November 24, 2022

Horse 3102 - Constitutional Survey - IX

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89. Payment to States before uniform duties

Until the imposition of uniform duties of customs:

- the Commonwealth shall credit to each State the revenues collected therein by the Commonwealth;

- the Commonwealth shall debit to each State:

- the expenditure therein of the Commonwealth incurred solely for the maintenance or continuance, as at the time of transfer, of any department transferred from the State to the Commonwealth;

- the proportion of the State, according to the number of its people, in the other expenditure of the Commonwealth;

- the Commonwealth shall pay to each State month by month the balance (if any) in favour of the State.

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Section 89 is purely a transitional section concerning what is to happen with the customs duties collected by the Commonwealth until such time as uniform legislation is passed. Basically this says that the Commonwealth could extract enough from the revenues collected which was necessary for the administration of said collection and the passed were to be passed back to the States.

Section 89 is government by leaky bucket; which has been made inoperative by subsequent legislation.

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90. Exclusive power over customs, excise, and bounties

On the imposition of uniform duties of customs the power of the Parliament to impose duties of customs and of excise, and to grant bounties on the production or export of goods, shall become exclusive.

On the imposition of uniform duties of customs all laws of the several States imposing duties of customs or of excise, or offering bounties on the production or export of goods, shall cease to have effect, but any grant of or agreement for any such bounty lawfully made by or under the authority of the Government of any State shall be taken to be good if made before the thirtieth day of June, one thousand eight hundred and ninety-eight, and not otherwise.

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Section 89 said that until the Commonwealth passed legislation to do with duties of customs that it should pass the revenues onwards. Section 90 placed a hard limit on the claim of the States over the revenues had. Section 90 passed exclusive powers to the Commonwealth concerning the duties of customs and it also renders future claims void, except be they made before 30th Jun 1898.

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91. Exceptions as to bounties

Nothing in this Constitution prohibits a State from granting any aid to or bounty on mining for gold, silver, or other metals, nor from granting, with the consent of both Houses of the Parliament of the Commonwealth expressed by resolution, any aid to or bounty on the production or export of goods.

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The creation of the Commonwealth created a new person as corporation sole which was a new Crown. That new Crown was separate and distinct from the existing six Crowns who were the persons and corporations sole who owned the various States' property. Section 91 quite rightly acknowledges the continuance of the existing State Crowns and their rights lay bounties on the materials in the ground, and the future taxation which might be gained from goods leaving the States and Commonwealth.

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92. Trade within the Commonwealth to be free

On the imposition of uniform duties of customs, trade, commerce, and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.

But notwithstanding anything in this Constitution, goods imported before the imposition of uniform duties of customs into any State, or into any Colony which, whilst the goods remain therein, becomes a State, shall, on thence passing into another State within two years after the imposition of such duties, be liable to any duty chargeable on the importation of such goods into the Commonwealth, less any duty paid in respect of the goods on their importation.

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At the outset of the Commonwealth, Australia had some interesting political parties. There were such parties as the Anti-Socialist Party as well as the Free Soil Party, who clashed in the immediate period before Federation on the issue of what would happen with regards interstate commerce. Some parties wanted open internal borders as they saw the existence of the states and internal customs duties as a friction cost of doing business. Some people wanted to maintain protections which existed for businesses. Then there were those people who wanted to make a business from what essentially amounted to internal arbitrage on moving goods across state borders.

Section 92 had to rule somewhere and no matter what the decision was, there would be someone deeply unhappy with it. The existence of this Section, I is a reasonable decision, given that the internal borders are sort of the result of historical accident and that there are many businesses which straddle them. Firms and businesses do not have to account for or carry taxation as a cost of doing business over state lines; which seems to me to be sensible.

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93. Payment to States for five years after uniform tariffs

During the first five years after the imposition of uniform duties of customs, and thereafter until the Parliament otherwise provides:

- the duties of customs chargeable on goods imported into a State and afterwards passing into another State for consumption, and the duties of excise paid on goods produced or manufactured in a State and afterwards passing into another State for consumption, shall be taken to have been collected not in the former but in the latter State;

- subject to the last subsection, the Commonwealth shall credit revenue, debit expenditure, and pay balances to the several States as prescribed for the period preceding the imposition of uniform duties of customs.

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I think that Section 93 attempts to compensate the States for the revenues that they would have collected from the imposition of duties on customs, by paying out the revenues of the Commonwealth collect as a result of same; for a period of five years. The Commonwealth as a new person, still had to negotiate transitionary measures for a time, as the six states before federation were and still have Crowns as corporation sole and therefore separate legal persons.

My guess is that the man who were huddled together in sweaty angry rooms in summer, envisaged that there would be firms who would try to import stuff and say that they landed the stuff in another state depending on which state had the most favourable taxation policy at the time. The middle clause of Section 93 at least attempts to crystallise the point of entry for stuff, at the original landed point for said stuff.

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94. Distribution of surplus

After five years from the imposition of uniform duties of customs, the Parliament may provide, on such basis as it deems fair, for the monthly payment to the several States of all surplus revenue of the Commonwealth.

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I have a sneaking suspicion that the Constitution was written by people who although legally trained, had little to no understanding of economics and given that it was written in the 1890s before the dismal art had any kind of systemic and properly calculable literature, I think that they would have had an impaired understanding of economics anyway.

Even if we assume that the state as the issuer of currency is actually forced to issue money on the basis of what it has collected, the full disbursement of any surplus of customs duties doesn't really make a lot of sense if elsewhere you've already stated that monies collected are going into a consolidated revenue fund. Money is after all perfectly fungible and one dollarpound is identical to any other dollarpound. The tokens which represent those dollarpounds might be individually different but as money is an abstract notion of stored value, then cutting into a dollarpound with a hacksaw doesn't cause money to leak out all over the floor.

Even after reading through the Constitutional Convention transcripts, I still do not understand the rationale behind Section 94; nor do I understand why it needed to be included. My confusion is well founded as after an exhaustive search of the High Court of Australia case databases, I can not find any cases which relate to this either. Section 94 on the face of it and by practical demonstration, is useless.

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95. Customs duties of Western Australia

Notwithstanding anything in this Constitution, the Parliament of the State of Western Australia, if that State be an Original State, may, during the first five years after the imposition of uniform duties of customs, impose duties of customs on goods passing into that State and not originally imported from beyond the limits of the Commonwealth; and such duties shall be collected by the Commonwealth.

But any duty so imposed on any goods shall not exceed during the first of such years the duty chargeable on the goods under the law of Western Australia in force at the imposition of uniform duties, and shall not exceed during the second, third, fourth, and fifth of such years respectively, four-fifths, three-fifths, two-fifths, and one-fifth of such latter duty, and all duties imposed under this section shall cease at the expiration of the fifth year after the imposition of uniform duties.

If at any time during the five years the duty on any goods under this section is higher than the duty imposed by the Commonwealth on the importation of the like goods, then such higher duty shall be collected on the goods when imported into Western Australia from beyond the limits of the Commonwealth.

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Before the Commonwealth of Australia was federated, Fiji and New Zealand had already backed out of the process and there was a chance that Western Australia would also jump ship. I imagine that Section 95 which specifically deals with Western Australia, was added because had they jumped ship, then this could have been knocked out. My assumption is if Western Australia hadn't joined the Commonwealth, then there would have been an election in 1902 and a referendum which would have asked the people of Australia to strike this off. As it is, Section 95 is similar to Sections 89-94 but as they specifically apply to Western Australia.

Perhaps the fears that Western Australia was going to jump ship may have been realised with the 1931 secession referendum, which was eventually decided as being unconstitutional but the point remains that that weird weird place all the way over in the middle of nowhere, thinks itself as being different even though there's not really any evidence of that at all. 

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96. Financial assistance to States

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 conditions as the Parliament thinks fit.

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I am really struggling to understand the rationale behind Section 96. Even after reading through the debates at the 1898 Constitutional Conventions, I can follow what is going on but in my mind, this artificial refusal to render financial assistance to States for a period of ten years after the establishment of the Commonwealth, is as far as I am concerned, nonsensical.

I already know that in the 1890s, the Colonies who would become States, hated each other to the point of madness. Western Australia was suspicious of everyone in the east; and Victoria and New South Wales just straight up hated each others' guts. It could very be that Victoria and New South Wales didn't want to give any money to Tasmania or South Australia, who as smaller states could have wanted to stick their hands out for monies. I think that it might also be possible that New South Wales didn't want to be dragged into funding the potential Victorian Railways building projects of the early 1900s. 

Much later in the piece and well after the statutory period of ten years after the establishment of the Commonwealth, we do end up with all kinds of omnishambles in New South Wales, with Big Red Jack Lang and the Governor, a loans scandal, and the whole sort of general mish-mash which saw NSW Labor spinning and chucking off fragments like a sick child on a fairground ride. This is mostly a story for another time but there are some fun discussions to read in Federal Hansard, about whether or not the Commonwealth would bankroll New South Wales. Section 96 was the instrument by which this would happen.

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97. Audit

Until the Parliament otherwise provides, the laws in force in any Colony which has become or becomes a State with respect to the receipt of revenue and the expenditure of money on account of the Government of the Colony, and the review and audit of such receipt and expenditure, shall apply to the receipt of revenue and the expenditure of money on account of the Commonwealth in the State in the same manner as if the Commonwealth, or the Government or an officer of the Commonwealth, were mentioned whenever the Colony, or the Government or an officer of the Colony, is mentioned.

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Federation in principle is the creation of a new sovereign person (being the Commonwealth Crown person) in addition to the several sovereign persons which already existed. Those several sovereign persons not only continued to exist but were/are/will be still sovereign in their own right. The saving of state laws, which also in this case includes the laws with respect revenue and the expenditure of money, makes sense if the state Crowns are to remain and retain their sovereignty.

It is curious that the Commonwealth did not set up things like the Australian Taxation Office or start minting coins on behalf of the Commonwealth until 1910 and onwards. In so many respects, the Commonwealth was still very dependent on the states for the maintenance of its budget and I suspect that the states were fine with that as it meant that the Commonwealth was weaker than it is now. 

Key Legislation such as the Income Tax Assessment Act wouldn't be passed until 1936 which is very late in the piece. This means that for the first few decades, the laws which were in force were the state laws as no Commonwealth law existed.

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98. Trade and commerce includes navigation and State railways

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.

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Ahah!

New South Wales and Victoria are bittersweet frenemies. They love each other as much as I love putting WD-40 on a hamburger, or wearing a hat made of treacle. Perhaps famously, Albury Station has the longest railway platforms in the world; as the result of New South Wales and Victoria having different gauges of railway lines and the New South Wales State Government wanting to impose an overly impressive building to mark the dead stop of where the Victorian railways would extend north. "Oh look on Victoria and despair, for you shall pass no further.".

This also applied to the Murray River which acts as the border between New South Wales and Victoria; where (asterisks all the way down), the border is actually the southern edge of the water. In effect this means that all of the paddle steamers and river traffic which plies the Murray River, is in New South Wales and it is only when goods are loaded onto the wharves of the southern bank that they are in Victoria. Unless a boat runs aground, it remains in New South Wales.

Section 98 is the Commonwealth, at law, getting tired of New South Wales' and Victoria's shenaniganry and knavery and tells them with respect to navigation and shipping and to railways, where to go and how to get there (which presumably in this case is by ship and train).

Section 98 has also been brought into play twice with two pandemics. Both the 1918-20 H1N1 Influenza pandemic and the 2020-date COVID-19 pandemic have briefly touched upon Section 98 and most charismatically about the arrival of big passenger ships. In 1918/19 the question of big passenger ships arriving from Europe after the Great War and knowing that they'd be riddled with Flu carriers, and in 2020 (and 2022) the question of big cruise ships arriving and knowing that are riddled with COVID-19 carriers, has brought into play what kinds of powers that the Commonwealth is willing to exact with regards navigation and shipping. In 1918/19 this involved diverting passengers into quarantine stations but in 2020 (and 2022) the policy seems to have been one of doing little and turning this over to the states.

This section also covers things like coast guard and border control operations on sea; as well as like provisions and laws to do with aircraft regulation, IATA rules and regulations to do with navigation, wayfinding, and air traffic control. Weirdly Section 98 covers shipping and air travel at the same time because Sydney Harbour is itself technically an international airport because there used to be flying boats. Rose Bay even has an IATA code. 

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99. Commonwealth not to give preference

The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.

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The material of Section 99 is pretty obvious but it does express a spirit at law which is worth repeating. The House of Representatives because it is a representative chamber, has three very very big states. If New South Wales and Victoria wanted to properly collude on something, they could hold government forever. This is a limiting provision which holds The Commonwealth at law, to not play favourites.

Section 99 is gloriously impotent on the issue of pork barrelling as although car park rorts, sports rorts, infrastructure rorts and all manner of pork rorts are all morally repugnant, they're not actually "give preference to one State or any part thereof over another State". It is exceptionally hard to prove that pork barreling is a violation of Section 99; which yet again shows that what is moral and what is legal are unrelated concepts sometimes.

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100. Nor abridge right to use water

The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.

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I do not know exactly when it was that the Great Artesian Basin was fully mapped. What I do know is that if the people of Queensland and New South Wales wanted to, they could suck all of the water out of the Murray-Darling River system, before it ever reached further down stream. Likewise, the Murray River itself which was a navigation and transport route, was deemed a very very long time ago to be the property of New South Wales. The southern border of New South Wales is in fact the water's edge; at this point I have to add that this comes with so many caveats that it's asterisks all the way down.

When it comes to the Commonwealth regulating water rights, it has to play a very very dangerous game of "Pass The H-Bomb" because if it gets it wrong, then the interested firms and states will definitely challenge any ruling that it has made in the High Court. The question of what is "reasonable use of the waters" is fraught with more angst than a bildungsroman because it pits Billy Brown from Sydney Town, against Sally Jane from Brisbane, Muzza from Melbourne, and whomever else wants to play the game of what is and who is the theoretical reasonable person. 

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101. Inter-State Commission

There shall be an Inter-State Commission, with such powers of adjudication and administration as the Parliament deems necessary for the execution and maintenance, within the Commonwealth, of the provisions of this Constitution relating to trade and commerce, and of all laws made thereunder.

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In practice, this Inter-State Commission is either covered by the various functions of government departments or by the Commonwealth Of Australia Governments (COAG) Meetings, where the several state Premiers, Treasurers and other officers all get into small rooms and yell at each other.

One of the potential problems of retaining the sovereignty of the several states is that the laws they produce might come into conflict with each other. The Inter-State Commission would also be helpful in discussing the harmonisation of laws, where they might differ. 

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102. Parliament may forbid preferences by State

The Parliament may by any law with respect to trade or commerce forbid, as to railways, any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State; due regard being had to the financial responsibilities incurred by any State in connexion with the construction and maintenance of its railways. But no preference or discrimination shall, within the meaning of this section, be taken to be undue and unreasonable, or unjust to any State, unless so adjudged by the Inter-State Commission.

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This is where the Commonwealth can pull rank on a state if it wants to be legislatively nasty. I suspect that as the NSW border with Victoria is the southern bank of the Murray River, that this section exists to stop NSW from being a bad neighbour to its southern cousin whom it hated. Likewise, Western Australia and South Australia at the time of Federation, shared one long border running north-south across the continent and Western Australia in particular always view everything to the east of itself as highly suspicious.

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103. Commissioners' appointment, tenure, and remuneration

The members of the Inter-State Commission:

- shall be appointed by the Governor-General in Council;

- shall hold office for seven years, but may be removed within that time by the Governor-General in Council, on an address from both Houses of the Parliament in the same session praying for such removal on the ground of proved misbehaviour or incapacity;

- shall receive such remuneration as the Parliament may fix; but such remuneration shall not be diminished during their continuance in office.

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This is pretty straightforward. They members of the Inter-State Commission need to be aptly and properly paid and appointed and like most things that fall under the responsibility of the Commonwealth, it is they Governor-General who as the officer in the executive position on behalf of the Crown, who gets to decide these things.

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104. Saving of certain rates

Nothing in this Constitution shall render unlawful any rate for the carriage of goods upon a railway, the property of a State, if the rate is deemed by the Inter-State Commission to be necessary for the development of the territory of the State, and if the rate applies equally to goods within the State and to goods passing into the State from other States.

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The states still get sovereignty over the carriage of goods through their state by rail. Railways were the big-tech item in 1900 and national highways and air traffic was not yet really thought of. This left the railways as the default method of getting stuff around this vast unwieldy continent of Australia.

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105. Taking over public debts of States

The Parliament may take over from the States their public debts, or a proportion thereof according to the respective numbers of their people as shown by the latest statistics of the Commonwealth, and may convert, renew, or consolidate such debts, or any part thereof; and the States shall indemnify the Commonwealth in respect of the debts taken over, and thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth payable to the several States, or if such surplus is insufficient, or if there is no surplus, then the deficiency or the whole amount shall be paid by the several States.

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This really needs to be taken together with Section 105 because this is quite a long and involved story but I shall still make a comment.

The Australian Constitutional Conventions took a lot of inspiration from both Switzerland, Canada and the United States, in working out what disparate states working in concert should look like in federation. In this respect, it was likely George Reid who liked the idea that the faith anf good credit of the United States was bolstered by the US Federal Treasury assuming the debts of the states to the tune of $75 million.

The Commonwealth Bank in Australia which started out as the de facto bank of reserve and issue, would be given powers to assume the dents of the states if it was amenable to better faith and good credit of the new Commonwealth. Also in practice, this would be necessary if the Australian Pound would have a life separate from the British Sterling Pound, to which it was pegged 1:1 on opening day.

There is also an accounting identity name within the confines of this section "thereafter the interest payable in respect of the debts shall be deducted and retained from the portions of the surplus revenue of the Commonwealth payable to the several States". Although this kind of thing should be pretty normal, the idea that the Commonwealth can make internal contra entries in lieu of payments, was a novel idea for 1900. 

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105A. Agreements with respect to State debts

The Commonwealth may make agreements with the States with respect to the public debts of the States, including:

- the taking over of such debts by the Commonwealth;

- the management of such debts;

- the payment of interest and the provision and management of sinking funds in respect of such debts;

- the consolidation, renewal, conversion, and redemption of such debts;

- the indemnification of the Commonwealth by the States in respect of debts taken over by the Commonwealth; and

- the borrowing of money by the States or by the Commonwealth, or by the Commonwealth for the States.

The Parliament may make laws for validating any such agreement made before the commencement of this section.

The Parliament may make laws for the carrying out by the parties thereto of any such agreement.

Any such agreement may be varied or rescinded by the parties thereto.

Every such agreement and any such variation thereof shall be binding upon the Commonwealth and the States parties thereto notwithstanding anything contained in this Constitution or the Constitution of the several States or in any law of the Parliament of the Commonwealth or of any State.

The powers conferred by this section shall not be construed as being limited in any way by the provisions of section one hundred and five of this Constitution.

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Section 105A of the Constitution was inserted after a referendum and after a series of very serious implosions in the New South Wales State Government. Big Bad Red Jack Lang had a confrontation with the Governor at one point; which saw physical monies being moved for safe storage down George St. The short of this story is that the NSW State Government went broke after building massive infrastructure pieces, had to make loans which the Governor thought was untoward, and Jack Lang was fired from the role of Premier. 

Section 105A comes in the shadow of this state of affairs; after it was deemed necessary for the states to have a greater degree of control over their own destinies and where the Commonwealth was given powers to act as the lender and guardian of last resort. This Section formally gives the Commonwealth the power to assume and take over State debts and for the terms they it might wish to impose on the various parties after it has done so. 

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