The Minister for Trade and Customs submits the following minute:

The point was raised last night (10th June) as to whether the Federal Government could undertake the business of general iron manufacturers; and as the point will be further considered this afternoon I shall be glad to be advised thereon. Also as to the right to levy customs duties on State imports⁽¹⁾.

1. The powers of the Commonwealth are first to be sought in the express endowments of the Constitution-notably in section 51. The power to make laws under sub-section (i) ('Trade and commerce with other countries, and among the States') is vast and difficult to limit. It does not however appear to have contemplated such an extension of the sphere of Federal action as is here proposed. There is a natural as well as a legal distinction between production and distribution, though both are essential to trade and commerce.

   Production and manufacture are not commerce. Commerce only begins where production and manufacture end: Kidd v. Pearson 128 U.S. 1, at p. 20. The fact that the trade and commerce power is limited to that with other countries and among the States shows that the rights which the States undoubtedly possess to undertake national industries within their own limits are not shared by the Commonwealth under this sub-section. The Commonwealth cannot under the power to make laws with respect to 'trade and commerce' establish a general iron manufacturing business.

   Under sub-sections (i), (ii) and (iii), taken together, (trade and commerce, taxation and bounties), the authority of the Commonwealth over industrial development is of the largest; but though it allows of control, regulation and guidance, it in no respect points to direct establishment or management of any industries.

   Sub-section (xxxi) (acquisition of property 'for any purpose in respect of which the Parliament has power to make laws') does not extend the power of the Commonwealth beyond the express provisions.

   In connection with this question, it may be asked whether sub-section (xiii) (Banking) does not authorize the Commonwealth to establish a national bank-and if so, whether sub-section (xx) (trading or financial corporations) does not authorize the Commonwealth to be a trading corporation. But-whatever may be the powers under sub-section (xiii), sub-section (xx) only enables the Commonwealth to legislate with respect to corporations 'formed' within the Commonwealth; it does not confer the power to 'form' corporations. It probably does not extend beyond the power of making a uniform company law.

   I cannot see in any other part of the Constitution any express.authority for the course proposed.

2. The implied legislative powers of the Commonwealth are, substantially, those which arise within the terms of sub-section (xxxix) of section 51, as being 'incidental' to the execution of any power vested in the Commonwealth. The manufacture of iron may be incidental to the execution of many such powers-e.g. defence, or the construction of railways. The Commonwealth might clearly undertake the manufacture of any goods for its own use; and probably if it did so, and it were incidentally advantageous to the interests of the economical working of the undertaking that it should also manufacture for other consumers, such manufacture would also come within its implied powers.

   Except as above mentioned, it does not seem possible to imply from the Constitution any power to establish and conduct manufactures.

3. The question may however arise-what power is there to declare a vote for the establishment of ironworks to be unconstitutional?

   The extent of the purpose for which Congress can appropriate its revenues has been the subject of exhaustive discussion in the United States. It is now held by the leading constitutional authorities in America that the power to appropriate moneys is not limited to the purposes of the enumerated powers of Congress. The power to appropriate is coextensive with the power to raise money by taxation; and that power is to lay taxes 'to pay the debts and provide for the common defence and general welfare of the United States'. The words 'for the general welfare of the United States' are practically equivalent to the words 'for the peace, order, and good government of the Commonwealth' in section 51.

   Under the words in the United States Constitution, it seems to be admitted, both in opinion and in practice, that Congress has a very wide discretion in the application of the proceeds of taxation to purposes outside the enumerated powers; though it is also laid down that the application to purposes which are purely local, and unconnected with the 'general welfare', would be unconstitutional: Story,§ 907 et seq., 1273; Kent, I, 394.

   It would be difficult, and it is hardly necessary till the question arises in a more definite way, to give any precise opinion as to the purposes to which the Commonwealth Parliament may lawfully appropriate money for the establishment of manufactures. Following the American authorities, it would seem that it must be conceded a large latitude in expenditure which is for the 'peace, order, and good government' of the Commonwealth as a whole-even though the expenditure cannot be brought strictly within the bounds of any of the enumerated legislative powers of the Federal Parliament. It may subsidise and assist manufactures in many ways-apart from the power to make laws in respect to bounties. Thus it could probably expend money in providing and diffusing information on matters connected with manufacture, and could probably organise a department (like the United States Department of Agriculture) for the purpose of assisting and instructing manufacturers. But a limit would seem to be reached where the exercise of this power would encroach on the powers reserved exclusively to the States; and the appropriation of money for the purpose of establishing a general iron manufacturing industry wouiu seem to be beyond this limit.

   It must be remembered that this or any other limit which now appears to bar Commonwealth action is not only incapable of strict definition, but will probably prove not to be so permanent as to prevent expansion according to future needs and necessities.

   Any payment made under an appropriation held to be ultra vires could probably be challenged in various ways; e.g. by the Auditor-General, or by a State interested in the return of surplus revenue.⁽²⁾

[Vol. 2, p. 38]

(1) Not dealt with in this opinion, but see Opinion No. 55.

(2) The substance of (1) and (2) of this opinion appears in an opinion, not published herein, dated 18 July 1903 [Vol. 3, p. 438], a version of which was published in Commonwealth of Australia, Pari. Papers 1904, Vol. 11, p. 1610.

* See also Opinions Nos 171,231