16 April 2009

The Seamless Economy Regulatory Project - Some Reforms

This series of articles illustrate that the manner by which Australian legislation is made is changing.

The articles show that whilst some consultation is undertaken at the margins, in many circumstances once something forms part of an intergovernmental agreement (an IGA) or is contained in a COAG resolution, it is next to cast in stone.

This leads to an undesirable democracy deficit.

A parliamentary process allowing the review of decisions emanating from the COAG process should be formalised.

In June 2008 the House of Representatives Standing Committee on Legal and Constitutional Affairs published a paper discussing constitutional reform.

The sole recommendation contained in the paper is that intergovernmental agreements should be automatically referred to a parliamentary committee for scrutiny and report to the Parliament.

This idea should be adopted.

It should also apply to draft bills that flow from an IGA.

IGAs and draft bills should also be referred to relevant committees of state and territory parliaments such as the Western Australian Uniform Legislation and Statutes Review Committee.

There should also be some capacity to permit parliamentary review where some COAG recognised body such as a Ministerial Council can make rules and regulations having the full force of law, such as the capacity to make standards for the national scheme for health professionals referred to in an earlier article in this series.

Thus, if a parliament of a participating jurisdiction disallows a subordinate instrument made by a ministerial council within the period of time that state or territory law permits the disallowance of subordinate instruments, the instument should be taken not to be in force anywhere in Australia.

In this way, the interests of all stakeholders can be heard, better legislation developed and the protections of a federal system of government retained whilst allowing the development of harmonised regulations that are seen as necessary to allow the Seamless Economy to efficiently function.

Decision makers in companies and industry associations will have to establish strategies to ensure their interests are protected as the new regulations underpinning the Seamless Economy develop.

The Seamless Economy Regulatory Project and Democracy Deficit Part 2

There are some signs that state parliaments may be commencing to assert their sovereignty over rule by COAG.

The Queensland Scrutiny of Legislation Committee considered the Health Practitioner Regulation (Administrative Arrangements) National Law Bill 2008, which established the framework to allow for the national scheme of registration for health professionals to commence.

It said:

It is the committee’s practice to draw to the attention of the Parliament any provisions of a bill which are to give effect to national scheme legislation. The committee, in common with the legislative scrutiny committees of the Parliaments of other Australian States and the Commonwealth, has identified concerns that elements of intergovernmental legislative schemes might undermine the institution of Parliament. The committees’ concerns relate to the potential for the executive to formulate, manage and possibly alter such schemes to the exclusion of legislatures. The committee has also warned against a perception of a reduced need for legislative scrutiny of an intergovernmental agreement proposed for ratification.


In The Constitutional Systems of the Australian States and Territories, Professor Gerard Carney provides a summary of concerns regarding the legislative scrutiny of national scheme legislation:

A risk of many Commonwealth and State cooperative schemes is ‘executive federalism’; that is, the executive branches formulate and manage these schemes to the exclusion of the legislatures. While many schemes require legislative approval, the opportunity for adequate legislative scrutiny is often lacking, with considerable executive pressure to merely ratify the scheme without question.

Thereafter, in an extreme case, the power to amend the scheme may even rest entirely with a joint executive authority. Other instances of concern include,for example, where a government lacks the authority to respond to or the capacity to distance itself from the actions of a joint Commonwealth and State regulatory authority. Public scrutiny is also hampered when the details of such schemes are not made publicly available. For these reasons, a recurring criticism, at least since the Report of the Coombs Royal Commission in 1977, is the tendency of cooperative arrangements to undermine the principle of responsible government. A further concern is the availability of judicial review in respect of the decisions and actions of these joint authorities.

Certainly, political responsibility must still be taken by each government for both joining and remaining in the cooperative
scheme. Some blurring of accountability is an inevitable disadvantage of cooperation – a disadvantage usually outweighed by the advantages of entering this scheme. But greater scrutiny is possible by an enhanced and investigative
role for all Commonwealth, State and territory legislatures.

Drawing from some specific criticisms made by the Committee, the Queensland Opposition said this when debating the Bill:

From the outset, it is important to note that there is broad support for national registration for health practitioners. Again, I repeat that there is broad support for national registration for the health professions.

There is overwhelming consensus of the need for consistently high standards and portability of registration of health practitioners across Australia. However, the problem lies with the national law that will establish an unaccountable political institution that will not only control and influence what health practitioners are taught but also how to treat and help sick people while following orders from politicians and bureaucrats without reproach.

The bill before this House is a sugar-coated toxic blend of important and required reform for a national health practitioner registration scheme with an accreditation and training proposal that threatens Australia’s envied position as having one of the best and most comprehensive professional standards of training and practice for our medical practitioners.

There is a need for a greater capacity for public involvement in the development of the regulatory structure of the Seamless Economy evolves is required. This is dealt with in the final article of this series.

The Seamless Economy Regulatory Project and Democracy Deficit Part 1

As a general proposition, the ‘applied model’ of legislation – where one jurisdiction will develop and pass model legislation through its parliament with the remaining states or territories subsequently passing legislation that picks up the model legislation is the favoured way of introducing harmonised legislation when regulating areas previously the province of states and territories.

Whilst nominally capable to amend legislation, state parliaments – including those chambers without government majorities - have typically accepted the national legislation without batting an eyelid, on the grounds that ‘COAG decided’.

This system can give rise to what can be called a ‘democracy deficit’, as can be seen in this example.

During 2008 the Australian Parliaments considered the Australian Gas Law, which instituted a single law for the Australian natural gas market.

South Australia was the lead jurisdiction. The Greens wanted to move an amendment to the legislation in the Legislative Council.

However, as the Greens Member said:

We are going through the motions here. We are able to ask some questions; I guess there is a democratic exercise there but, in terms of amendments, the pressure is very much on legislators here not to propose or to accept any amendments. Really, if we were honest, we are not the lead legislative jurisdiction; we are not the lead legislator: we are the lead rubber stamp. I think that is an outrageous way to pass laws in this country. Having got that off that my chest, I will move my amendments when we get to them.

As an Opposition member (and former Minister) explained:

The only other point I would make is that I doubt very much whether minister Conlon and indeed probably all the other ministers at the moment actually understand the legislation that is going through the council. It is actually only being driven by hard-working and very competent officers who work on this
as their livelihood, and the point that the Hon. Mr Holloway made is almost entirely accurate.

It is certainly my experience that, in trying to debate some of these issues as they were, not in relation to national gas but national electricity, and have a debate with some ministers in the past, they had no comprehension at all of the details of the legislation. Ministers get a summary brief from their office which says 'here is what has been arrived at. These are the major issues.'
The Green member continued:

There were no meritorious reasons that these ought not be accepted. However, as the Hon. Rob Lucas says, we are all in a difficult position, because our various executives have got together and decided what our laws should be, and here we are effectively being invited to rubber-stamp them.

Whilst supportive of uniform national approaches, I for one am not prepared to be a rubber stamp to the extent that I turn my back on sensible amendments that incorporate into our legislation recognised environmental and social principles. It just makes sense that we do it, and I do not think that it undermines the uniform national legislation.

In the ACT Legislative Assembly, when discussing the same legislation, the Green member said:

The reform or harmonisation of the national electricity market, as agreed at COAG's Ministerial Council on Energy meetings, has been happening steadily in the background without much, if any, input by state and territory governments.

Especially now that Australia has Labor governments across all states and federally, an ever-increasing number of decisions are being made at COAG level, meaning that decisions are not subject to the usual scrutiny that parliaments would otherwise have.

This means that these decisions can be made by ministers and their advisers without any public or stakeholder input and without any community consultation; we should be satisfied if they take external views into account at all. It seems that COAG is the new government that counts. It is appointed by premiers and chief ministers, not elected by people.

She also said:

Given the process through which this legislation has been developed, it is a farce to even discuss the matter here in this chamber. The agreements have already been made at the ministerial council level; even though the states and territories are going through the motions of debating the bill in each place, in actual fact the bill that just passed in South Australia is the only one that counts.

A colleague in South Australia, Mark Parnell, put some amendments forward which would take social and environmental aspects into account. However, these were defeated by the two major parties as there was significant pressure there in South Australia not to make any changes at all. Mr Parnell is concerned that the South Australian government is not the lead legislator but the lead rubber stamp for the energy reforms.

She concluded:

Due to the ambulatory forces, whenever South Australia amends its schedules, our legislation is automatically updated. This puts a lot of pressure on our minister for energy, the Chief Minister, to be alert and fully engaged in the COAG processes, where ultimately all decisions about our energy markets are decided—not here in the Assembly. It also leaves the Chief Minister with the responsibility for informing the rest of the Assembly when there are significant updates, as the schedules are inbuilt and not disallowable or even notifiable.

Thus, up until now it has been the case that ‘COAG says’. However as the next article shows, this could be changing.

The Seamless Economy Project - Is it a Good Idea?

The previous four articles illustrate how the regulations are made in an Australia with a seamless economy.

Many will say the Seamless Economy Project is good idea - Australia is an integrated common market, with people and companies commonly undertaking activities across state borders.

Moreover, Australia exists in a globalised world, with the complication of different rules in different states a reason not to come to Australia.

Regulatory difference is nothing more than a mere compliance costs that distort allocative efficiency with no public benefit.

In this case, there to be only one set of rules (usually encapsulated in legislation), preferably made by one legislative body – in our case, the Australian Parliament.

The states would have the role of (effectively) an English county council, concentrating on service provision based on national standards.

However, there are alternative arguments.

The (few) supporters of a federal system argue that citizens benefit where there is genuine "competitive federalism" –the idea that different jurisdictions will make different rules and regulations and have different levels of taxation, with each jurisdiction ultimately picking up what is "best practice" or face the loss of people and investment.

A similar argument is one holding that States are "incubators of innovation" –a place where different ideas can be tried, with the good ones taken up in the bad ones discarded - and if an idea is really bad, the entire nation doesn’t have to face the consequences.

To that extent, it is noted that in February 2009 the Standing Committee of Officials on Consumer Affairs have developed a discussion paper An Australian Consumer Law – Confident Consumers to assist in the development of a single national consumer law that will generally replace state based fair trading legislation.

Part III of the paper is entitled Consumer Law Reforms Based on Best Practice in Existing State and Territory Laws.

The Paper identifies a number of areas where activities (such as door to door sales, or lay-bys) are regulated in different ways (or not at all) and then asks for comments on what is ‘best practice’.

By definition, a single Australian consumer law would preclude this capacity to trial different forms of legislation.

Another danger is the development of a ‘democracy deficit’. This is discussed in the next article.

The Seamless Economy Regulatory Project - an Australian Consumer Law

On 2 October 2008, COAG adopted a recommendation from the Australian Council of Consumer Affairs Ministers to implement a national consumer law, based on the consumer provisions of the Trade Practices Act 1974.

The proposal is for current state based fair trading legislation to be replaced by agreed amendments to the Trade Practices Act, which will be picked up by state legislatures through the applied law model.

State based fair trading law will largely be repealed, with significant responsibility for consumer protection vested in the ACCC.

A discussion paper has been released seeking a degree of input into the structure of the IGA.

However, the input sought is limited. As pages 1 and 2 of the Discussion Paper says:

The purpose of this information and discussion paper is to:

Explain how the national consumer law will be developed; and

Explain the nature and scope of COAG's agreed reforms to create the national consumer law, and, in some limited circumstances, seek views on specific aspects of those reforms.

For example, COAG has decided that the law will provide consumers relief from an ‘unfair contracts’ contained within standard form contracts such as hire purchase agreements.

The ‘unfair contract’ provision proposed to be used is drawn from the law currently in force in Victoria.

The Discussion Paper seeks comment on whether small businesses should also be able to get relief from ‘unfair’ standard form agreements. However, relief from other forms of ‘unfair contracts’ appear to be ruled out because COAG has so decided.

That would appear to (notionally, at least) close off consideration of some of the recommendations of the Senate Standing Committee on Economics relating to relief from ‘unfair contracts’.

At page 49 of a report dealing generally with the unconscionable conduct provisions contained in Part IVA of the Trade Practices Act, non-government senators said:

We (the non government Senators) believe that the current Victorian legislative framework for dealing with unfair contract terms in consumer transactions should be extended to cover business to business relationships involving small business.
It will be interesting to see if the COAG decision will mean that it will be argued that this recommendation can’t be considered – simply because COAG has considered the matter and has made a decision.

The question of whether uniform legislation through the COAG process is a good idea or not is discussed in the next few articles.

The Seamless Economy Regulatory Project - National Licensing for Specifed Occupations

COAG has decided to harmonise the regulation of a number of trades and professions.

So as to improve efficiency and labour mobility, it is proposed to remove overlapping and inconsistent occupational licensing regulations.

The list of affected trades and professions is an eclectic one, constituting air conditioning and refrigeration mechanics, building and building-related tradesmen, electricians, land transport passenger vehicle and dangerous goods drivers, participants in the maritime industry, plumbers and gasfitters and property agents.

A regulatory impact statement (RIS) was prepared seeking comment on a number of issues.

However, as page 15 of the RIS makes clear, irrespective of comments received from stakeholders, it is proposed that a single national body will be responsible for ‘setting licence policy and a framework for operations’.

As with the registration of health professionals, there is no indication as to:

1. which parliament would have specific oversight of the single national body; and

2. whether it is anticipated that there is any parliamentary involvement in the development of ‘licence policy’.

COAG will sign an Intergovernmental Agreement (IGA) which will reflect the agreement between jurisdictions as to how the various trades and professions will be regulated at the proposed meeting on 30 April.

The next article looks at the development of a single Australian consumer law.

The Seamless Economy Regulatory Project - Occupational Health and Safety

On 3 July 2008 an intergovernmental agreement (IGA) was signed, which records a COAG agreement to introduce harmonised occupational health and safety laws.

It is proposed to implement harmonised OHS laws through the model legislation method, where a model principal Act supported by model OHS regulations and model codes of practice will be prepared.

Each jurisdiction would then give effect to the laws in as uniform a manner possible after having regard to the drafting protocols in each jurisdiction.

Unlike other national schemes, this agreement anticipates a capacity for some differences between states and territories.

Paragraph 5.1.8 of the Agreement says:

The adoption and implementation of model OHS legislation is not intended to prevent jurisdictions from enacting or otherwise giving effect to additional provisions, provided these do not materially affect the operation of the model legislation, for example, by providing for a consultative mechanism within a jurisdiction.
And so, in this case legislation will be uniform….unless it isn’t.

The Workforce Ministers Ministerial Council have agreed to resolve outstanding policy issues by May 2009, prior to the publication of an exposure draft in August.

There is no particular indication as to what policy issues are ‘outstanding’ between the jurisdictions.

The next article looks at the proposed national licensing scheme for specified professions.

The Seamless Economy Regulatory Project - National Registration of Health Professionals

An intergovernmental agreement (IGA) to establish a scheme of national registration for health professionals was signed on 26 March 2008.

It is designed to establish a single national registration and accreditation scheme for the nine currently regulated medical professions ranging from doctors to osteopaths.

The intention is to establish a scheme of national registration so health professionals can practise across State and Territory borders without having to re-register.

The national registration and accreditation scheme has at its apex the Australian Health Minister’s Council, assisted by an independent Australian Health Workforce Advisory Council.

A national agency is to provide assistance and guidance to the nine profession-specific boards, who will (amongst other things) make decisions relating to the registration of health professionals.

The scheme is to be implemented using the applied law model.

Queensland is the lead jurisdiction.

To allow the national scheme to commence on time (1 July 2010), the Queensland Parliament has passed the Health Practitioner Regulation (Administrative Arrangements) National Law Act 2008,which establishes the a single registration board for each of the nine professions as well as an Australian Health Practitioner Regulation Agency as (effectively) a company under Queensland law, that will support the various boards.

However, the finer details of the scheme are still being developed. Another piece of legislation now being developed will fill these in. It is intended to introduce the relevant Bill into the Queensland Parliament before the end of the year.

There has been significant consultation about various elements of the scheme.

However, there is concern as to what sort of parliamentary oversight the Agency will be subject to once it commences operation – it is nominally an entity created by the Queensland Parliament, but exercises legal powers in all Australian states and territories.

There is also concern that the Australian Health Ministers Council rather than specialist professional boards can make the standards that health practitioners must meet – instruments not subject to parliamentary disallowance by any legislature.

It would appear that this issue in particular will not be subject to change because it is a structure that has been decided by COAG.

That said, the Senate Community Affairs Committee has decided to inquire into the proposed national registration scheme.

The timing is a bit odd – well after the IGA that set the ball rolling, but only just before a draft of the proposed Bill setting out the nuts and bolts of the national scheme is released.

However, it is nevertheless a review.

The next article discusses the proposed harmonisation of occupational health and safety legislation.

The Seamless Economy Regulatory Project - How Regulations are Developed

In 21st century Australia, regulations identified for reform as part of the Seamless Economy agenda are made in this way.

An area for reform is identified by either COAG or one of its working groups.

In most (although not all) circumstances, the most appropriate of the 31 ministerial councils and committees will develop an intergovernmental agreement, which forms in effect the drafting instructions for the national legislation.

The Agreement is then usually put to COAG for ratification.

A process is then put in place to develop the harmonised legislation identified in the agreement.

One of three legislative models is usually used to capture the policy agreed by the participants in the COAG process:

1. the 'applied law' model – where one jurisdiction passes a 'template law, and the others adopt that law as a law of the jurisdiction;

2. the'national model legislation' model - where legislation is essentially the same, but allows for some jurisdictional variation; or

3. the 'reference' model – giving the Commonwealth the power to legislate in the relevant area, with the States leaving the field. This was the option taken for non-bank deposit making institutions as part of the Seamless Economy process.

Varying levels of public participation are offered in the IGA/legislation formulation process.

Ultimately, harmonised legislation is produced, with the product going to the relevant legislature(s) for passage.

The next four articles discuss how the harmonised legislation process of some of the identified regulatory hot spots are developing.

The Seamless Economy Regulatory Project - the Commonwealth Buy In

A National Partnership Agreement to Deliver a Seamless National Economy has been signed to encourage the development of the seamless economy.

It is part of an Intergovernmental Agreement on Federal Financial Arrangements, which aims to:

reduc(e) the costs of regulation and enhancing productivity and workforce mobility in areas of shared Commonwealth, State and Territory responsibility


deliver(ing) more consistent regulation across jurisdictions and address unnecessary or poorly designed regulation, to reduce excessive compliance costs on business, restrictions on competition and distortions in the allocation of resources in the economy.

The areas where harmonisation was regarded as being desirable are listed in paragraph 21 of the Agreement.

The paragraph also says:

The States and Territories will have responsibility to work together, and for many specific reforms to work jointly with the Commonwealth, to implement a coordinated national approach….

Paragraph 22 continues:

The states and territories will also have shared responsibility with the Commonwealth for regulatory reform.

Finally, the ultimate Commonwealth weapon: there are ‘reward components’ payable under the National Partnership Agreement by the Commonwealth to states and territories in two tranches from 2011-12, with paragraph 32 of the agreement providing:

The Commonwealth will provide reward payments to the States and Territories following CRC (COAG Reform Council) advice as to the achievement of key milestones, as set out in the Implementation Plan for the 27 deregulation priorities.

So there is a significant Commonwealth buy-in of areas of traditional state responsibility.

The article discusses how regulations develop in the seamless economy.

The Seamless Economy Regulatory Project - Overview

On 15 May 2008, Brendan Nelson made his one and only Address in Reply to the Budget as Opposition leader.

One issued raised was the condition of the Australian federation.

He said:

It is very important for every one of us to ask ourselves in this the 21st century: how can we make the Federation work more effectively for our country in the interest of Australians? It will require all of us, in a mature and sober way, to examine the constitutional arrangements and responsibilities of the three tiers of government—who is responsible for what, how the money is raised and then how it is distributed.

However, those who are interested in the debate will have to hurry, or it will be too late - Australia will effectively be a unitary state.

Writing in The Australian on 10 June 2008, the federal Minister for Finance and Deregulation Lindsay Tanner said:

Across Australia there is recognition that our federation is a mess. We have this system because of how we started: a collection of separate entities, joined together to form a federation. In the intervening period, technological change and an increasingly global economy have transformed Australia in ways our colonial forebears could not have imagined.

He went on to say:

I no longer think that abolition of the states is the most practical or desirable reform option. But I do want to create a much clearer delineation of the roles and responsibilities of the different levels of government.

This is the prevailing view amongst Australian public policy makers.

In March 2008, the Council of Australian Government (COAG)

identified 27 areas where there was need for regulatory reform.

It called for the Commonwealth to take responsibility for non-bank lending institutions.

Other areas where harmonisation was considered desirable include occupational health and safety, environmental assessment and approvals, payroll tax, electronic conveyancing, licensing of tradespeople, registration of health professionals, rail safety, consumer law, a national construction code to ensure consistency in on-site building and plumbing regulation, maritime safety regulation and wine labelling –areas largely the responsibility of states and territories.

Progress in implementing the Seamless Economy agenda is tracked by COAG’s
Business Regulation and Competition Workgroup.

The Commonwealth now has an additional weapon to drive the process, as will be discussed in the next article.