Source: Australian Parliamentary Secretary to the Minister for Industry
Good afternoon everyone,
Or as Alfred Deakin might have said if he were around today:
‘Welcome to the most fiscally fraught federation on earth’
On behalf of the Prime Minister and the Education Minister, I’m delighted to welcome you to the National Schools Constitutional Convention.
This year, we have 120 students from schools across the country, including those who have travelled long distances, like students from Katherine High School in the Northern Territory, Hedland Senior High School in WA, and Longreach State High School in Queensland.
You join over 3,000 students who have participated in this convention since it began in 1995.
You’re here because of your curiosity, your drive, and your interest in how our country works. Your schools and communities are proud of you, and you should be proud too.
I want to thank your teachers and acknowledge Emeritus Professor Clement Macintyre from the University of Adelaide, who will be guiding you through these discussions, and recognise Professor Kim Rubenstein, Professor Anne Twomey and Dr Angela Jackson. I also want to thank the National Curriculum Services, who work hard each year to make this event happen.
You’ve gathered here to tackle a question so complicated, so contentious, and so classically Australian that even the constitutional framers of the 1890s threw up their hands and reached for poetic metaphor. Take Sir Josiah Symon, who declared:
‘No human being—I do not believe even an archangel from heaven—could at this moment introduce into the Constitution which it is our mission to frame a provision which would do justice all round upon the financial question.’
Yes, this is fiscal federalism—the constitutional equivalent of trying to split the bill at a 1901 dinner party where every guest is arguing over who ordered the roasted black swan.
So, what are we talking about today?
You’ve been asked to revisit 2 sections of the Constitution: 51(ii) and 90. Both are about money. Which, as we all know, is a topic capable of uniting families… in mutual suspicion.
Section 51(ii) gives the Commonwealth power to make laws with respect to taxation ‘but so as not to discriminate between states or parts of states.’ That sounds fair. But as with most constitutional promises, the devil is in the drafting.
Then there’s section 90, which gives the Commonwealth exclusive power over duties of customs and excise. Translation: only the Commonwealth can tax goods as they move through the economy. Which means, more or less, the states can’t. Unless they get… creative.
And creative they have been. Let me take you on a whistle‑stop tour through a few highlights in the epic saga of Australia’s fiscal tug‑of‑war.
Chapter 1: the Conventions—where optimism went to die
Imagine you’re a delegate in the 1890s, sitting through the fifth day of debates in a hot Adelaide chamber. Your brain’s melting, your moustache is drooping, and someone just mentioned ‘surplus revenue’ again.
Cheryl Saunders gives us this gem of a quote from the 1897 Convention:
‘We have had various very able persons who have devoted themselves to the consideration of the proposals made, who have all satisfied themselves as to the conclusions they have arrived at, and they all disagree with each other. I think it is only fair to say that most of us disagree with all of them.’ — Sir John Downer
That’s not just debate fatigue — that’s fiscal despair.
The question that haunted them: How do we share the money fairly between the Commonwealth and the States?
The answer they settled on: a temporary formula for the first 10 years… and a vague hope that future generations would sort it out.
Spoiler alert: they didn’t.
Chapter 2: the Deakin Prophecy
In 1902, Alfred Deakin, Prime Minister, constitutional framer, and certified financial fortune‑teller, warned:
‘The rights of self‑government of the States have been fondly supposed to be safeguarded by the Constitution. It left them legally free, but financially bound to the chariot wheels of the central government. Their need will be its opportunity.’
Mic drop.
Deakin predicted the states would become reliant on the Commonwealth for money. And he was right. Today, the Commonwealth raises most of the revenue, while the states do much of the spending.
Chapter 3: Capital Duplicators
One of the most entertaining cases involving section 90 comes from 1993 and it’s called Capital Duplicators. The ACT government, unhappy with the existence of X‑rated video shops, decided to tax them… heavily. They imposed a 40 per cent ‘licence fee’ on these shops.
The High Court smelt a rat. It ruled the fee was essentially a sin tax on goods, disguised as a licence. Under section 90, only the Commonwealth can do that. So the ACT lost. In the end, it took technology, not taxes, to get rid of those X‑rated video shops.
Chapter 4: the Inter‑State Commission—a sleeping giant?
Or there’s the story of one of the most underappreciated characters in this whole drama: the Inter‑State Commission. Ever heard of it? Don’t worry—most people haven’t.
The framers of the Constitution imagined it would be a powerful body, helping ensure fairness in trade and revenue distribution across states. For a brief moment in the early 20th century, it flickered to life. But today it mostly lives on in the fine print of constitutional debates and the dreams of reformers.
Chapter 5: the great fiscal what‑ifs
Every federation has its quirks — but Australia might just win the gold medal for creative constitutional workarounds. So let’s indulge in some ‘what‑ifs’ — the great might‑have‑beens of fiscal federalism.
What if the states had kept control over income tax?
What if the Inter‑State Commission had become a fiscal superhero rather than a constitutional wallflower?
What if section 94, which says the Commonwealth should return surplus revenue to the states, had teeth?
And here’s a big one: What if we designed our financial arrangements not just for efficiency or fairness, but for imagination?
Could we create incentives that make it easier to live and work in regional towns? Could we design a tax system that reflects not just geography, but community needs and future opportunities? Could we balance national priorities with local autonomy?
These are questions no court will answer, no accountant can solve alone. But they’re exactly the kind of questions that students — and future leaders — like you are here to wrestle with.
Because when you boil it down, fiscal federalism isn’t about money. It’s about trust. About how we share, how we plan, and how we imagine a better, fairer federation.
So why does this matter to you?
You might be wondering: why do a bunch of talented teens need to care about section 51(ii)?
Well, here’s the thing. Every school you’ve ever been to, every hospital you’ve ever walked past, every train you’ve taken or road you’ve driven on—they all depend on how the money flows in our federation.
And the system we’ve inherited is full of tension.
You’re here today because the future of our democracy needs people who ask hard questions, spot the absurdities, and aren’t afraid to imagine something better.
So yes, there’ll be legal detail today. And yes, someone will probably say ‘vertical fiscal imbalance’ more times than is healthy.
But I hope you also see the human side of all this. The reason section 51(ii) matters is not because it has a Roman numeral. It’s because it shapes whether your local community can afford better schools, roads, and public services.
Tonight, the Treasurer will deliver the Budget speech in Parliament. For those of you attending the Budget Speech, it’s a fantastic opportunity to witness a major political event firsthand.
I hope your time in Canberra sparks your interest in Australian politics—and maybe even inspires some of you to pursue a career in it.
Let me leave you with one final thought. In 1901, our Constitution was a masterpiece of compromise. It created a nation from 6 colonies who didn’t particularly like each other. But in doing so, it made some assumptions about fairness, money and trust that haven’t aged all that well.
And so we return to today’s theme: Can we reimagine Australia’s fiscal federalism to embrace regional economic possibilities while still maintaining national priorities?
I say: that’s your job.
Let’s get to work.
Thank you and enjoy the Convention.