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Fiscal balance must prevail

By David Flint - posted Friday, 14 September 2007

The problems of our Federation are not going to be solved by ending the “blame game”, “co-operative federalism”, “inspirational nationalism”, or any other glib formula. Nor will they be solved by any proposal to abolish the States. Not only is this undesirable, it is completely unachievable and would be overwhelmingly rejected in any referendum.

As Justice Michael Kirby said in the WorkChoices Case, the answer lies in our rediscovering “the federal character of the Constitution”. I would argue, although His Honour might not, that the proper working of the Federation will only be achieved by returning to the original intention of the founders of this nation. After all, they succeeded in writing one of the world’s most successful constitutions.

The intention of the founders, and, most importantly, the people, was very clear. Had a succession of centralist federal and acquiescent state politicians, as well as the too many centralist judges, kept more to that intention, many if not most of the problems of overlap, of centralisation and of financial irresponsibility would have been avoided. And as has been demonstrated to the premiers recently, the nation would be wealthier and better governed.


The founders were as well aware as the Founding Fathers of the United States had been that the component parts of the federation must be principally dependent on taxes they raised themselves. To put that in eye-glazing technical terms, the Founding Fathers who designed the modern federation knew that vertical fiscal balance must prevail. This was not just a matter of arcane theory; common sense told them it should be so, a point which apparently eludes our rulers and a point to which to which I shall return.

The original intention was not that the federal powers, the latest being the corporations power, should be interpreted without limit, and without any regard to the powers reserved to the states. The intention was certainly not the present unhappy result, that the states be reduced to their present mendicant status. The founders and the people intended the states should continue as they were, self governing communities, with the only change being that they would be united “in one indissoluble Federal Commonwealth under the Crown ... and under the Constitution”.

And the compact to which the states agreed, and the people approved, specifically provided the Federal Parliament and government would have strictly limited powers.

The problems of federalism today are not so much in the Constitution, but in the fact that it has been effectively changed not only without the approval of the people, but in the knowledge that when the people were asked, they almost always indicated their disapproval to any increase in federal powers. This is a point made cogently by Justice Callinan in WorkChoices.

The answer to these problems is certainly not in the dissolution of the states and the substitution of regions even more dependent on the Commonwealth; in the transfer of even more powers to the Commonwealth; in a vast increase in the power of the judges to govern us through a bill of rights; or in the grafting of some unspecified republic onto our Constitution.

The states are doomed to continue to function poorly as long as they remain the equivalent of healthy young adults who are welfare dependent. Common sense predicts and experience demonstrates that such dependants become dysfunctional and without hope, and that they lose self respect.


Similarly, by being reduced to being mere mendicants (in the Australian argot, “bludgers”) on the Commonwealth, the states remain unable to perform their core functions to any reasonable standard of competence. The American Founding Fathers, intelligent men imbued with good sense, knew of and identified this very danger: that of a government not being directly accountable to the electors for the money they spend.

And just as the healthy welfare dependent only regain their capabilities, effectiveness and their honour when they return to the workforce, the same is true of our states. You only have to look at the way the states perform to see this. The New South Wales Government has long been among the worst. The Northern Territory Government would come close with its ostrich like attitude to the degradation which had befallen its Aboriginal population.

How did this happen?

To the question how did this happen, we need to recall that only two institutions straddle the Commonwealth-State divide. One is the Australian Crown; the other is the High Court. Both are intended to be above politics. With the exception of some unwise vice-regal incursions, the Crown remains above politics, but the High Court has too often wandered beyond its role, no more so than in some of their more controversial decisions during the 1990s.

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This article is based on “The High Court’s Workplaces Decision: Implications for our Federal System” published in the quarterly, the National Observer, Number 72, Autumn, 2007.

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About the Author

David Flint is a former chairman of the Australian Press Council and the Australian Broadcasting Authority, is author of The Twilight of the Elites, and Malice in Media Land, published by Freedom Publishing. His latest monograph is Her Majesty at 80: Impeccable Service in an Indispensable Office, Australians for Constitutional Monarchy, Sydney, 2006

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