practical Limitations on Increasing State Tax-Bases ............................................ 91 C Introducing a Judicial Appointment’s Policy ................................................... 92 1 How Can Judicial Appointments be Achieved? ................................................... 93 2 Difficulties With Involving the States in Judicial Appointments ......................... 94 III CONCLUDING REMARKS ............................................................................... 95 CHAPTER 5: CONCLUSION ........................................................................... 96 BIBLIOGRAPHY ............................................................................................... 99 A Articles ............................................................................................................. 99 B Books .............................................................................................................. 105 C Book Chapters ................................................................................................ 108 D Reports ........................................................................................................... 109 E Cases ............................................................................................................... 111 F Legislation ...................................................................................................... 115 G Treaties ........................................................................................................... 116 H Conference Proceedings ................................................................................. 117 I Speeches .......................................................................................................... 119 J Electronic Sources ..........................................................................................
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