Week 8 Content Tutorial - Vertical Fiscal Imbalance and Section 92 PDF

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TUTORIAL WEEK 8 Content Required Readings s92 Constitution BW7: 1263 Recommended Readings JC4: 394-423 1.

Russell Mathews argues that the vertical fiscal imbalance that characterises Australia’s constitutional system breaks the link between spending and taxing decisions for both the Commonwealth and State governments and, accordingly, “there has been a loss of accountability and a weakening of democratic controls over all the governments concerned” (extracted in BW5, 1094). What does ‘vertical fiscal imbalance’ mean in the Australian constitutional context? Critically evaluate Mathews’ comments about Australia’s vertical fiscal imbalance by considering the positive and negative aspects of the split accountability that it introduces.

2.

Discuss the role of at least two Commonwealth heads of power in the development of vertical fiscal imbalance in Australia.

3.

Has the High Court adopted a narrow or broad interpretation of the grants power in s 96 Constitution? How has this interpretation affected the “federal balance” in the Australian context?

4.

Explain how vertical fiscal imbalance has been enhanced by the High Court’s interpretation of the various spending powers, including sections 81, 96, 51 (ii), and 90. How did the introduction of the GST contribute to the problem of vertical fiscal imbalance?

5.

In Cole v Whitfield (1988) 165 CLR 360, what purpose did the Court say s 92 was intended to serve? How did the court use the Convention Debates in reaching this Conclusion? What is the test for the application of s 92? What kind of laws does it apply to?

6.

In the pre-Cole era there were two different interpretations of Section 92 of the Australian Constitution. Under the individual rights or laissez-faire theoretical approach, a law would be found violative of section 92 if the regulation directly restricted trade and commerce rather than indirectly. This became known as the ‘criterion of operation’ test. What criticisms were levelled against this approach to interpreting s 92 by the court in Cole v Whitfield?

7.

Why did the court say it would be rare for s 92 to invalidate Commonwealth, as opposed to State, legislation?

8.

In applying s 92, does the Court examine only the law’s direct legal effect, or also at the ‘factual operation’ of the law? What does the court mean by ‘factual operation’?

9.

What law was being challenged in Cole v Whitfield? Did this law directly discriminate against trade in an impermissible way? Did the ‘factual operation’ of this law discriminate against trade in an impermissible way? Why? Was the law protectionist? Why? Was the law valid or invalid?

10. What was the law under challenge in Bath v Alston Holdings? 11.

Castlemaine Tooheys is a crucial case on the application of the Cole v Whitfield test for s 92. In general terms, how did the Court develop the idea of ‘protectionist discrimination’ as the touchstone for the application of s 92?

12. Why did the majority in Castlemaine say the law failed the s 92 test? 13. The High Court revisited s 92 in the 2008 case of Betfair Pty Ltd v Western Australia (2008) 234 CLR 418. How did the Court treat the earlier authorities of Cole v Whitfield and Castlemaine Tooheys? 14. Does the decision in Betfair consider the contemporary economic climate? How did this influence the interpretation of s 92 Constitution? HYPOTHETICAL A Victoria runs one of the most exceptional global thoroughbred racing events annually. The Victorian Spring Horse Racing Carnival beginning in early September and lasts 50 days. In 2006, approximately 800 000 people attended the Carnival. It has been estimated by the Premier of Victoria that the Carnival last year yielded a total economic benefit to the state of close to $630 million. In addition, interstate visitors spent close to $50 million on raceday packages organised by interstate horse owners. In July 2007, there emerged an outbreak of equine influenza in Queensland and New South Wales but no reported cases in Victoria or in any other states. In August 2007, Victoria passed the Horse Flu Quarantine Act 2007 (Vic) to ban the movement of horses into Victoria from all other states in Australia unless certain protocols are followed. The protocols require that horses from interstate be administered a horses flu vaccine the cost of which is $ 3,500 per vaccination. Horses must be administered a course of three vaccinations over a three week period. In addition, interstate horses must be quarantined for two weeks after the administration of the last vaccine and undergo a health test establishing they are not carrying the equine influenza virus. Interstate horses failing to provide proof of having followed this protocol are barred from entering Victoria to compete in this year’s annual Spring Horse Racing Carnival. After

the Carnival ends, interstate horses will be allowed to enter Victoria. Because there is not enough vaccine in the country to vaccinate all of the potential thoroughbreds in the country, horses in Victoria will not be vaccinated until more vaccine arrives from overseas. This is estimated to be at least one month after the Racing Carnival ends. Thoroughbred horse owners intending to compete in the 2007 Racing Carnival from all states (particularly Western Australia, Tasmania and South Australia) are angry about the legislation. During the fourth week of the Carnival, over 200 Victorian thoroughbred horses exhibited symptoms of the horse flu and one quarter of the horses who were to compete in the Carnival were infected with the virus and withdrawn from participation. Discuss whether the Victorian Act is a valid exercise of state legislative power.

HYPOTHETICAL B (if time permits) Australia receives a great deal of income from Japanese tourism. Eighty percent of Japanese "touro-dollars" spent in Australia are spent in Queensland, but the benefits are felt throughout the Australian economy. Most Japanese tourists spend most of their time in Queensland, but 70% make at least one interstate journey. The demand generated in Queensland by Japanese tourists stimulates a great deal of interstate trade in goods. Australia's Japanese touro-dollar income is threatened by competition from other countries for the Japanese touro-dollar. In fact, Australia is engaged in a full scale "tourist war" for the Japanese tourism market. In response to this threat, the Commonwealth government passed legislation to attract Japanese tourists, ensure the quality of goods and services offered to them, and lower the costs of the industry to improve the competitive edge of Australian businesses. The Promotion of Japanese Tourism Act 2013 (Cth) ("the Act") introduced a licensing and marketing scheme, under which a business providing goods and/or services to Japanese tourists may apply for a "Japanese Quality Licence". The Australian government negotiated recognition by the Japanese Government, and by Japanese travel agents and tour operators, that licence holders provide goods and/or services of the highest quality. Licence holders are given priority by the Japanese tourism industry when making bookings for Japanese tourists. Almost all Japanese tourists and tour guides know that it is better to go to licence holders with their touro-dollars. The Act also provides that the holder of a licence is entitled to pay lower wages than those required under the relevant state industrial awards.

A licence may only be issued where the directors of the applicant company, or the principals of the business if it is not a company, have had at least two years experience working in the Japanese tourism market. Eighty-five percent of the licence holders under the Act are corporations. Kenneth Jeffries, a retrenched Victorian politician, has established a shop in Surfers Paradise. He imports designer wedding dresses from Melbourne (the fashion capital of Australia) to Queensland, and sells them in the Japanese holiday wedding market. Ken was not able to get a licence under the Act because he had not previously been involved in the Japanese tourist trade. This was a common problem for Victorians, because very few Japanese tourists visit Victoria for any length of time. After three months Ken realises that he is facing bankruptcy. Almost no Japanese tourists will buy from an unlicensed business, and Ken has to pay full Queensland award wages whilst his licensed competitors have significantly lower wage costs. Advise Ken on the constitutional validity of the Commonwealth legislation....