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The Commonwealth of Australia Constitution Act was the legislative instrument of the United Kingdom parliament that effected the federation of the then colonies of New South Wales, Victoria, Queensland, Tasmania, South Australia (including the Northern Territory) and Western Australia. The Constitution came into force on 1 January 1901 and superimposed a Commonwealth over the colonies without disturbing the existing colonial governments. Prior to federation the Australian colonies were distinct political entities with their own government and parliaments. At federation the Colonies changed their status to become the States of Australia. The 6 States and the Commonwealth are represented on the 7-pointed Federal Star that appears on the Australian Flag.
The State parliaments retain a plenipotentiary law-making power, however, the power to make laws in respect of certain matters were ceded to the Commonwealth parliament (to the exclusion of the States) under the Constitution. For example, the Commonwealth parliament has exclusive power to make laws relating to "currency, coinage and legal tender" (section 51(xii)). This means that Australia has a single currency, which was not the case prior to Federation. Other powers include "trade and commerce with other countries, and amongst the States" (section 51(i)) and "external affairs" (section 51(xxix)). A complete list of the Commonwealth parliament's law-making powers is at section 51 of the Constitution. Outside those limited areas listed in section 51 the Commonwealth parliament is without power and cannot legislate for the States.
In addition to the 6 States, Australia has 2 internal territories: the Australian Capital Territory (where the Commonwealth parliament sits) and the Northern Territory (formerly the Northern Territory of the State of South Australia). Unlike the States, the Commonwealth Parliament has plenipotentiary legislative power over the Territories. This means that the Commonwealth Parliament can pass laws that apply to the Territories where the subject matter of the law is not listed in section 51.
The Constitution creates a federal system under which the Commonwealth and the States parliaments both have legislative power. The Constitution also provides a simple mechanism by which conflicts between Commonwealth and State laws can be addressed. To the extent of any inconsistency between an Act of the Commonwealth parliament and an Act of a State parliament, the Commonwealth Act prevails (section 109). This assumes that the Commonwealth Act is a valid exercise of the Commonwealth's legislative power. Precisely what is a valid exercise of the Commonwealth's legislative power is often a difficult matter to determine. For example, in 1983 the Commonwealth Government used the external affairs power in section 51 to pass legislation which prevented the Hydro-Electric Commission of Tasmania from building a dam on the Franklin River in Tasmania. The Commonwealth Government asserted that it was a signatory to the United Nations Convention for the Protection of the World Cultural and Natural Heritage and, by banning the building of a dam in a World Heritage Area in Tasmania, it was implmenting that convention in Australian domestic law and the Commonwealth Act then over-rode the Tasmanian Act that had permitted the building of the dam. The referee in such disputes between the Commonwealth and the States is the High Court of Australia (established under Chapter III of the Constitution). In the landmark High Court case of the Commonwealth of Australia v Tasmania (the Tasmanian Dam Case) the Commonwealth was successful. Since Federation many disputes between the Commonwealth and the States have been decided by the High Court, leading to an often lively debate within the Australian federal system.
Although the Constitution reserves a relatively limited number of legislative powers to the Commonwealth Parliament, the real sitution is somewhat different. The Commonwealth Government collects the vast majority of revenue across all Australian governments. The Commonwealth Parliament also has the power to "grant financial assistance to any State on such terms and conditions as the Parliament thinks fit" (section 96). The Commonwealth uses this constitutional power in concert with its large revenues (relative to the States) to exert de facto control or significant influence in such areas as hospitals, main roads and education that would otherwise be solely within the State's legislative competence.
The Act vested authority in the Queen, but did not explicitly designate her (or anybody else) as the Australian ' head of state'. In 1973, the monarch was formally designated as 'Queen of Australia' (but still not as 'head of state'). The Act made provision for a Governor-General to be the representative of the Queen in Australia. The Governor-General carries out specified functions and exercises certain powers, either in the name of the Queen, or in his own name as representative of the Queen. In effect, the Governor-General normally fulfils most of the roles generally possessed by a head of state, whenever the Queen is not physically present in Australia. For this reason, some Australian commentators consider the Governor-General to be the de facto head of state, and this status has also been acknowledged by some foreign governments. However, others argue it is absurd to have a head of state who is merely a representative of and ultimately subject to a higher authority (the monarch). For example, when the Queen is visiting Australia, the Governor-General assumes a lower profile than he normally adopts, and it is the Queen who has opened a new session of Parliament while she was here, not the Governor-General. Such modesty and deference on the part of the Governor-General does not seem fitting for a 'head of state'.