On The Decline In State Population Distribution: A Coasean Role For Section 111 Of The Australian Constitution?

Since Federation,22The Federation of Australia was the culmination of a series of constitutional conventions held in Melbourne, Sydney and Adelaide between 1890 and 1898. In the first convention, politicians from New South Wales, Victoria, Tasmania, Queensland, South Australia, Western Australia, and New Zealand affirmed their intention to enter into a political union. Later conventions were attended by elected delegates. New Zealand, however, decided not to continue with the proposed scheme for federation, mainly due to its geographic isolation from the Australian continent. The conventions culminated with the adoption of a draft constitution that was eventually adopted by all six Australian States. It is also worth noting that the first Commonwealth between Australian states came in 1885, with the passing of the Federal Council of Australasia Act 1885 (Imp), 48 & 49 Victoria, c. 60 (U.K.). This confederal union came to an end with the coming into force of the Commonwealth of Australia Constitution Act 1900 (Imp), 63 & 64 Victoria, c. 12, § 9 (U.K.). The Commonwealth Constitution came into force on 1 January 1901. the ratio of people living outside capital cities to those living within these cities have been declining in all six States. Historically, Australia opted for a regulatory approach that favoured in favouring satellite towns around state capitals, such as Newcastle and the Gold Coast, over the alternative of decentralised regional urban centres, such as Wagga Wagga or Townsville. The latest phase of this planning paradigm envisages integrating these satellites and their capital cities into mega-metropolises. Notwithstanding the benefits from agglomeration, rectifying the observed imbalance assumes an urgency not only through a national security imperative but also through social equity. To analyse the cause of this population decline, I use a theoretical model to explain how sub-national state political accountability distorts incentives when it comes to the provision of public goods. The equilibrium provision is not Pareto optimal given the observed population distribution externality. The inefficient provision of public goods is causing more people to choose to live in the capital city, which in turn creates a vicious circle of worsening population distribution. The model suggests that breaking this circle requires Coasean bargaining so that eliminating the externality is assigned to the Australian jurisdiction that can do so at the lowest cost. Surrender and acceptance agreements under section 111 of the Australian Constitution furnish a modality for the envisaged bargaining to the end of transforming regional Australia into a national jurisdiction. Whether this efficiency can be realised remains a question of transaction costs and income effects flowing from such jurisdictional reassignment.