1 On 1 February 1898, during the Third Session of the Australasian Federal Convention in Melbourne, Sir John Forrest,
the Premier of Western Australia, rose to speak with a sense of exasperation that still springs from the printed record of the debates.
My principal object in rising was to urge honourable members not to discuss this matter all over again. We have had two days of it,
and it seems to me we shall have two or three days more if we are to re-discuss the whole question. There is a limit even to the
endurance of the delegates to the Convention. 
2 The prolonged discussion which so bored Forrest concerned the extent to which the Commonwealth could regulate
the use of the Murray-Darling River system in the exercise of its power to make laws with respect to trade and commerce among the
States. It has been described by a leading Australian historian as “one of the hardest fought controversies” at the
Convention. The debate was informed by the conflict between the interests of New South Wales irrigators and South Australian river boat traders.
None of the water ever made its way across the Nullarbor to Western Australia, which no doubt accounts for Forrest’s lack
of interest in it. The question was resolved by s 100 of the Constitution. In the interests of New South Wales, the trade and commerce power of the Commonwealth which extended to navigation was limited so as not to authorise laws abridging “the right of a State or of the residents therein to the reasonable use of
the waters of rivers for conservation or irrigation”. In the interests of South Australia a limitation was placed on that
limitation by insertion of the word “reasonable” before the phrase “use of waters of rivers for conservation or
3 110 years later the Murray-Darling River Basin is a matter of high national concern and debate which now involves
the States of Queensland, New South Wales, Victoria and South Australia, the Australian Capital Territory and the Commonwealth.
With national television coverage it even enjoys extended airplay in Western Australia. And even in Western Australia there is a
sense that the problem is potentially so large that it affects everybody. Three million Australians depend upon water from the
Basin and it supports an agricultural industry worth more than $9 billion per annum. On 3 July 2008 the affected States and Territories,
along with the Commonwealth, meeting as the Council of Australian Governments (COAG) signed an Intergovernmental Agreement on Murray-Darling
Basin Reform. The question was no longer one about irrigation versus navigation. Against a background of climate change, extreme
drought, environmental stress and capacity and use disputes, it was a question about the availability of a diminishing amount of
water for use for any purpose by anyone. Although an intergovernmental Murray-Darling Basin Agreement has existed since 1992, and
was amended in 2006 and 2007, the most recent development contemplates greater centralisation of management with an authority supported
by referrals from the States of necessary legislative power to the Commonwealth.
4 Large scale, dramatic and urgent as is the question of the possible collapse of the Murray-Darling Basin water
system, it is but one of many areas of infrastructure, natural resource usage and regulation generally giving rise to political
imperatives for Australia wide approaches. What used to be local has expanded to become national and in that sense the federation
has shrunk. The forces driving the contraction are various. The harsh economics of global markets, the complicated array of international
obligations and relationships which Australia has developed, the creation of an electronic environment in which many transactions
are negotiated and completed and internally the rapid movement of the people, goods and services across the country, are all transforming
the local to the national in a variety of fields of human activity. The responses which they demand test the ability of a Constitution based upon a division of legislative powers, to accommodate national approaches to subjects not directly under Commonwealth legislative
competency. A variety of cooperative models, some of considerable sophistication, have been developed. Some have had to be designed
to avoid the effect of interpretations of the Constitution by the High Court limiting the capacity of national institutions to undertake functions conferred on them by State legislatures.
5 Given the difficulties of amending the Constitution, cooperative approaches on matters unable to be comprehensively covered by Commonwealth legislation, are necessary. There are benefits
in such arrangements which can deliver national responses with checks and balances on the exercise of central power. These derive
from conditions and limitations on that power which are the price of cooperation. But such benefits can also come at a cost in complexity
and comprehensibility. Moreover, where regulatory authority is conferred on bodies deriving their powers from mixed sources within
the federation political accountability can be difficult to locate. But overall the cooperative process uninformed by consistent
selection principles is likely to lead to greater centralisation of political authority.
6 This paper considers some of the responses, in Australia’s dealings with national infrastructure and regulation,
to the limitations imposed by the division of powers between Commonwealth and States. It expresses a preference, in areas where cooperation
is necessary, for referral of powers from the States to the Commonwealth, subject to safeguards which would prevent the cooperative
underpinnings of such references being undermined by unilateral action on the part of the Commonwealth. It also raises the larger
question whether the trend to a variety of cooperative arrangements and extended exercises of Commonwealth power, are driving Australia
into a singular state - a federation in constitutional form but a unitary state in political reality.
7 The development of “cooperative federalism” in Australia in recent times has been very significant.
As a review of existing arrangements and current initiatives demonstrates there is an array of schemes in place or contemplated
for overcoming the difficulties to which the division of legislative and financial powers gives rise in areas seen as requiring a
national response. This is an evolutionary process. There is a generally perceived need to improve the way in which federalism
works and to favour cooperation over friction and blame shifting. But such improvement at present does not seem to be informed
by principles for determining what matters are best dealt with by a cooperative or multi-government approach and which are not.
Nor are there in evidence principles for selecting the most appropriate cooperative mechanism. The identification and application
of such principles is not straight forward. A conservative selection principle would favour a scheme which, while achieving desired
efficiencies, has least impact on the distribution of power in the federation. On the other hand, the conservative principle may
give rise to complexity. A principle of simplification and the location of accountability in one authority may be preferred.
8 The impetus for a national approach to dealing with a whole array of subject areas of government is not likely
to diminish. The question of the working of federalism was very much on the agenda for the Australia 2020 Summit. The Interim Report
from the Summit on the structure of Australian Federation identified inefficiencies in the economy arising from differences between
the States and Territories. The need for a “seamless national economy” was raised. That term was used by COAG at its meeting held on 3 July 2008. At the 2020 Summit there was also recognition of the need to fix federalism
to create a modern Australian federation. That would be done, it was suggested, by:
- reviewing roles, responsibilities, functions, structures and financial arrangements at all levels of governance by a three stage process
- an expert Commission to propose a new mix of responsibilities;
- a convention of the people, informed by the Commission and by a process of deliberative democracy; and
- implementation by inter-governmental cooperation or referendum; and
- forming a National Cooperation Commission to register, monitor and resolve disputes concerning inter-governmental agreements.
There is no doubt that change is occurring and that the stage is set for further change.
9 These general observations can be given some concrete referents by considering recent events in the growth of
national and cooperative approaches to infrastructure and regulation. The major vehicle for that growth has been the Council of
Australian Governments (COAG). That body was established in May 1992, comprising the Heads of the Commonwealth, State and Territory
governments. Since February 2006, it has been driving a National Reform Agenda in a variety of areas. The scope of that agenda
may be seen in the outcome of some of its recent meetings.
The Council of Australian Governments - Expanding the reach of cooperative federalism
10 At the COAG meeting held on 20 December 2007, seven areas were identified for its 2008 work agenda:
- Health and Ageing.
- The productivity agenda – including education, skills, training and early childhood.
- Climate change and water.
- Business regulation and competition.
- Indigenous reform.
Seven working groups were established, one for each of the nominated areas. Each group is overseen by a Commonwealth Minister with
deputies nominated at a senior departmental level by the States and Territories. Senior officials from all jurisdictions are included
in the groups. It is sufficient to refer to three of them here.
11 The Working Group on Climate Change and Water has as its objective an effective national response to climate change
- A single national emissions trading scheme (ETS) incorporating State schemes.
- A nationally consistent set of climate change measures to support the ETS.
- A national cooperative approach to long term adaptation of climate change.
It also has the objective of ensuring “sustainable water use across Australia”. In relation to the ETS, the Working Group
is to be the vehicle for Commonwealth consultation with the States and Territories. It is charged with developing an implementation
plan for a “… coherent and streamlined set of climate change measures across jurisdictions to complement Commonwealth
implementation of the ETS”. The Working Group is to report to COAG on the “state of play with water reform” including
progress on the assessment of irrigation infrastructure and the development of water markets.
12 The Infrastructure Working Group has as its objectives:
- Better coordination of infrastructure planning and investment across the nation, across governments and the private sector.
- To identify and remove blockages to productive investment in infrastructure.
One of the tasks of the Working Group is to develop an implementation plan covering mechanisms by which a newly established Infrastructure
Australia Council will report to COAG, the scope of the national infrastructure audit and a forward work program for Infrastructure
13 The Business Regulation and Competition Working Group has as its objective:
- To accelerate and broaden the regulation reduction agenda to reduce the regulatory burden on business.
- To accelerate and deliver the agreed COAG regulatory hotspots agenda.
- To further improve processes for regulation-making and review, including exploring a national approach to processes to ensure no net
increase in the regulatory burden, and common start dates for legislation.
- To deliver significant improvements in Australia’s competition productivity and international competitiveness.
A National Approach to Infrastructure – Infrastructure Australia
14 On 8 April 2008 the Governor-General assented to the Infrastructure Australia Act 2008. The Act established an organisation to be known as Infrastructure Australia. It consists of a Chair and 11 other members. The members are to be appointed by the relevant Commonwealth Minister. Nine of its twelve members are to be nominated by the Commonwealth. Three are to be persons nominated by agreement between the
States, the Australian Capital Territory and the Northern Territory.
15 The primary function of Infrastructure Australia is the provision of advice expressed thus:
(1) Infrastructure Australia has the primary function of providing advice to the Minister, Commonwealth, State, Territory and local
governments, investors in infrastructure and owners of infrastructure on matters relating to infrastructure, including in relation
to the following:
(a) Australia’s current and future needs and priorities relating to nationally significant infrastructure;
(b) policy, pricing and regulatory issues that may impact on the utilisation of infrastructure;
(c) impediments to the efficient utilisation of national infrastructure networks;
(d) options and reforms, including regulatory reforms to make the utilisation of national infrastructure networks more efficient;
(e) the needs of users of infrastructure;
(f) mechanisms for financing investment in infrastructure.
16 Additional functions conferred on the new entity include the conduct of audits of the adequacy of the capacity
and condition of nationally significant infrastructure, and the development of priority lists in relation to Australia’s infrastructure
needs. It is also to review, and provide advice on, proposals to facilitate the harmonisation of policies and laws relating to the
development of, and investment in, infrastructure. The provision of advice on infrastructure policy issues arising from climate
change and the review of Commonwealth infrastructure funding programs to ensure their alignment with infrastructure priority lists
is also included in the additional functions.
17 In a press release on 20 March 2008, the Minister for Infrastructure indicated that when the Council had been
appointed Infrastructure Australia would commence its work with a national infrastructure audit, including areas of water, energy,
transport and communications and would compile an infrastructure priority list for presentation to the March 2009 meeting of COAG.
In a further release on 13 May 2008, following the inaugural meeting of the COAG Infrastructure Working Group, the Minister announced
that the Working Group, representing State, Territory and Commonwealth officials, had agreed that all participating governments would
provide information necessary for the audit to be carried out by Infrastructure Australia by 30 June 2008. Its first infrastructure
priority list would be completed within 12 months and presented to COAG.
A seamless national economy – the COAG Communiqué
18 Beyond the specifics of measures taken in relation to COAG’s seven working areas, the proliferation of
matters upon which national regulatory responses are contemplated, was evidenced in a Communiqué issued by COAG after its
meeting on 3 July 2008. In that Communiqué express reference was made to the objective of a “seamless national economy”.
Many of the challenges facing economy can only be addressed through more effective Commonwealth-State arrangements. By moving towards
a seamless national economy through the reform of business and other regulation, COAG’s reforms will make it easier for businesses
and workers to operate across State and Territory (State) borders. These reforms will make life simpler for businesses and consumers
while continuing to provide the necessary protections and access for consumers and the community.
19 Progress on some 27 areas of regulatory reform was reported in the COAG Communiqué:
1. Occupational health and safety. An intergovernmental agreement was signed for the adoption of model occupational health and safety laws.
2. Environmental assessment and approval processes. Bilateral assessment agreements have been negotiated between the Commonwealth and each State and Territory with the exception of
Victoria, with whom agreement will be reached by 31 August 2008.
3. Payroll tax harmonisation. All States and Territories have agreed to harmonise payroll administration from 1 July 2008.
4. Licences of tradespeople. A national trade licensing system has been agreed to, to be endorsed in an intergovernmental agreement between jurisdictions by
COAG in December 2008.
5. Health work force agreement. COAG has agreed to implement reforms to health work force regulation.
6. National system of trade measurement. A Commonwealth Bill will be introduced in September 2008.
7. Rail safety regulation. All mainland States will have model legislation in place by the end of 2008 with Tasmania to follow in 2009.
8. Consumer policy framework. COAG has agreed in principle to the development of an enhanced national consumer policy framework.
9. Product safety. By agreement, the Commonwealth will assume responsibility for the making of permanent product bans and standards under the Trade Practices Act 1974 (Cth) (TPA). States and Territories will continue with powers to issue interim product bans. The Australian Competition and Consumer
Commission (ACCC) and State and Territory Fair Trading Officers will share responsibility for enforcement.
10. National regulation of trustee companies. The Commonwealth is to assume responsibility for trustee companies. It is intended that its legislation will create a national
market removing the need for multiple State and Territory licenses.
11. National regulation of mortgage broking. COAG has agreed that regulation of mortgage broking will be transferred to the Commonwealth, accelerating a previously agreed timetable.
12. National regulation of margin lending. COAG has agreed that the regulation of margin lending will be transferred to the Commonwealth, again accelerating a previously agreed
timetable from October 2008.
13. National regulation of non-deposit lending institutions. The Commonwealth will assume responsibility for the regulation of non-deposit taking institutions.
14. Development assessment. This is a cooperative initiative by States and Territories towards more streamlined development assessment processes.
15. National construction code. COAG agreed to the development of a National Construction Code on building, plumbing, electrical and telecommunications standards.
16. Regulation of chemicals and plastics.
17. Registering business names. COAG noted agreement in principle by the Small Business Ministerial Council towards the development of a seamless, single on-line
registration system for Australian business numbers and Australian business names. It approved the establishment of a national
registration system and the necessary referral of power to the Commonwealth to enable it to implement the system.
18. Personal property securities. COAG agreed to reform Australia’s personal property securities law with a view to Commonwealth legislation being introduced
late in 2008 or early in 2009.
19. Standard business reporting. COAG agreed on a Commonwealth initiated electronic system of standard business reporting.
20. Food regulation. COAG agreed to implement development of reforms to reduce regulatory burdens on business and not for profit organisations in relation
to food regulation.
21. National mine safety framework. COAG asked the Ministerial Council on Mineral and Petroleum Resources to report on options for reforms to national mine safety regulation.
22. National electronic conveyancing system. COAG agreed to a number of principles to form the basis for the creation of a new e-conveyancing system to provide an effective
and efficient national platform for the settlement of property transactions electronically and the lodgment of instruments electronically
with Land Registries.
23. Oil and gas regulation. COAG agreed to the commissioning of a productivity commission report on the regulation of crude oil and natural gas projects that
involve more than one jurisdiction.
24. Maritime safety regulation. COAG asked the Australian Transport Council to report on the implementation of a single national approach to maritime safety for
25. Wine labeling. COAG asked the relevant Ministerial Council to speed up work to bring the World Wine Trader Groups Agreement on requirements for
wine labeling into force.
26. Director’s liabilities. COAG agreed that there is a case for reform to promote a consistent and principled approach to the imposition of personal criminal
liability for corporate fault.
27. A national system for remaining areas of consumer credit. COAG agreed that the Commonwealth would assume regulatory responsibility for the remaining areas of consumer credit and requested
the Business Regulation and Competition Working Group to report back to the October 2008 meeting together with a detailed implementation
20 Other major reform priorities identified by COAG include Commonwealth/State financial arrangements, preventative
health, complex chronic disease management, hospitals, schools, national reform of the vocational education and training sector,
the development of children and family centres and key indigenous measures.
21 In the two key areas of climate change and infrastructure, the COAG Communiqué referred to extensive consultations
being undertaken by the Commonwealth in relation to a proposed Emissions Trading Scheme and the fact that all jurisdictions are currently
assessing the complementarity of their existing climate change measures. So far as infrastructure is concerned, Infrastructure
Australia is receiving information it requires from jurisdictions for the National Infrastructure Audit and the development of an
infrastructure priority list for COAG’s consideration in early 2009.
22 These recent developments in relation to infrastructure, environmental and regulatory reform are indicative of
pressures towards increasing degrees of cooperation and coordination within the Australian Federation. The various measures which
are being undertaken and contemplated should be placed in their constitutional context, namely the distribution of powers within
the Federation and the legal techniques available for the exercise of cooperative federalism.
Distribution of powers under the Australian Constitution
23 Federalism is a solution to the problem of combining different political communities in a national polity while
allowing them to retain their identities. There are different ways of distributing power between the components of a federation.
Any such distribution will set limits to their legislative competencies. When a national policy is necessary to meet a need, perhaps
not foreseen as such when the Constitution was created, the legislative and other powers necessary to implement such a policy may cross those boundaries. A Constitution may of course be amended to take account of changes in circumstances since it was created. In Australia, however, as in some other
federations, amendment is a difficult process. Alternatives to amendment involve cooperative approaches between the units of the
federation. Broadly these fall into two categories. They may involve the coordinated exercise of powers by all components or the
referral which may be subject to conditions or safeguards.
24 The Commonwealth of Australia Constitution Act 1900 created the Commonwealth of Australia as a federation. It conferred on the Commonwealth Parliament law-making powers with respect
to particular topics. The Constitutions of the former Australian colonies, which became States in the Federation, were continued
in force subject to the Commonwealth Constitution. So too were their law-making powers, save for those vested exclusively in the Commonwealth Parliament or withdrawn from the Parliaments
of the States. The legislative powers of the Commonwealth are mostly concurrent with those of the States. In the areas of concurrent legislative
competency Commonwealth law is paramount. If a law of a State is inconsistent with a law of the Commonwealth, the Commonwealth law
shall prevail and the State law shall, to the extent of the inconsistency, be invalid.
25 The existence of Federal and State polities and the division of legislative powers between them, together with
the scope for concurrent laws dealing with the same subject matter, must be taken into account when establishing national policies
requiring legislative implementation. This is particularly so in the area of infrastructure of national significance and activities
seen as requiring regulation which cross State and Territory boundaries.
26 Important powers conferred upon the Commonwealth Parliament under s 51 of the Constitution, relevant to national infrastructure and regulation, include but are not limited to the following:
(i) Trade and commerce with other countries, and among the States.
(ii) Taxation; but so as not to discriminate between States or parts of States;
(x) Fisheries in Australian waters beyond territorial limits;
(xx) Foreign corporations and trading or financial corporations formed within the limits of the Commonwealth.
(xxix) External affairs.
(xxxi) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has
power to make laws.
(xxxiv) Railway construction and extension in any State, with the consent of that State.
(xxxvii) Matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that
the law shall extend only to States by whose Parliament the matter is referred, or which afterwards adopt the law.
(xxxviii) The exercise within the Commonwealth, at the request or with the concurrence of the Parliaments of all the States directly
concerned, of any power which can at the establishment of this Constitution be exercised only by the Parliament of the United Kingdom or by the Federal Council of Australasia.
(xxxix) Matters incidental to the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth or in the Federal Judicature or in any department
or officer of the Commonwealth.
27 Section 61 provides for the executive power of the Commonwealth:
The executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen’s representative,
and extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth.
It supports Commonwealth entry into intergovernmental agreements and may be supplemented by the use of the incidental power under
s 51(xxxix). It is also in the exercise of executive power that the Commonwealth enters into treaties and conventions including international
trading conventions and free trade agreements. It may then, pursuant to the external affairs power under s 51(xxix), give legislative effect to treaties or conventions to which it has become a party and therefore pass laws to implement them in the
exercise of the external affairs power.
28 Section 96 confers upon the Commonwealth significant financial power over the States by authorising conditional grants in the following terms:
During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the
Parliament may grant financial assistance to any State on such terms and condition as the Parliament thinks fit.
29 The extension of the trade and commerce powers to navigation and State railways is provided for in s 98:
The power of the Parliament to make laws with respect to trade and commerce extends to navigation and shipping, and to railways the
property of any State.
30 There are also, of course, restrictions on the legislative powers of the Commonwealth. These include the requirement
in s 92 (also applicable to the States) that trade, commerce and intercourse among the States, whether by means of internal carriage or ocean
navigation, shall be absolutely free. There is the restriction under s 99 which prevents the Commonwealth by any law or regulation of trade, commerce or revenue giving preference to one State or any part
thereof over another State or any part thereof. The restriction imposed by s 100 protecting States or their residents from laws abridging their right to the reasonable use of the waters of rivers for conservation
or irrigation, has already been mentioned. Section 116, not relevant to the present discussion places restrictions on the Commonwealth’s ability to legislate in respect of religion.
31 Section 106 continues the Constitution of each State of the Commonwealth as at the establishment of the Commonwealth until altered in accordance with the Constitution of the State. By s 107 every power of the Parliament of the Colony which becomes a State shall, unless exclusively vested in the Parliament of the Commonwealth
or withdrawn from the Parliament of the State continue as at the establishment of the Commonwealth. State laws are saved and continued
in effect, subject to the Constitution, by s 108. The paramountcy provision, s 109, provides:
When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent
of the inconsistency, be invalid.
32 The mode of alteration of the Constitution is set out in s 128 which requires, in effect, the proposed alteration be passed by both Houses of the Commonwealth Parliament and by a majority of all
Australian electors and by a majority of electors in a majority of the States.
Techniques of cooperative federalism
33 The techniques of cooperative federalism directed to national or uniform regulation of particular areas include
1. Intergovernmental agreements providing for:
(a) uniform legislation enacted separately by each participating polity;
(b) enactment by one unit in the Federation of a standard law which can then be adopted by other parties to the
2. The referral of State legislative powers authorising Commonwealth law-making under s 51(xxxvii) on a particular topic or according to the text of a proposed Bill.
3. Executive cooperation by way of intergovernmental agreements.
Of all of these techniques the referral power offers the possibility of achieving, on a cooperative basis, one law from one source
of legislative power, namely the Commonwealth Parliament, but subject to mechanisms to protect referring States from abuse of the
power by the Commonwealth.
A brief overview of the reference power
34 The power conferred upon the Commonwealth Parliament by s 51(xxxvii) of the Constitution to make laws with respect to matters referred to it by the Parliament or Parliaments of any State or States has the capacity to deliver
cooperative legislative regimes in much simpler form than those derived from a uniform legislation or cooperative adoption of laws
passed by one element of the Federation. There have been a number of references of power pursuant to s 51(xxxvii) since Federation. The mechanism which has invariably been used is the enactment of an Act of the relevant State Parliament or Parliaments
referring a designated subject matter or the text of a proposed law for enactment by the Commonwealth Parliament. Referrals have
covered meat inspection, State banking, poultry processing, air navigation, access and maintenance in family law, child custody and
35 The mutual recognition scheme which provides for the recognition of qualifications and certain product standards
between States and Territories is supported by a referral of power to the Commonwealth by the Parliaments of New South Wales and
Queensland. What those Parliaments referred was a matter defined in the referring Act as “the enactment of an Act in the terms
or substantially the terms set out in the schedule”. In each case a proposed mutual recognition Bill was scheduled to the
State referring Act. As a result the Mutual Recognition Act 1992 (Cth) was passed as a law of the Commonwealth. It was adopted by the other States and Territories so that it ultimately applied
across Australia. The referral was based upon a formal agreement signed on behalf of the Commonwealth, the States and the Territories
on 11 May 1992.
An important use of the power was that which supported the introduction of the current national Corporations Scheme. It is discussed
later in this paper as part of the history of corporate regulation in Australia. The States have referred other powers to the Commonwealth
including powers to make laws with respect to terrorism. The reference in that respect is substantially a text reference.
36 The reference placitum in s 51 defines a head of legislative power conferred upon the Commonwealth Parliament
to make laws with respect to matters referred. It is not a power conferred on the States to refer matters. It is subject to the
Constitution. Constitutional prohibitions operate with respect to it. A law made in the exercise of the power is a Federal law and attracts
the operation of the paramountcy provision, s 109, in respect of inconsistent State laws. The matter referred may be either subject matter or the text of a proposed law. The High Court has rejected the proposition that a matter referred can only be in the form of a text. By necessary implication
the Court accepted that reference could relate to specific Bills.
37 There are constructional and technical questions about references which need not be explored in detail here.
One question is whether a reference unlimited in time is irrevocable. Another question is whether a Commonwealth law passed pursuant
to a reference is contingent, for its continuing operation, on the reference not being revoked by the State. The amendment of laws
made pursuant to a reference is presumably uncontentious where the referral is of a subject matter. However, where the reference
is of the specific text of a proposed Bill, then an amendment of the law passed pursuant to that reference is likely to be invalid.
The possibility also exists and has occurred of laws being made by the Commonwealth which apply only to referring or adopting States.
38 Despite some technical difficulties there are many advantages in the use of the power. Where agreement has been
reached between the Commonwealth and the States on the text of a Bill to be referred, the result will be a single Federal law rather
than complicated cross-jurisdictional adoption of one State’s law by the Commonwealth and other States. There are safeguards
of State interests that can be embedded in text referrals and in the terms of referred Bills which may effect their disapplication
in the event of a breach of any underlying agreement by the Commonwealth.
39 In the application of this power, as in other areas of cooperative federalism, it would be desirable to have some
kind of coherent and principled framework within which choices are made about whether reference or another species of cooperative
arrangement is desirable. There may be different species of reference for different occasions. It would be useful for both Commonwealth
and States to have some sense of the circumstances in which a subject matter reference would be appropriate as distinct from the
usual, more conservative choice, of a text reference. The range of safeguards available to protect State interests, and therefore
federalist principles where a reference is made, could be classified and some policy adopted for the selection of the most appropriate
mix. At the present time the choices of whether to refer or not and, if so, on what terms, seem to be ad hoc and historically contingent.
On the other hand, politics being what it is perhaps that is as good as it gets.
Cooperative federalism in corporations law
40 The extent to which political initiatives, the accident of judicial decisions and other contingencies can affect
choices of cooperative schemes is illustrated by the history of corporations law in Australia. That history is a useful case study
for a succession of different arrangements endeavoring to effect national consistency in the regulation of companies.
41 In 1961, under a Uniform Companies Act Scheme agreed between them, each State Parliament passed its own Companies
Act which mirrored the terms of the Companies Act of every other State. The law in each State had application only within the territorial
limits of the jurisdiction of that State. Jurisdiction was exercised by the Courts of the States. There was thus a mosaic of similar
laws throughout the country rather than one law covering the whole country. The scheme, although simple in concept, was susceptible
to the development of differences over time because of pressures brought to bear upon particular State legislatures.
42 In 1981 the Uniform Companies Scheme was replaced by another cooperative scheme based upon the Companies Act 1981 (ACT) enacted by the Commonwealth Parliament for the Australian Capital Territory in reliance upon s 122 of the Constitution. Each of the States passed a Companies Code which reflected the provisions of the Commonwealth Act. The Scheme was overseen by a
Ministerial Council for Companies and Securities and a national regulator, called “The National Companies and Securities Commission”
(NCSC), which worked in conjunction with State regulatory authorities.
43 In 1989 the Commonwealth, acting unilaterally in reliance upon the corporations power, passed the Corporations Act 1989 imposing a national scheme of corporate regulation. It established the Australian Securities Commission (ASC) under that Act. In
1990 the High Court held elements of the Act invalid because the Commonwealth did not have power to make laws about the incorporation
of companies. Under a new cooperative arrangement the Commonwealth then enacted the Corporations Act 1989 (ACT) and the Australian Securities Commission Act 1989 (ACT), each being a law for the Australian Capital Territory. The States each passed their own statutes which applied the provisions
of the Territory Acts designated as the Corporations Law and the ASC Law respectively as laws of the respective States. The States
also purported to confer jurisdiction on the Federal Court and the State Supreme Courts with respect to civil matters arising under
their Corporations and ASC laws. In 1999 the High Court struck down so much of the legislation as purported to confer jurisdiction
on the Federal Court with respect to matters arising under the State laws. The difficulties caused by this invalidation of the cross vesting of State jurisdiction to the Federal Court were compounded by the
High Court’s approach to the construction of laws made under the scheme in so far as they conferred functions under State law
upon Federal authorities such as the Commonwealth Director of Public Prosecutions and the Australian Securities and Investments Commission.
44 The striking down of the cross vesting arrangements under the cooperative corporations scheme led, after some
political contention, to another cooperative solution whereby the States referred to the Commonwealth the power to make laws in terms
of the texts of a proposed Corporations Act 2001 and an Australian Securities and Investments Commission Act 2001. These Bills largely reflected the terms of the former Corporations Law and ASIC Law. Each State also referred to the Commonwealth:
The formation of corporations, corporate regulation and the regulation of financial products and services ... to the extent of the
making of laws with respect to those matters by making express amendments to the corporations legislation.
The latter reference had effect only to the extent that the matter was not already a subject of Commonwealth
power. There was a five year sunset clause for each reference.
45 Following the references by the States the Commonwealth Parliament, relying upon s 51(xxxvii), passed the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth). The Commonwealth and the States made an agreement which included undertakings about the use of the referred powers and procedures
for the alteration of the statutes and for termination of the references. The agreement required that the operation of the scheme
be reviewed every three years. The scheme was powerfully supported by referral agreements made by Victoria and New South Wales directly
with the Commonwealth. Other States were then left with little option but to fall into line. Queensland did so. Western Australia
did so following a change of government in that State. South Australia and Tasmania also joined after the Commonwealth agreed to
consider an amendment limiting the degree to which the power could be used to require persons to incorporate.
46 The development of the comprehensive regulation of corporations in Australia showcases cooperative arrangements
which are possible under the Constitution. Referral has the virtue of simplicity. Nevertheless, from the point of view of the States it involves an expansion, be it permanent
or temporary, of Commonwealth legislative power on the subject matter referred. Typically safeguards are sought. It is no doubt
for this reason that the reference in relation to corporations was limited to the text of a particular Bill and subject to a sunset
clause. There is a sense however in which such safeguards may be illusory. The exercise by the Commonwealth of referred power may
become widely accepted by the relevant elements of the community. A retreat from the post-reference legislation becomes impossible.
So while legally temporary or conditional, the reference may become politically permanent and unconditional.
47 Moving from the classes of techniques by which cooperative federalism can be exercised, their complexities and
variety may be appreciated by reference to some subsisting arrangements.
Cooperative schemes involving interlocking legislation
48 There are three major areas of infrastructure and national economic regulation involving interlocking legislation
which gives rise to some legal complexity and engender uncertainty about the operation of the scheme at critical junctures and may
also sometimes obscure accountability. The three areas selected for review in this context are: competition law, the national electricity
market and the natural gas pipelines access regime.
49 In October 1992, the year that COAG was established, it agreed to set up an independent committee of inquiry into
a national competition policy for Australia. The inquiry, headed up by Professor Fred Hilmer, reported in August 1993. It recommended,
(i) The TPA extend to unincorporated businesses and State and Territory government businesses.
(ii) Prices surveillance be extended to State and Territory government businesses.
(iii) Competitive neutrality principles be applied so that government businesses would not enjoy a competitive advantage by
reason of public sector ownership.
(iv) Public sector monopoly businesses be restructured.
(v) Legislation restricting competition be reviewed.
(vi) Provision be made for third party access to nationally significant infrastructure.
50 In February 1994, COAG accepted the so-called Competition Policy Principles set out in the Hilmer Report. It
agreed, inter alia, that any recommendation or legislation arising from the Hilmer Report would be applicable to all bodies, including
Commonwealth and State agencies and authorities. It was at this meeting that COAG foreshadowed the creation of ACCC out of a merger
of the Trade Practices Commission and the Prices Surveillance Authority. It would have new powers and Commonwealth, State and Territory
governments were to participate in appointments to it.
51 The principles set out in the COAG Communiqué underpinned three intergovernmental agreements made in April
1995 which established what has become Australia’s National Competition Policy. These agreements were known as:
1. The Competition Principles Agreement.
2. The Conduct Code Agreement.
3. The Agreement to Implement the National Competition Policy and Related Reforms (Implementation Agreement).
52 Clause 3 of the Competition Principles Agreement established the competitive neutrality principle applicable to
government owned businesses. Clause 4 provided for structural reform of public monopolies and clause 5 for a review of legislation.
An important provision, clause 6, provided that the Commonwealth was to prepare legislation to establish a regime for third party
access to services provided by means of what were called “significant infrastructure facilities” where:
(a) it would not be economically feasible to duplicate the facility;
(b) access to the service would be necessary in order to permit effective competition in a down-stream or up-stream market;
(c) the facility was of national significance having regard to its size, its importance to constitutional trade or commerce
or its importance to the national economy; and
(d) the safe use of the facility by the person seeking access could be ensured at an economically feasible cost and, if there
were a safety requirement, appropriate regulatory arrangements exist.
Importantly, this element of the Competition Principles Agreement recognised that infrastructure facilities entirely within a State
or Territory might be of national significance.
53 The Conduct Code Agreement provided for the adoption by each of the States of a competition code replicating Part
IV of the TPA. The parties agreed that the Competition Code text should be applied by way of “application legislation to all persons within the legislative competence of each State and Territory”. In other words, the States agreed to adopt common form laws. They also attempted to avoid the development of differences following
the initial adoption. Clause 6(1) stated:
It is the intention of the Parties that where modifications are made to provisions of either Part IV of the Trade Practices Act or of the Schedule Version of Part IV of that Act, similar modifications will be made to corresponding provisions of the other.
The Commonwealth agreed to consult with the other parties before submitting to Parliament any modification of Pt IV of the Trade Practices Act or the Code.
54 The Commonwealth was required to call a vote on the proposed amendments by sending a notice to each party. It
would have two votes. Each of the other parties would have one. The Commonwealth would also have the casting vote. It agreed not
to submit for parliamentary consideration any amendment to the Competition Code text unless a majority of the votes of the Commonwealth
and the other parties supported the amendment.
55 Under the Implementation Agreement, the Commonwealth committed to make National Competition Policy payments to
each State and Territory in the period 1997-1998 to 2005-2006 where the relevant State or Territory had made satisfactory progress
against its obligations under the National Competition Principles and related reforms.
56 A legislative implementation of the Competition Principles Agreement and the Conduct Code Agreement was effected
by the Competition Policy Reform Act 1995 (Cth). Among other things, it established the ACCC and the National Competition Council (NCC). It also redesignated the Trade Practices
Tribunal, responsible for review of ACCC decisions, as the Australian Competition Tribunal (ACT).
57 Amendments were made to Pt IV of the TPA, making them applicable to areas within State and Territory jurisdiction and applying the TPA in various respects to the Crown in right
of the States and the Territories in so far as they carried on a business. The third party access regime in relation to significant
infrastructure was also introduced into the TPA. The Competition Code was introduced into the TPA to facilitate its application
by participating States and Territories. Importantly, State and Territory application laws were permitted to confer functions or
powers on Commonwealth entities.
58 Following the enactment of the Competition Policy Reform Act 1995 (Cth), each of the States and Territories enacted Competition Policy Reform Statutes adopting the Competition Code text. A typical
example of an application of the Competition Code text is to be found in s 5 of the Competition Policy Reform (NSW) Act 1995:
1. The Competition Code text, as in force for the time being, applies as a law of New South Wales.
2. This section has effect subject to section 6.
Section 6 provided that modifications to the Competition Code text would not apply as the law of New South Wales under s 5 until at
least two months after the date of the modification unless an earlier date were appointed by proclamation. The effect of these two
provisions seems to be that a law of the Parliament of New South Wales had a content varying without legislative action by the New
South Wales Parliament, according to changes in the content of the Commonwealth law.
59 The State application Acts did purport to confer functions on the NCC, the ACCC and the ACT, all bodies set up
under Commonwealth law. Conferral by State Parliaments of functions under State law on Commonwealth bodies is not straight forward.
In R v Hughes the High Court held that (at ):
1. A State cannot by its laws unilaterally invest functions under such laws in officers of the Commonwealth.
2. A State law which purports to give to a Commonwealth officer a wider power or authority than that the acceptance of which
is prescribed by Commonwealth law would, to that extent be inconsistent with the Commonwealth law and invalid under s 109 of the Constitution.
60 The Commonwealth law can permit a Commonwealth authority to exercise a non-obligatory function conferred on it
by State law. It does not require the support of any express Commonwealth head of power. If a State law however purports to impose
a duty on a Commonwealth body, then the duty must be authorised and, indeed, imposed by a Commonwealth law which is in turn supportable
by reference to a head of Commonwealth legislative power. If there is an intergovernmental agreement by which duties may be imposed
on Commonwealth officers to carry out functions under State law, then a Commonwealth law imposing such a duty may be an exercise
of the incidental power under s 51(xxxix) in aid of the executive power of the Commonwealth under s 61.
61 Concerns about these restraints are reflected in provisions of the TPA relating to functions conferred upon the
NCC, the ACCC and the ACT. By way of example, s 44ZZM in Pt IIIA deals with the conferral of powers and functions under State or
Territory access regimes on the ACCC and the ACT. It provides:
(1) A State or Territory access regime law may confer functions or powers, or impose duties, on the Commission or Tribunal.
(2) Subsection (1) does not authorise the conferral of a function or power, or the imposition of a duty, by a law of a State
or Territory to the extent to which:
(a) the conferral or imposition, or the authorisation, would contravene any constitutional doctrines restricting the duties
that may be imposed on the Commission or Tribunal; or
(b) the authorisation would otherwise exceed the legislative power of the Commonwealth.
(3) The Commission or Tribunal cannot perform a duty or function, or exercise a power, under a State or Territory access regime
law unless the conferral of the function or power, or the imposition of the duty, is in accordance with an agreement between the
Commonwealth and the State or Territory concerned.
62 Section 44ZZMA deals with the case in which there is a duty imposed on a Commonwealth body by a State law. It
provides, in effect, that if the State could impose a duty on the Commonwealth body, with the consent of the Commonwealth and that
duty would be consistent with constitutional doctrines, then it will operate by force of State law alone. If the imposition of the
duty requires the support of Commonwealth laws then that support is available. Thus:
(3) If, to ensure the validity of the purported imposition of the duty, it is necessary that the duty be imposed by a law of
the Commonwealth (rather than by the law of the State or Territory), the duty is taken to be imposed by this Act to the extent necessary
to ensure that validity.
(4) If, because of subsection (3), this Act is taken to impose a duty, it is the intention of the Parliament to rely on all
powers available to it under the Constitution to support the imposition of the duty by this Act.
(5) The duty is taken to be imposed by this Act in accordance with subsection (3) only to the extent to which imposing the
(a) is within the legislative powers of the Commonwealth; and
(b) is consistent with constitutional doctrines restricting the duties that may be imposed on the Commission or Tribunal.
63 There are similar techniques in relation to the conferring of functions on Commonwealth entities under the Competition
Code as adopted by State application laws. There is a specific regime relating to third party access to gas pipelines which also involves the conferral of State functions
on Commonwealth instrumentalities. The difficulties to which the decision in Hughes gives rise may be said to have led to unnecessary complexity in the legislation and corresponding uncertainty about its interpretation
64 In 1989 the Industry Assistance Commission reported to the Commonwealth Treasurer that the gas and electricity
industries were particularly inefficient. In the same year the newly formed Industry Commission was asked by the Treasurer to report on institutional or regulatory or other
arrangements subject to influence by governments which led to inefficient resource use in the electricity and gas sectors, and to
advise on the reduction or removal of those efficiencies. The Industry Commission reported in 1991 finding that there was an urgent
need for reform of both sectors. The primary source of the inefficiency was identified as lack of commercial discipline imposed
65 At a Special Premiers’ Conference held in 1991, predating the formation of COAG which occurred in May 1992,
it was agreed that a National Grid Management Council (NGMC) be established to consider arrangements for an interstate electricity
network. The NGMC asked to submit its recommendations to COAG. The NGMC proposed the establishment of a competitive national market
in the trading of electricity and made other recommendations about features of that market including absence of barriers to interstate
trade to entry for new participants in generation or retail supply to uniform trading rules across South and Eastern Australia. Under the Implementation Agreement referred to earlier, it was a condition of Commonwealth competition payments for the States and
Territories that they implement all COAG agreements on electricity arrangements through the NGMC.
66 A National Electricity Market Legislation Agreement was made in May 1996 between NSW, Victoria, Queensland, South
Australia and the ACT. Each of those entities agreed to a National Electricity Law with South Australia as the lead jurisdiction.
The National Electricity Law was scheduled to the National Electricity (South Australia) Act 1996 (SA). It was given effect as a law of South Australia by s 6 of that Act and was applied and adopted as a law of the Commonwealth, the other States and the ACT. The National Electricity Law provided for the approval by the parties of a Code of Conduct called the National Electricity Code.
This was to be managed, administered and enforced by the National Electricity Market Management Corporation (NEMCO). The National
Electricity Market began its operations on 13 December 1998. It interacted with price control legislation in the States.
67 An intergovernmental agreement embracing both electricity and gas markets was made in 2004. The Australian Energy
Market Agreement 2004 as amended in 2006 outlines a governance framework for Australian energy market institutions, including the
Ministerial Council on Energy (MCE), the Australian Energy Regulator (AER) and the Australian Energy Market Commission (AEMC).
68 The Agreement sets out the transfer of economic and non-economic regulatory functions including the transmission,
distribution and retail sectors from individual jurisdictions to a national framework. In particular, the AEMC and the AER, along
with the ACCC, have now taken over many of the regulatory arrangements for electricity that were previously the responsibility of
the state government authorities.
69 The MCE, comprising Commonwealth, State and Territory Ministers with responsibility for energy, is the national
policy and governance body for the Australian energy market. It is responsible for the national energy policy framework, including
governance and institutional arrangements for the energy market and the legislative and regulatory framework within which the market
operates and natural monopolies are regulated.
70 In 2004 Pt IIIAA was inserted into the TPA. It established the Australian Energy Regulator (AER). The AER comprises a Commonwealth member and two State/Territory members. The AER has any functions conferred upon it under a law of the Commonwealth or prescribed by regulations made under the TPA. By the enactment the Commonwealth also consented to the conferral of functions, powers and duties on the AER. It used provisions
modeled on those applicable to the NCC, the ACCC and the ACT in respect of the Competition Codes. The functions under State or Territory legislation to which it consented were functions conferred by State/Territory energy laws.
A State/Territory energy law is defined in the TPA as:
(a) a uniform energy law that applies as a law of a State or Territory;
(b) a law of a State or Territory that applies a law mentioned in paragraph (a) as a law of its own jurisdiction;
(c) any other provisions of a law of a State or Territory that are prescribed by the regulations for the purposes of this paragraph.
The term “uniform energy law” means:
(a) the South Australian electricity legislation; and
(b) provisions of a State or Territory law that:
(i) relate to energy; and
(ii) are prescribed by the regulations for the purposes of this subparagraph;
being those provisions as in force from time to time.
71 The Australian Energy Market Act 2004
(Cth) provides that the National Electricity Law as set out in the South Australian Act applies as a law of the Commonwealth “in
the adjacent area of each State or Territory” and any other places, circumstances or persons as prescribed by regulations.
The Australian Energy Regulator (AER) is responsible for regulating the natural monopoly transmission and distribution sectors of
the NEM, monitoring the wholesale electricity market and enforcing electricity market rules. The Australian Energy Market Commission
is a national statutory body responsible for rule making, policy advice, market development and electricity distribution in the NEM.
72 Although many of the regulatory arrangements for electricity have been taken over by national bodies, state and territory Governments
and regulatory bodies are responsible for any regulation of retail electricity prices and maintain close involvement in planning,
especially in the assessment of proposals for new energy infrastructure.
73 In 1997, the Natural Gas Pipelines Access Agreement was signed by the Commonwealth, State and Territory Governments.
It was aimed at establishing a uniform national regulatory framework for third party access to natural gas pipelines. South Australia
again passed the “lead legislation” (Gas Pipelines Access (South Australia) Act 1997 (SA)) and all other Australian governments enacted legislation providing that the Gas Pipelines Access Law (as contained in Schedules
1 and 2 of the South Australian Act) and regulations would apply as laws or regulations of that jurisdiction, or, in the case of the Commonwealth Act, in certain territories and adjacent areas. The Agreement together with these Acts constitutes the Gas Access Regime.
74 In 2004, the Productivity Commission reviewed the Gas Access Regime, noting it was effectively a form of cost-based price regulation and recommended the addition of a less costly monitoring option.
In response to this review, the Ministerial Council on Energy decided to introduce a “light handed” regulatory option
for covered pipelines and an overarching objects clause, change the coverage criteria to only apply to those pipelines for which
coverage would generate a material increase in competition in a related market, and quarantine from coverage, for 15 years, pipelines assessed as qualifying for non-coverage.
75 The AEMA provides that the MCE is responsible for the national energy policy framework and governance and institutional
arrangements in relation to gas transmission, distribution and retail.
76 In November 2006, the MCE released its exposure draft of the National Gas Law. The National Gas (South Australia) Bill 2008 (SA), containing the National Gas Law in the Schedule, was introduced in the South Australian House of Assembly on 9 April 2008
and was received in the Legislative Council on 30 April 2008, but has not yet been proclaimed. At present, New South Wales, Queensland, Victoria, Tasmania, the Northern Territory and the Australian Capital Territory have followed South Australia in introducing “jurisdictional application” Bills, which provide that the National Gas
Law as set out in the Schedule to the South Australian Act, and any regulations made under that Act apply as a law of that jurisdiction
and as regulations in force respectively. Tasmania will follow, while Western Australia will not. As Western Australia has only agreed
to implement legislation conferring functions and powers on the AEMC in respect of natural gas pipeline access, it will pass complementary legislation to give effect to the relevant access sections of the National Gas Law.
77 According to the MCE, the National Gas Law is intended to commence in all jurisdictions except Western Australia
on 1 July 2008. Western Australia is expected to pass its complementary legislation in September 2008.
Road, rail, shipping and ports – multiple jurisdictions and overlap
78 Other examples of national infrastructure which are not subject to the interlocking complexities of competition
and energy law have less developed cooperative frameworks characterised by executive coordination through national bodies such as
the National Transport Commission and the Australian Transport Council.
1. Road transport
79 Interstate road transport is not an express head of Commonwealth legislative power. That is not to say it cannot be regulated to
a degree by application of the other heads of power. Since 1987 there has been in place a Federal Interstate Registration Scheme
designed to provide uniform charges and operating conditions for heavy vehicles engaged solely in interstate operations. It is supported
by the Interstate Road Transport Act 1985 (Cth) and a cognate statute and regulations. It is administered by State and Territory road transport authorities on behalf of the
Commonwealth government. Vehicles for which registration is sought must comply with relevant Australian design rules.
80 The registration scheme relies upon statutes supported by the interstate trade and commerce power. However the Australian Design
Rules are made under the Motor Vehicle Standards Act 1989 (Cth). The corporations power is used in addition to the trade and commerce powers to regulate new motor vehicle safety and environmental
standards through that Act. The Australian Design Rules have been described as providing “national standards for vehicle safety,
anti-theft and emissions”.
81 The National Transport Commission, the nature of which is described below, has been called more of a facilitator than a regulator
in connection with road transport:
[T]he NRTC, and now the NTC, is more of a facilitator than a regulator. In the end a majority of the nine governments need to agree
to most proposed changes, and there is then little ability to enforce agreements. For example, there was agreement among Ministers
to uniform heavy vehicle mass limits but not all States have implemented them. It is still the case today that there is no common
heavy vehicle mass limit across Australia. A vehicle with the maximum allowable mass in Victoria, for example, cannot travel into
New South Wales.
82 There are a number of heads of power under which the Commonwealth can make laws relating to rail transport. These include the trade
and commerce power, and ss 51(xxxii), 51(xxxiii) and 51(xxxiv).
83 In the 1970s publicly accessible rail services within Australia were operated by government agencies. The Commonwealth government
at that time offered to take over State owned entities and create a single national rail operator. Only South Australia and Tasmania
took up the offer. Their rail operations were combined with existing Commonwealth Railways operations linking the Eastern States
with Western Australia. The new organisation, which came into existence in 1975, was known as Australian National Railways. The
rail network for which it had responsibility ran from Broken Hill to Kalgoorlie. Over the years that followed there was a gradual
conversion of railway lines within Australia to standard gauge until 1995 when all Australian State capitals were linked by one standard
gauge rail network. Although there was now one standard gauge network, there were five different government owned rail authorities
84 In the early 1990s there were initiatives to establish a National Track Authority for the interstate standard gauge network. The
Australian National Railway was privatised and a distinct business known as AN Track Access was established to administer access
to interstate track under Australian National control.
85 In 1997 Commonwealth and State governments agreed to a “one stop” shop for all operators seeking access to the National
Interstate rail network. The Australian Rail Track Corporation Limited was created pursuant to that agreement. Over particular
corridors it is responsible for selling access to train operators, the development of new business, capital investment, management
of the network and management of infrastructure maintenance. The remainder of the interstate rail network is controlled by government
agencies comprising Queensland Rail (Brisbane to Queensland border), Railcorp (the Sydney metropolitan region) and WestNet (Kalgoorlie
86 Nevertheless, as Ken Henry pointed out in 2006, operators of interstate trains in Australia may have had to deal with six access regulators,
seven rail safety regulators, nine different statutes, three transport accident investigators, 15 statutes relevant to occupational
health and safety of rail operations and some 75 pieces of legislation relating to environmental management. He observed:
Australia has seven rail safety regulators for a population of around 20 million people. In contrast, the United States, with a population
of 285 million people, has one rail safety regulator.
One example of rail services fragmentation which he gave related to train communications. As at 2006 each State and Territory required
trains within its jurisdiction to have a particular type of radio. New South Wales mandated two. This meant that a train could
not operate nationally without eight different radio systems. And even with a cabin full of eight radios, trains could not “talk”
to each other.
A cooperative endeavour – the National Transport Commission
87 There is in place an institutional mechanism for cooperative regulation of land transport between Commonwealth and States. In 2003
the National Transport Commission was established under the National Transport Commission Act 2003 (Cth) pursuant to the Inter-governmental Agreement for Regulatory and Operational Reform in Road, Rail and Inter-modal Transport.
The Agreement recites the desirability of a national approach to the regulatory and operational reform of road and rail transport. Its overarching objective is:
To improve[e] transport, productivity, efficiency, safety and environmental performance and regulatory efficiency in a uniform or
nationally consistent manner.
88 The National Transport Commission superseded the National Road Transport Commission and covers both road and rail
transport. It is jointly funded by the Commonwealth, the States and the Territories. Its ongoing responsibilities include “developing uniform or nationally consistent regulatory and operational arrangements
for road, rail and inter-modal transport” and the continual maintenance and review of those reforms approved by the Australian Transport Council. As mentioned above it has been described as “more of a facilitator than a regulator”.
89 The Australian Transport Council is “a ministerial forum for Commonwealth, State and Territory consultations
and provides advice to governments on the coordination and integration of all transport and road policy issues at a national level”. It consists of Federal, State and Territory Transport Ministers and is responsible, inter alia, for approving submissions or recommendations
by the National Transport Council. Such recommendations are primarily in the form of “model legislation”, guidelines or codes developed by the National
Transport Council. Upon approval by the Australian Transport Council, State and Territory parties to the Agreement are committed
“use their best endeavors to implement and maintain Agreed Reforms in a uniform or nationally consistent manner”.
Transport and the COAG National Reform Agenda
90 Transport regulation is also an element in the “National Reform Agenda” which COAG agreed to implement
in February 2006. The competition stream of that Agenda includes a focus on “further reform and initiatives in the area of
transport, energy, infrastructure regulation and planning and climate change, technological innovation and adaptation”. It
includes an objective of improving the efficiency, adequacy and safety of Australia’s transport infrastructure by committing
to high priority national transport market reforms. These include the development of proposals for the efficient pricing of road
and rail infrastructure through consistent and competitively neutral pricing regimes, the harmonisation and reform of rail and road
regulation within five years, the strengthening and coordination of transport planning and project appraisal processes and the reduction
of current and projected urban transport congestion. In its meeting in February 2006 COAG agreed to address six priority cross-jurisdictional “hot spot areas” where overlapping
and inconsistent regulatory regimes were said to be impeding economic activity. These included rail safety regulation.
91 A National Model Rail Safety Bill and related National Model Regulations developed by the National Transport Commission
were approved by Commonwealth, State and Territory Transport Ministers in June 2006. They are intended to constitute a “seamless,
national regulatory regime”. Statutes based on the National Model Rail Safety Bill have since been enacted in various jurisdictions.
92 While road networks are regulated by States and Territories, the Commonwealth provides financial assistance through
tied grants and policies. This expenditure has rarely been tied to regulatory issues. However, in 2005 the Commonwealth Parliament enacted the AusLink (National Land Transport) Act 2005 establishing the AusLink network. It is intended to provide “a planning framework and funding for the Australian government’s
investment in land transport infrastructure”. It is said to have involved “a major change to how road and rail investment
is planned and funded”.
93 The High Court held in New South Wales v Commonwealth  HCA 58; (1976) 135 CLR 337 that the Commonwealth had sovereignty over the territorial sea. The Offshore Constitutional Settlement of 29 June 1979 followed
this decision. It was described at the time as a milestone in cooperative federalism. The Commonwealth, the States and the Northern Territory agreed to enact legislation implementing arrangements relating to shipping
under which the States and Territories would be responsible for:
- trading vessels except those proceeding on an interstate or an overseas voyage;
- all Australian commercial fishing vessels except those going on an overseas voyage;
- all vessels whose operations are confined to rivers, lakes and other inland water ways (with New South Wales responsible for all vessels
operating on the River Murray upstream from the South Australian boarder); and
- pleasure craft, and vessels used for pleasure on a hire and drive basis.
The Commonwealth on the other hand took responsibility for trading vessels on interstate or overseas voyages, the navigation and marine
aspects of offshore industry mobile units and offshore industry vessels other than those confined to one State and Territory. The
Commonwealth and the States also developed a Uniform Shipping Laws Code which was adopted by the Australian Transport Council. The
Code was to be used as the basis for uniform Commonwealth, State and Northern Territory legislation for the survey and manning of
commercial vessels, including fishing vessels. It provides safety standards for the design, construction and operation of domestic
94 Ports are regulated by the States and by the Northern Territory. In a report published in April 2007 under the
title “Australia’s Infrastructure: National Overview Report” COAG stated:
Most of Australia’s ports are owned by State and Territory governments and operated on a commercial basis by State-owned corporations
or Port Authorities. Some ports have been privately developed for the exclusive handling of specific commodities. Some (eg Adelaide
and other South Australian ports) have been privatised in recent years.
Port Authorities in general are responsible for providing channels, berths and operating some common use facilities. The private
sector commonly establishes infrastructure and operates services … under leases or licences within the port precincts.
95 There was some debate in the life of the last government about the possibility that the Commonwealth might assume
legislative control of Australian ports by use of the interstate and overseas trade and commerce power. That possibility has not
recently been publicly pursued. However regulation of ports is under review as part of the COAG national reform agenda. In the
Competition and Infrastructure Reform Agreement, the COAG members have agreed:
To provide for a simpler and consistent national system of economic regulation for nationally-significant infrastructure, including
for ports, railways and other export-related infrastructure.
The aims of the foreshadowed reforms are to reduce regulatory uncertainty and compliance costs for owners, users and investors in
significant infrastructure and support the efficient use of national infrastructure.
96 In March 2008 all the affected jurisdictions had commenced, although not all had completed the required review.
The COAG Reform Council has recommended that the findings and recommendations of the review be implemented by December 2008.
97 This paper began with a reference to water and it is appropriate that the review of current and foreshadowed cooperative
arrangements conclude with water. Regulatory arrangements for water in Australia are complex. They differ between the States and
Territories. Some governance and regulatory arrangements exist at the national, State, river basin, regional and local government
levels. In Queensland, for example, water management responsibilities are allocated at State, regional and local levels divided
between ministers and their departments’ regional water authorities. The allocation is as follows:
- water pricing and economic regulation: State, regional and local;
- water planning and management: State and regional;
- water markets: State and local;
- water supply and services: Regional and local; and
- water quality management: State.
98 On 25 June 2004 at a COAG meeting all Australian governments signed the Intergovernmental Agreement on a National
Water Initiative, save for Tasmania which signed on 3 June 2005 and Western Australia on 6 April 2006. The Initiative set out a
framework for national water reform with a view to creating a nationally-compatible market-, regulatory-and planning-based system
for the management of water resources. Key elements included:
- water access entitlements and planning frameworks;
- efficient water market and trading arrangements;
- best practice water pricing;
- integration of environmental and other public benefit outcomes into water management;
- improved water resource accounting;
- urban water reform;
- community partnerships; and
- knowledge and capacity building.
99 The National Water Initiative contained 70 agreed actions to be undertaken by governments across the eight elements
of water management and regulation. Almost half involved national actions or other action by governments working together. This
reflected the agreement’s emphasis on greater national compatibility in water regulation and a greater level of cooperation
between governments to that end.
100 The National Water Commission was established by the National Water Commission Act 2004 (Cth). It is responsible for managing the implementation of the National Water Initiative and assessing and reporting on its progress.
101 The First Biennial Assessment of Progress in Implementation of the National Water Initiative, which was released
in October 2007, found that the Initiative remains the primary and enduring national blueprint for water reform. It found also that
governments have made considerable progress in implementing the Initiative.
102 The recent history of cooperative federalism in Australia demonstrates a tendency to treat as national a whole range
of issues which, not so long ago, would have been regarded as local. The concentration of central power to which this trend contributes
began many years ago. The Commonwealth entered, through tied grants made under s 96, the regulation of a range of areas including
health and education which were and still are constitutionally the province of the States. That use of s 96 was sanctioned by the
High Court. The application of the external affairs power to enact laws affecting trade and commerce and interpersonal relations
in connection with race, sex and disability discrimination and human rights generally is another example.
103 Cooperative federalism today is in part extra-constitutional. Driven by political imperatives it yields results
on a consensual basis which go well beyond those achievable by the exercise of Commonwealth legislative power and the separate exercise
by the States of their powers. In that sense the cooperative federalism movement may be seen to overshadow expansive interpretations
of Commonwealth power under the Constitution. And in my opinion, although cooperative and thus respecting the formal constitutional position of the States, it contributes towards
centralisation. For every topic which is treated as national becomes potentially a matter which, somewhere along the line, it can
be argued is best dealt with by a national government.
104 Mixed jurisdictional cooperative schemes may appear to be fragile because they depend upon a consensus. But once
in place it is arguable that there is a ratchet effect. Once a topic has been designated as one of national significance and requiring
a cooperative approach, it is difficult to imagine circumstances in which it becomes politically acceptable to the parties to go
backwards and fragment responsibility for it. The pressure seems to be in one direction only. It is added to by the kind of criticism
that is advanced of mixed jurisdictional cooperative arrangements in terms of locating accountability. A recent commentary by Jack
Waterford in the Canberra Times on the Murray-Darling Basin Water Agreement makes the point about the Authority pursuant to the Agreement:
Who’s in charge and who will we hang if it doesn’t work out? Who’s actually deciding things?
He referred in particular to the provision of the agreement underlying the Authority which said:
Decisions of the Basin Officials Committee will be exercised consistent with the delegations received from the Ministerial Council.
These delegations will relate to objectives and outcomes consistent with those set by the Ministerial Council and consistent with
the Authority having the autonomy to decide on the matters set down in the corporate plan covering program design, delivery, monitoring
and reporting arrangements required to implement the decisions of the Ministerial Council and the Basin Officials Committee.
He added the rhetorical question: “Clear Now?”.
105 It is reasonably arguable that accountability is optimised under a cooperative scheme when one government and one
minister has to be responsible for its administration. An electorate well versed by long experience in the arts of blame shifting
between governments is likely to require no less when things go wrong. This suggests an ongoing pressure, albeit over a period of
years, to simplify complex cooperative arrangements where accountability is not well located. That simplification can occur in at
least two ways:
1. Use by the Commonwealth Parliament of broad constitutional powers to take over control of the relevant area. In this respect
there may be unused potential particularly in the corporations power, trade and commerce power, the external affairs power and the
incidental power to enter into areas previously untouched by Commonwealth law.
2. Reference by the States of the power to make laws in relation to the relevant subject matter. Such references are likely
in the foreseeable future to be text-based with in extremis escape mechanisms for the States, underpinned by ministerial agreements
and, perhaps, a ministerial council and an official advisory body. The law which emerges will be a Commonwealth law and any regulatory
agency set up under that law will be a Commonwealth agency. Accountability for its actions will reside ordinarily with the agency
and the relevant minister although at least in policy development the Ministerial Council and official advisory bodies will have
an important role to play. Such an agency will also be subject to judicial review. ASIC, as corporations regulator, is an example
of this class of case.
106 Most people prefer to see cooperation between the components of a federation rather than conflict. But when the
trend of cooperation is ultimately to centralise power, then the price of cooperation may ultimately involve a risk of losing some
of the benefits of federation. A number of those benefits were listed by Twomey and Withers in their Federalist Paper in April 2007:
- protection for the individual by checking the concentration of power;
- choice and diversity;
- the customisation of policies to meet local needs;
- incentives to reform and improve in order to complete with other jurisdictions;
- incentives to innovate and experiment; and
- greater scrutiny of policies as a result of the need to achieve concentration.
107 They gave a number of examples of State and Territory innovations which have led reform in Australia in areas such
- road safety campaigns and the compulsory use of seat belts;
- the establishment of the first environmental protection authority in Australia and the second in the world after California;
- the enactment of various kinds of anti-discrimination laws;
- the use of commercialisation and corporatisation to improve the performance of government enterprises;
- the development of trade relations with Indonesia;
- the creation of mechanisms for the review of business regulators;
- the use of casemix funding of public hospitals;
- the establishment of health care call centres;
- the development of private financing initiatives;
- the development of the mutual recognition scheme;
- the reform of financial regulation;
- the development of the National Reform Agenda to enhance human capital;
- the development of regional migration schemes;
- the development of markets for the trading of salinity credits and biodiversity credits;
- the creation of carbon rights and the development of a national carbon emissions trading scheme; and
- the development of population policies. 
108 The continuance of the benefits to federation in Australia assumes the existence of reasonably efficient, effective
and accountable governments at all levels of the Federation. There is no doubt however that some State governments, despite the
best efforts of committed ministers and officials, are regarded by a significant proportion of electors as not adequately discharging
their constitutional functions. Such negative views of State governments where they exist can feed into an increasing sympathy for
assumption by the Commonwealth Government of power and responsibility for matters left to the States under the Commonwealth Constitution. If that observation, which is at best impressionistic be correct, then there is little to be done to stop the drift short of a
substantial revitalisation of those governments.
109 The reality of the problem is evidenced by the way in which some federal political leaders have been prepared to
talk about relegating the States to a lesser role or abolishing them altogether. When Prime Minister Whitlam in the 1970s floated
the idea of provincial governments to replace State governments he was seen as something of a radical. He does not seem so radical
now in light of some contemporary debate about Commonwealth powers.
110 In my opinion the benefits of federalism are real even if many of them cannot reliably be quantified in money terms.
The current level of cooperation between States, Territories and the Commonwealth is to be applauded. Some of its outcomes are,
however, unnecessarily complex, technical and difficult to administer. They also diffuse accountability. The comparatively simple
remedy of referral, which locates accountability clearly but retains an underlying veto control by the states of amendments and
abuse of the referred powers is to be preferred.
111 On the other hand, despite the benefits of cooperative federalism the wide range of its application may have an
overall tendency to define as national that which was once local. That may in turn be used in future argument favouring Commonwealth
control and accountability in respect of such matters. If the States are not perceived by electors as adequately discharging their
constitutional responsibilities then such perceptions will feed into the legitimisation of national control. A shrinking federation
will continue to shrink. The logical outcome is the singular State of a unitary federation. That is the federation you have when
you do not have a federation.