Hostname: page-component-745bb68f8f-v2bm5 Total loading time: 0 Render date: 2025-02-04T20:57:30.392Z Has data issue: false hasContentIssue false
  • English
  • Français

Federalism and Subsidiarity: Principles and Processes in the Reform of the Australian Federation

Published online by Cambridge University Press:  01 January 2025

Nicholas Aroney
Nicholas Aroney*
Affiliation:
Constitutional Law and Australian Research Council Future Fellow, School of Law, University of Queensland
Get access Rights & Permissions [Opens in a new window]

Abstract

The principle of subsidiarity offers a criterion for the rational allocation of roles within federations between federal and state governments. The principle states that ‘functions should be performed by the lowest level of government competent to do so effectively’. However, embedded in the principle is a hierarchy: there are ‘higher’ and there are ‘lower’ levels of government. This hierarchy suggests a point of view from which assessments of optimal allocation are to be made. The deeper question, therefore, is this: ‘who will decide for whom?’ The reform of a federal system turns not only on what principles are used, but on questions of process: who will decide what those principles require, and how will they go about doing it? A problem of path dependency lies at the heart of Australia's federal malaise. It is this problem that we need to be grappling with when considering the optimal design of the system. To do so, we need to consider not only the principles but also the processes by which the federal system is to be reformed. This paper draws on the comparative experience of Switzerland, Germany and Austria to provide guidance about how Australia's federal system might best be reformed.

If we want to know how to change institutions, we must be attuned to the fact that there is frequently a mismatch between the initial aims of institution-builders and the contemporary value we attach to them.

Type
Article
Information
Federal Law Review , Volume 44 , Issue 1 , March 2016 , pp. 1 - 24
Copyright
Copyright © 2016 The Australian National University

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This paper was presented at the Australian Attorney-General's Department Constitutional Law Symposium, Canberra, 1 May 2015. Note, since the writing of this article, the Federation White Paper process has been discontinued by the federal government. The support of ARC grant FT100100469 is gratefully acknowledged.

Daniel Ziblatt, Structuring the State: The Formation of Italy, Germany, and the Puzzle of Federalism (Princeton University Press, 2006) xi.

References

2 Eg, Department of Prime Minister and Cabinet, Reform of the Federation White Paper: A Federation for Our Future: Issues Paper 1 (Commonwealth of Australia, September 2014) v, 18, 20–21 (‘Issues Paper 1’).

3 Department of Prime Minister and Cabinet, Reform of the Federation White Paper: COAG and Federal Financial Relations: Issues Paper 5 (Commonwealth of Australia, February 2015) 5 (‘Issues Paper 5’).

4 John Paul II, Centesimus Annus: Encyclical Letter on the Hundredth Anniversary of Rerum Novarum (1 May 1991) [48]. The best explanation of origin and nature of the idea in Roman Catholic social teaching is Hittinger, Russell, ‘Social Pluralism and Subsidiarity in Catholic Social Doctrine’ (2002) 16 Annales Theologici 385Google Scholar.

5 Elazar, Daniel J, Exploring Federalism (University of Alabama Press, 1987) 64Google Scholar.

6 Treaty on European Union, opened for signature 7 February 1992 [2009] OJ C 115/13 (entered into force 1 November 1993) art 5(3) (‘Treaty on EU’).

7 Bermann, George A, ‘Taking Subsidiarity Seriously: Federalism in the European Community and the United States’ (1994) 94(2) Columbia Law Review 331, 348–66CrossRefGoogle Scholar.

8 Treaty on EU Preamble, art 5.

9 Dashwood, Alan, ‘The Relationship between the Member States and the European Union/European Community’ (2004) 41(2) Common Market Law Review 355, 368CrossRefGoogle Scholar; Toth, A G, ‘Is Subsidiarity Justiciable?’ (1994) 19(3) European Law Review 268Google Scholar.

10 Aroney, Nicholas, ‘Subsidiarity: European Lessons for Australia's Federal Balance’ (2011) 39(2) Federal Law Review 213, 221–9CrossRefGoogle Scholar.

11 Protocol on the Application of the Principles of Subsidiarity and Proportionality [1997] OJ C 340/105; Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality [2010] OJ C 83/206.

12 Consolidated Version of the Treaty on the European Union [2010] OJ C 83/13, art 12(b). See also Protocol (No 1) on the Role of National Parliaments in the European Union [2010] OJ C 83/203.

13 Some early assessments of the system are reviewed in Aroney, above n 10, 218–21.

14 Pius XI, Quadragesimo Anno: Encyclical Letter on Reconstruction of Social Order (15 May 1931) [79]-[80].

15 Charles De Secondat Montesquieu, The Spirit of Laws (L'esprit Des Lois) (Hafner, 1949) 183–4 (IX.1).

16 Tiebout, Charles M, ‘A Pure Theory of Local Expenditures’ (1956) 64(5) Journal of Political Econonomy 416, 421–423CrossRefGoogle Scholar. For a collection of articles on the topic, see Kobayashi, Bruce H and Ribstein, Larry E, Economics of Federalism (Edward Elgar, 2007)Google Scholar.

17 New State Ice Co v Liebmann, 285 US 262, 310-11 (1932) (Brandeis J).

18 Turnour, Matthew, Beyond Charity: Outlines of a Jurisprudence for Civil Society (PhD Thesis, Queensland University of Technology, 2009) 102Google Scholar; Sirico, Robert A, ‘Subsidiarity and the Reform of the Welfare of the Nation State’ in Evans, Michelle and Zimmermann, Augusto (eds), Global Perspectives on Subsidiarity (Springer, 2014) 107CrossRefGoogle Scholar.

19 Evans, Michelle, ‘Subsidiarity and Federalism: A Case Study of the Australian Constitution and its Interpretation’ in Evans, and Zimmermann, (eds), Global Perspectives on Subsidiarity (Springer, 2014) 185, 188–94.CrossRefGoogle Scholar

20 Commonwealth Constitution ss 51, 52, 106, 107; Australia Act 1986 (Cth) s 2; Australia Act 1986 (UK) s 2.

21 Official Report of the National Australasian Convention Debates, Sydney (Acting Government Printer, 1891) 31–2.

22 Commonwealth Constitution ss 1, 7, 24. Note, however, the possibility of joint sittings of both houses under s 57.

23 Commonwealth of Australia Constitution Act 1900 (UK) Preamble.

24 Commonwealth Constitution s 128.

25 See generally Aroney, Nicholas, The Constitution of a Federal Commonwealth: The Making and Meaning of the Australian Constitution (Cambridge University Press, 2009).CrossRefGoogle Scholar

26 See generally Aroney, Nicholas, ‘Constitutional Choices in the Work Choices Case, or What Exactly is Wrong with the Reserved Powers Doctrine?’ (2008) 32(1) Melbourne University Law Review 1.Google Scholar

27 Sawer, Geoffrey, Australian Federal Politics and Law 1901–1929 (Melbourne University Press, 1956) 128–9Google Scholar. This point is often exaggerated, however. For a discussion, see Aroney, Nicholas et al, The Constitution of the Commonwealth of Australia: History, Principle and Interpretation (Cambridge University Press, 2015) 58–60.CrossRefGoogle Scholar

28 Issues Paper 1, above n 2, 30-32; Issues Paper 5, above n 3, 26–34.

29 See, eg, Jonathan Pincus, ‘Productive Reform in a Federal System’ (Paper presented at Productive Reform in a Federal System, Productivity Commission Roundtable, Canberra, 27-28 October 2005) 25, 27; Neil Warren, Benchmarking Australia's Intergovernmental Fiscal Arrangements: Final Report (New South Wales Government, 2006) 31; Twomey, Anne, ‘Reforming Australia's Federal System’ (2008) 36(1) Federal Law Review 57, 59CrossRefGoogle Scholar; Head, Brian, ‘Taking Subsidiarity Seriously: What Role for the States?’ in Brown, A J and Bellamy, Jennifer (eds), Federalism and Regionalism in Australia: New Approaches, New Institutions? (ANU E Press, 2007) 155.Google Scholar

30 The papers are available at: <https://federation.dpmc.gov.au/>.

31 Issues Paper 5, above n 3, 5.

32 Issues Paper 1, above n 2, 20.

33 Ibid 17, 20.

34 Ibid 20.

35 Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208, 240; Federated Municipal and Shire Council Employees’ Union of Australia v Melbourne Corporation (1919) 26 CLR 508, 515-16, 544.

36 Commonwealth Constitution ss 73, 109.

37 Uther v Federal Commissioner of Taxation (1947) 74 CLR 508, 529–32 (‘Uther’); Commonwealth v Cigamatic Pty Ltd (in liq) (1962) 108 CLR 372, 377–8. For a trenchant criticism, see Meagher, R P and Gummow, W M C, ‘Sir Owen Dixon's Heresy’ (1980) 54(1) Australian Law Journal 25.Google Scholar

38 Uther (1947) 74 CLR 508, 529.

39 Ibid 529–30.

40 Ibid 530.

41 Bryce, James, The American Commonwealth (Macmillan, 2nd ed, 1889) vol I, 12–15, 332.Google Scholar

42 Aroney et al, above n 27, 272–6.

43 Federal Council of Australasia Act 1885 (UK).

44 Aroney, above n 25, 146-8.

45 Unanimity among the people of the states is arguably the deepest constitutive principle of the federation. See Aroney, Nicholas, ‘A Public Choice? Federalism and the Prospects of a Republican Preamble’ (1999) 20(2) University of Queensland Law Journal 262.Google Scholar

46 See Halberstam, Daniel, ‘Federalism: Theory, Policy, Law’ in Rosenfeld, Michel and Sajó, András (eds), The Oxford Handbook of Comparative Constitutional Law (Oxford University Press, 2012) 576, 593–594.Google Scholar

47 Frenkel, Max, Federal Theory (Centre for Research on Federal Financial Relations, Australian National University, 1986) [294]–[301]Google Scholar. This analysis puts aside, for the time being, the place of the territories and local government within the system.

48 The people of the Commonwealth are nothing more than an aggregation of the people of the states. The peoples of the two mainland territories were also formerly parts of the peoples of the states.

49 The principle of subsidiarity suggests that fundamental constitutional design decisions should be determined by the lowest level capable of making such decisions. When it is the design of an entire federal system that is in question, it seems clear that each individual state will not be capable of doing so because it will consider the system from its own perspective and not from the perspective of the whole. However, it also seems clear that the Commonwealth government will likewise consider the question from a limited perspective, for it cannot understand the system from the perspective of the states. A decision-making process that involves both the Commonwealth and the states (and, where necessary, the people of the Commonwealth and the people of the states) is therefore more likely to satisfy the principle of subsidiarity as applied to fundamental constitutional reform within a federal system.

50 Similar considerations apply to the people of the Commonwealth and the people of the states; that is why s 128 involves both sets of peoples in the referendum process.

51 Hayek, Friedrich A, Law, Legislation and Liberty, Vol 1: Rules and Order (University of Chicago Press, 1973) 14.Google Scholar

52 There is some recognition of this in the Issues Papers. Gary Sturgess is quoted as saying: ‘Many people, including many academic economists, think of government as a single organisation, managed by a chief executive or a board with a single set of policy objectives. If government were such an organisation, then the coordination of policy-making and implementation, of regulation and service delivery would be largely a matter of command and control. Overlap and duplication could be eliminated through fiat, and programs could be coordinated simply by relocating authority upwards to an official higher in the chain of command. In reality, the governance of large-scale societies is much more complicated than this.’ Issues Paper 1, above n 2, 6, citing Gary Sturgess, The Great Barrier Reef Partnership: Cooperation in the Management of a World Heritage Area (Queensland Government, 1999) 25. See generally Scott, James C, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (Yale University Press, 1998).Google Scholar

53 Blöchliger, Hansjörg and Vammalle, Camila, Reforming Fiscal Federalism and Local Government: Beyond the Zero-Sum Game (OECD Publishing, 2012) 18.CrossRefGoogle Scholar

54 Ibid 14, 17.

55 Ibid 16.

56 One study described them as: ‘inefficiency and intransparency of fiscal equalisation schemes, the struggle for definition of autonomous rights, competencies and resources of the subnational units - and the quest for more effective modes of vertical and horizontal coordination and cooperation’: Nathalie Behnke, ‘Towards a New Organization of Federal States? - Lessons from the Processes of Constitutional Reform in Germany, Austria, and Switzerland', Polis Nr. 66/2009 (Institut für Politikwissenschaft, FernUniversität in Hagen, 2009) 2. The reforms in Switzerland and Germany have been characterised as seeking to increase the degree of local ‘self-rule’ enjoyed by the constituent governments, unlike past reforms in Canada and Australia that have been characterised as increasing ostensibly cooperative ‘shared rule’: Broschek, Jörg, ‘Pathways of Federal Reform: Australia, Canada, Germany, and Switzerland’ (2014) 45 Publius: The Journal of Federalism 51CrossRefGoogle Scholar. The accent of the current White Paper process appears to be more in the direction of self-rule.

57 Blöchliger and Vammalle, above n 53, 124.

58 Ibid 125.

59 Behnke, above n 56. On Austria, compare Bußäger, Peter, ‘The “Austrian Convention“: Failure of an Ambitious Reform’ and Christoph Konrath, ‘Austria after the Austrian Convention’ in Benz, Arthur and Knüpling, Felix (eds), Changing Federal Constitutions: Lessons from International Comparison (Barbara Budrich Publishers, 2012).Google Scholar

60 Braun, Dietmar, ‘Constitutional Change in Switzerland’ (2009) 39(2) Publius: The Journal of Federalism 314CrossRefGoogle Scholar. A more detailed chronology appears in Freiburghaus, Dieter, ‘Swiss Federalism, Fiscal Equalisation Reform and the Reallocation of Powers’ in Benz, Arthur and Knüpling, Felix (eds), Changing Federal Constitutions: Lessons from International Comparison (Barbara Budrich Publishers, 2012) 53CrossRefGoogle Scholar. See also Blöchliger and Vammalle, above n 53, 81; Fischer, Manuel, Sciarini, Pascal and Traber, Denise, ‘The Silent Reform of Swiss Federalism: The New Constitutional Articles on Education’ (2010) 16 Swiss Political Science Review 747CrossRefGoogle Scholar; and compare Cappelletti, Fabio, Fischer, Manuel and Sciarini, Pascal, ‘‘Let's Talk Cash’: Cantons’ Interests and the Reform of Swiss Federalism’ (2013) 24(1) Regional & Federal Studies 1.CrossRefGoogle Scholar

61 Braun, above n 60, 317, quoting Scharpf, Fritz, Games Real Actors Play: Actor-Centered Institutionalism in Policy Research (Westview Press, 1997) 123.Google Scholar

62 Braun, above n 60, 318, citing Vanberg, Viktor and Buchanan, James, ‘Interests and Theories in Constitutional Choice’ (1989) 1(1) Journal of Theoretical Politics 49.CrossRefGoogle Scholar

63 Blöchliger and Vammalle, above n 53, 14.

64 Braun, above n 60, 319.

65 See also, Blöchliger and Vammalle, above n 53, 23.

66 Other commentators have observed that the success of the Swiss reform depended upon the bundling of several features into one comprehensive reform program, each feature involving key benefits to specific actors and interests, and that it was this bundling of inducements that overcame the many formal and informal veto points embedded in the Swiss system of consensual democracy: ibid 19. However, it is also important to notice that bundling can imperceptibly slip into log-rolling, where special interests join forces at the expense of other less well-organised groups: ibid 20.

67 Behnke, above n 56.

68 See, eg, Gunlicks, Arthur, ‘Reforming German Federalism’ in Appleby, Gabrielle, Aroney, Nicholas and John, Thomas (eds), The Future of Australian Federalism: International and Comparative Perspectives (Cambridge University Press, 2012) 115, 137–40CrossRefGoogle Scholar; and Behnke, Nathalie and Benz, Arthur, ‘The Politics of Constitutional Change between Reform and Evolution’ (2009) 39(2) Publius: The Journal of Federalism 213, 223–5CrossRefGoogle Scholar, citing several studies. For a more sanguine account, see Hofmann, Anton, ‘Constitutional Negotiations in Cooperative Federalism – the Case of Germany’ in Benz, Arthur and Knüpling, Felix (eds), Changing Federal Constitutions: Lessons from International Comparison (Barbara Budrich Publishers, 2012) 120Google Scholar. See also the measured assessment in Renzsch, Wolfgang, ‘German Federalism after Two Reforms’ in Benz, Arthur and Knüpling, Felix (eds), Changing Federal Constitutions: Lessons from International Comparison (Barbara Budrich Publishers, 2012) 375.CrossRefGoogle Scholar

69 Behnke, above n 56, 7.

70 Ibid 8.

71 Ibid 5.

72 Ibid 8.

73 Ibid.

74 Ibid 11. Swiss federalism is more than 700 years old. This time-horizon enables Swiss politics to progress at ‘deliberate speed’: more slowly than Australian politics, but with more progress as well. In both countries, the Constitution can only be amended by dual referendum, and yet the Swiss constitution was amended 117 times between 1874 and 1991 with a success rate of 47 per cent: Dubois, Philip L and Feeny, Floyd, Lawmaking by Initiative: Issues, Options and Comparisons (Agathon Press, 1998) 49Google Scholar. One important reason for this is that the federal government in Switzerland does not have a monopoly over the initiation of constitutional amendments; but this difference is itself a reflection of Swiss political culture, where the cantons and the people are treated as partners in government.

75 Behnke, above n 56. See, similarly, Blöchliger and Vammalle, above n 53, 23-4.

76 Behnke, above n 56, 14.

77 Ibid 11.

78 Ibid 12. Notably, it was a (rare) Grand Coalition government that in 2005 passed the first set of constitution reforms in Germany.

79 Ibid 13.

80 Lijphart, Arend, Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries (Yale University Press, 1999) ch 3Google Scholar; Vatter, Adrian, ‘Swiss Consensus Democracy in Transition. A Re-Analysis of Lijphart's Concept of Democracy for Switzerland from 1997 to 2007’ (2008) 4(2) World Political Science Review 1.Google Scholar

81 Lijphart, above n 80, 313.

82 Blöchliger and Vammalle, above n 53, 18.

83 Ibid 21, 63-72.

84 Former NSW Premier Nick Greiner has expressed concern that the federalism reform process ‘is being run by the federal bureaucracy’, principally through the Prime Minister's department: Jacob Greber and Katie Walsh, ‘State Funding Chaos', The Australian Financial Review (online) 11 September 2014 <http://www.afr.com/news/policy/tax/state-funding-chaos-20140911-jep3w>. See also Greiner, Nick, ‘Reforming the Federation: Perspectives of a Practitioner’ in Sovereignty, Blame Games and Tony Abbott's New Federalism (Centre for Independent Studies, 2014) 3.Google Scholar

85 On the Council for the Australian Federation, see Menzies, Jennifer, ‘The Council for the Australian Federation and the Ties That Bind’ in Kildea, Paul, Lynch, Andrew and Williams, George (eds), Tomorrow's Federation: Reforming Australian Government (Federation Press, 2012) 53.Google Scholar

86 Anderson, Geoff and Parkin, Andrew, ‘Federalism: A Fork in the Road?’ in Aulich, Chris and Evans, Mark (eds), The Rudd Government: Australian Commonwealth Administration 2007-2010 (ANU E Press, 2010) 210, 244Google Scholar, have described COAG as ‘an instrument of cooperative centralism’. See, similarly, O'Meara, Philip and Faithfull, Anna, ‘Increasing Accountability at the Heart of the Federation’ in Kildea, Paul, Lynch, Andrew and Williams, George (eds), Tomorrow's Federation: Reforming Australian Government (Federation Press, 2012) 92Google Scholar; Fenna, Alan, ‘Commonwealth Fiscal Power and Australian Federalism’ (2008) 31(2) University of New South Wales Law Journal 50Google Scholar; Nicholas Aroney, ‘Reinvigorating Australian Federalism’ in Michael White and Aladin Rahemtula (eds), Supreme Court History Program Yearbook 2009 (Supreme Court Library Queensland, 2010) 75.

87 However, see Chordia, Shipran and Lynch, Andrew, ‘Constitutional Incongruence: Explaining the Failure of the Council of the Australian Federation’ (2015) 43 Federal Law Review 339.CrossRefGoogle Scholar

88 Behnke and Benz, above n 68, 218.

89 To an extent, this also occurred in Canada: Blöchliger and Vammalle, above n 53, 69.

90 Scott Brenton, ‘Time for States to Change the Script over GST Gains', The Conversation (online), 20 April 2015 <https://theconversation.com/time-for-states-to-change-the-script-over-gst-gains-40309>.

91 Consider also the recent proposal by Prime Minister Turnbull to share income taxing powers with the states. The reactions have been predictable. Compare Peter Martin, ‘Why the states should charge income tax’, Sydney Morning Herald (online), 30 March 2016 <http://www.theage.com.au/comment/state-debate-under-turnbulls-scheme-voters-must-weigh-tax-versus-cost-of-healthcare-20160329-gntsub.html> and Michael Pascoe, ‘Turnbull proposal to stoke competitive federalism is politics not economic reform’, Sydney Morning Herald (online), 31 March 2016 <http://www.smh.com.au/business/the-economy/the-main-problem-it-is-the-wrong-tax-reform-20160330-gnupt2.html>.

92 Eg, John Brumby, Bruce Carter and Nick Greiner, GST Distribution Review: Final Report (Commonwealth of Australia, October 2012); John Brumby, ‘A Federation for the Future’ (Speech delivered at the 2014 Hamer Oration, The University of Melbourne, 19 May 2014).

93 Greiner, above n 84, 4.

94 Issues Paper 5, above n 3, 26-31.

95 Ibid 32-34.

96 A tax-base sharing arrangement could be an efficient way of achieving this: assessment and collection of income would continue to be administered by the Commonwealth, but the states would have a capacity to set an additional percentage of their own income tax. Negotiation of such a scheme would probably have to include a reduction of Commonwealth taxes to ensure that the overall tax burden is not increased. See Intergovernmental Relations Division, Western Australian Treasury, Directions for Financial Reform of Australia's Federation: Discussion Paper (Western Australian Government, June 1998).

97 Ibid.

98 Blöchliger and Vammalle, above n 53, 31-6.

99 Until the election of the Barnett government in Western Australia in September 2008.

100 Commonwealth of Australia, Budget Paper No. 2: 2014-15 (13 May 2014) 187.

101 Commonwealth of Australia, Portfolio Budget Statements 2014-15: Prime Minister and Cabinet Portfolio (25 November 2014) 25, n 1: ‘The Productivity Commission will receive funding for one year to develop transitional reporting arrangements, with PM&C continuing to monitor State and Territory performance on an ongoing basis.’

102 Issues Paper 5, above n 3, 19-25.

103 Aroney, above n 25, ch 6.

104 Levy, Ron, ‘Deliberative Constitutional Change in a Polarised Federation’ in Kildea, Paul, Lynch, Andrew and Williams, George (eds), Tomorrow's Federation: Reforming Australian Government (Federation Press, 2012) 350Google Scholar, argues, on the basis of survey evidence, that Australians are generally very supportive of constitutional reform processes that are genuinely deliberative in the sense of being fair and impartial, well-informed and in accordance with majority opinion.