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Battle to control ports a test of federal powers

By George Williams - posted Monday, 6 June 2005

Australia's federal system is going through change and turmoil like we have not seen since the Whitlam Government of the 1970s.

The Federal Government will soon outline its plan to take over the field of industrial relations. It continues to debate the states on their share of GST revenue and it has now said it will seize control of the nation's ports.

When it comes to a contest between the Commonwealth and the states, the Commonwealth usually comes out the victor. It can make laws in any of the 40 areas listed in section 51 of the constitution. The High Court, which is appointed by the Federal Government, has tended to give those powers a wide operation.


Moreover, once the Commonwealth can locate a law under one of these heads of power, the constitution says that its law overrides any state laws to the contrary.

To take over the ports, Deputy Prime Minister John Anderson has said that the Federal Government will rely upon its power in section 51(1) of the constitution. This enables the Federal Parliament to pass laws on the subject of "trade and commerce with other countries, and among the states".

This power has been in the constitution since 1901 and has been used in the area of airline and shipping regulation, and was the basis upon which the Commonwealth established Qantas. However, the power has not been used to the same extent in recent decades, partly because the Commonwealth has relied upon its other powers, such as those over corporations and external affairs.

Since the 1970s, the trade and commerce power has not been the Commonwealth's power of choice. While it has been used to support laws in areas such as trade practices, its potentially great scope has not been fully realised in other areas such as industrial relations and interstate and overseas trade. This looks set to change.

It is likely that the trade and commerce power would support a law that exerted federal control over state-run ports. The wording of the power is clear in covering matters such as interstate trade and the export and import of goods. Regulating the ports through this trade passage may well be covered by the power.

However, the power has its limits. The Commonwealth may not be able to pass laws for intrastate trade. The High Court has been careful to guard the power of the states to deal with trade that falls only within their borders. The outcome may be complex and difficult to implement because ports could be subject to federal law for some goods and to state law for others.


A second limitation is how far back the Commonwealth can regulate from the physical export of the goods at ports. There is no clear-cut High Court decision on this. It may be that the final point at which goods leave Australia or for another state can be covered by the power, but that it does not extend beyond that to the state road and rail network, which could therefore be beyond Commonwealth power.

This could pose a long-term problem. How much use is there in taking over just one part of the network of infrastructure that supports our export industry? Indeed, is it possible that by having Commonwealth control over ports, and state control over other parts of the export chain, there may be problems of integration and communication? After all, our federal system has many examples of dual Commonwealth and state regulation leading to duplication and additional cost.

This problem can be acute where the takeover of an area is actively resisted by the states. The capacity of the ports may ultimately be limited by the surrounding road and rail network, which may require state co-operation to improve. This is another example of where the adversarial nature of our federal system may frustrate attempts to achieve the best outcome in the national interest.

It would seem likely that the Commonwealth could use its trade and commerce power to take control over much of what happens in Australia's ports. While care should be taken in predicting what the High Court might say, its decisions in this and other areas suggest that result. However, there is another question again about whether coercing the states to hand over the ports is the best way forward.

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First published in The Age on May 20, 2005.

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About the Author

George Williams is the Anthony Mason Professor of law and Foundation Director of the Gilbert + Tobin Centre of Public Law at the University of New South Wales.

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