Earlier this month there was much publicity about the G20 world leaders meeting in London, where they agreed to a course of action to tackle the global financial crisis including strategies to rein in risky financial practices. At the same time, here in Australia a High Court challenge, if it had been successful, had the potential to put financial relations between our three spheres of government back decades.
On the world stage, the G20 leaders agreed to a $1.4 trillion package, designed to kickstart economic recovery, as well as some stringent new rules for the finance sector. It is clear they believe that only through international cooperation can this unprecedented economic meltdown be met head on.
The speed at which the fallout from risky lending practices by some banks in USA and Europe reverberated around the world took most by surprise and illustrated once again how much we are a global village.
Yet back here in Australia things were looking much more parochial. The High Court challenge questioned the Constitutional right of the Federal Government to provide direct payments to taxpayers to stimulate additional spending across the nation. At the same time, it cast doubt over a raft of other funding allocations from the Federal Government that bypass the State Governments. This included various programs providing direct funding to Local Government, such as Roads to Recovery.
Although it was widely agreed that Australia was well positioned to weather this global storm, the Rudd Government moved quickly to try to counter the slowdown as people, heeding the constant barrage of economic gloom and doom, began to curtail their spending. It was the Government’s second stimulus package that led to barrister Bryan Pape’s Constitutional challenge to the Federal Government’s ability to make direct payments of up to $900 to taxpayers.
Had the High Court found in favour of Mr Pape, the Australian Local Government Association (ALGA) believes that $6 billion
in Federal funding to Local Government may have been invalidated and, in a worst case scenario, required to be paid back by councils.
In a recent article in the Sydney Morning Herald Constitutional law expert Professor George Williams from the University of New South Wales wrote that for some years successive Federal Governments have spent billions of dollars in areas outside their Constitutional responsibilities in a way that has never been formally upheld by the High Court.
It had been assumed that while the Federal Government was handing out money it was unlikely that the States or anyone else would challenge this situation.
That was until State rights campaigner and barrister, Bryan Pape, decided to test the validity of such payments with his recent challenge.
Although this challenge was dismissed by the Full Bench of the High Court, ALGA is correct when it says that Constitutional uncertainty remains across our three spheres of government and this will not be resolved until the Australian Constitution is amended to bring it into line with contemporary practice. This must include an explicit power being inserted for the Federal Government to provide funds directly to Local Government.
