Jackson Wherrett explains the referendum we’ve all heard of but don’t quite get

Or no?
Or no?
Or no?

On 14 September, a referendum on the recognition of local government in the Australian Constitution may be held. I say ‘may’ because Labor’s leadership schemozzle is likely to result in a change of election date and, as a result, the date of the referendum – and has also generated uncertainty as to whether the referendum will be held at all.

Assuming it goes ahead, the referendum proposes to change section 96 of the Constitution, which gives the Commonwealth the power to grant ‘financial assistance’ to the States. The amendment would extend this power to allow the Commonwealth to give money to local government as well.

For many years, the Federal Government has given money to local governments directly, most notably through the ‘Roads to Recovery’ infrastructure program. However, the constitutionality of this funding was put in doubt by the 2009 decision of the High Court of Australia in Pape v Commissioner of Taxation. It is widely accepted that, in light of that judgment, a direct challenge to one of these programs may result in it being declared invalid because the Commonwealth does not currently have the power to fund local government directly. Hence the referendum.

The chief argument against the referendum is that it is unnecessary. The Commonwealth already has the power to fund local government, albeit indirectly. This is because section 96 provides that grants can be ‘on such terms and conditions as the Parliament thinks fit’, and so the Commonwealth can give money to the states on the condition that it is passed on to local governments. This arrangement has already been used for many years, and there is no doubt as to its constitutional validity.

It has been argued that this scheme must be inefficient, creating either delays in the provision of funding or money being taken by states for acting as the ‘middle person’. However, the Expert Panel on Constitutional Recognition of Local Government found no evidence to support these contentions.

Other arguments against the referendum include the resulting increased centralisation of Commonwealth power and influence over local government policy; a decrease in accountability as a result of each government blaming the others for any funding failures; and that a new system of money allocation may be costly and inefficient.

Arguments for the referendum include symbolic recognition of the important role played by local government in Australian society; more targeted investment in the provision of local services and the pursuit of national policy objectives; and the possibility of increased funding for local government.

All enrolled voters are required to vote in a referendum. To pass, a ‘double majority’ of the votes cast must be achieved. This means that the majority of the Australian electorate must vote ‘yes’, and a majority of the electors in a majority of the States (being four out of six States) must also vote ‘yes’.

For more information, a full ‘Yes/No case’ and some FAQs have been prepared by the Constitutional Reform Unit of Sydney Law School.