Academic journal article University of Queensland Law Journal

Fiscal Federalism in Australia: Will Williams V Commonwealth Be a Pyrrhic Victory?

Academic journal article University of Queensland Law Journal

Fiscal Federalism in Australia: Will Williams V Commonwealth Be a Pyrrhic Victory?

Article excerpt

I INTRODUCTION

Australia is a constitutional federation. In 2012, the country was ranked fifth in the world by per capita nominal GDP (1) and seventh by median household income among the OECD nations. (2) The 2013 Heritage Foundation-Wall Street Journal Index of Economic Freedom ranks Australia third behind Hong Kong and Singapore and ahead of countries such as New Zealand, Switzerland, Sweden, the US and the UK. (3) Australia enjoys AAA credit ratings. The Ride of Law Index of the World Justice Project conducted by the American Bar Association ranks Australia above countries such as the US, Canada and UK. (4) Australia is a successful federation by most measurements.

Australia's economic success has many causes including its abundance of land and natural resources, strong global demand for its minerals and agricultural commodities, a legal heritage firmly grounded in the rule of law tradition, a vibrant representative democracy and a federal system of government. However, it is reasonable to ask whether the country can do better with its advantages. Many nations like Japan, Germany, New Zealand and Sweden with no natural resources, or very little, have done equally well or better than Australia. Despite its overall economic health Australia has structural weaknesses reflected in problems concerning its international competitiveness and medium to long term fiscal sustainability. An evaluation of fiscal federalism is a necessary part of any general assessment of the institutional underpinnings of the Australian economy.

Two recent decisions of the High Court brought the state of fiscal federalism in Australia into sharp focus. In the case Pape v Federal Commissioner of Taxation (5) the High Court ruled that ss 81 and 83 of the Constitution were not a source of power to appropriate and spend money out of the consolidated revenue fund. The decision quashed the long standing Commonwealth claim, encouraged by previous High Court decisions, (6) that it had a source of power beyond its constitutionally specified legislative competencies to appropriate and spend money from the Consolidated Revenue Fund. The second case, that of Williams v The Commonwealth (7) directly raised the question whether the Commonwealth has capacity to fund activities that are unsupported by its legislative powers, its power to make conditional grants to States or its executive power.

The case arose from a challenge to a federal government scheme to provide religious chaplaincy services in state schools by engaging private religious organisations to deliver the service under contract. The scheme was not authorised by Commonwealth legislation but was executively implemented with funds drawn from the annual appropriation for ordinary services of government. The Scripture Union Queensland (SUQ) received funds under the scheme to provide chaplaincy services at the Darling Heights State School in southern Queensland. Williams, the plaintiff, is an atheist whose four daughters attended Darling Heights. He claimed that the funding arrangement was unlawful on two grounds. First, the scheme was said to be unauthorised because the federal government in the absence of legislative authority lacked power to spend money in this way to deliver chaplaincy services. Second, the plaintiff claimed that the scheme violated s 116 by requiring a religious oath as a qualification to hold an office or public trust under the Commonwealth. The High Court unanimously rejected the second ground in holding that the chaplains were not officers of the Commonwealth. The majority, with Heydon J dissenting, found merit in the first ground of challenge and decided that the funding agreement was invalid by reason of it being beyond the executive power of the Commonwealth under s 61 of the Constitution. This article is focused on the implications of the majority decision on fiscal federalism in Australia. It offers no comment on the High Court's views on matters of religion arising under s 116. …

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