Foundation for National Renewal     The "Model Constitution" Activity

Federal Election October 2004: Which Candidates Trust the People?

Historically, when the British Navy laid claim to Australia at Botany Bay in 1788, this was accomplished in the name of George III, the King of England. As was the custom in those days, a conquering power laid claim to anything and everything and subjugated or enslaved the population. The Australian Aborigines were thus dispossessed and the entire island continent became ‘Crown Land’. Theoretically, the land and all the natural resources of Australia became the property of the Monarch.

Over the ensuing centuries, the State, in the name of the Monarch, has granted ‘freehold’ or ‘leasehold’ title to much of the land surface and much of this was done as ‘patronage’ - to persons of power and influence loyal to ‘the Crown’. This ownership, however, did not extend to whatever lay beneath the surface. The State, in the name of the Monarch, has granted further ‘mining rights’ to individuals and corporations to exploit the oil and minerals below the surface. Similarly, fishing permits or ‘licenses’ have been granted to individuals and corporations to exploit the riches of the seas. More recently, the State has granted ‘Native Title’ to other groups of citizens.

Since those early days, the new ‘owners’ have been able to sell these resources to the highest bidder for their own individual profit. Even those with ‘leasehold’ title have been able to sell the lease on at greatly increased prices according to market value. However, recent High Court rulings in relation to ‘Native’ title have muddied the waters and currently there is much confusion and uncertainty over all ‘titles’.

The above is a very simplistic explanation of how we got to the situation we are in at the current time. It is therefore appropriate that a new constitution for Australia should address this issue. It is argued that, firstly a new constitution should establish that ‘The People’ own the land and all the other natural resources of this island continent of Australia. Secondly, a new constitution should establish a system of land ‘tenure’ and ‘rent’ payable for other natural resources. In a recent address to the World Bank, Herman E Daley is reported to have said, “It matters a great deal who receives the price for nature’s increasingly scarce services. Such payment is the ideal source of funds with which to fight poverty and to finance public goods.” He went on to say that taxing away value added by the labour of individuals creates resentment. Taxing value that no one added; that is, nature’s natural resources, does not cause resentment.

Obviously, any drastic change from the current system will entail a need for detailed interim measures to manage the transition from the current chaos to a logical system. However, that is not something we should concern ourselves with in crafting the ‘Model Constitution’. This is just one of many areas where interim and transition measures will be necessary. However, nothing in this paper should be interpreted as advocating the wholesale expropriation of all private property in land and resources.

One idea is that all the land and all the other natural resources should be deemed to be the property, collectively, of all the citizens of Australia. It would then be appropriate for our government to be charged with administering the natural resources for the benefit of all Australians. As with all other aspects of governance, this aspect would be managed subject to the will of the People of Australia as expressed in the Constitution.

Collective ownership would require our government to conduct an open tender or auction system before the transfer of any land or rights to individuals or corporations. This would preclude the granting of ‘selections’ to chosen recipients - an ancient practice that remains to this day. An open tendering system would ensure accountability and transparency and allow the citizenry to ensure that '‘The People'’ receive appropriate value when any rights to land or other natural resources is transferred to individuals or corporations.

Such a system would also ensure that environmentally sensitive land would not be allocated for development or mining contrary to the wishes of ‘The People’. Similarly, collective ownership of resources could ensure that associated benefits to the society could be incorporated into the granting of rights. For example, if the People perceived a need to retain a steel making industry in Australia, the granting of coal and/or iron ore mining leases could be tied to a requirement for a specified percentage of these natural resources to be processed in Australia. Similarly, environmental conditions could be incorporated in the terms of any lease.

Another advantage of a system in which there is clear ownership by the People is that, when land in long term use by a Federal or State government ceases to be needed for that purpose, there would be open public debate on what should happen to that land. Currently, governments take the view that the land ‘belongs’ to them and that they can do whatever they like with it. This usually results in the land being sold off (often at prices below market value) and ‘developed’. The sole purpose of the ‘development’ of course, is profit for the private developer. The tragedy is that this decision to sell-off is usually taken on the short term view that immediate cash is created allowing the current government to undertake some initiative for which they have not had to tax the people. Thus they hope to enhance their electoral chances.

Another aspect of this sort of constitutional reform is that of land title. One of the very few ‘rights of the individual’ enshrined in our current Constitution is found in Section 51 (xxxi). This section authorises the Commonwealth to acquire property from individuals but only by paying just compensation for such property. Such a provision should, of course, be incorporated into our ‘Model Constitution’. However, there are other aspects of administration that could be included in our constitution to both protect the rights of individuals, to facilitate efficient governance and to preserve the collective inheritance of future generations of Australians.

In the Australian Capital Territory, for example, the 1910 Seat of Government Act prevented the granting of ‘freehold’ title. When an individual (or a corporation) ‘purchased’ a parcel of land in the ACT, the title was leasehold. That is to say, a lease was granted to the original purchaser (usually 99 years on residential land and 50 years on commercial sites). In this way, ‘ownership’ of the land was seen to remain with the Commonwealth (the People). This system of administration effectively prevented speculators from making huge profits out of the increasing value of land as Canberra was developed. Despite some errors in the administration of the scheme (including a 20-year revaluation period) the system worked well until totally destroyed by a political decision based on perceived political electoral advantage. However, the most important aspect of this type of land title is that speculation is virtually eliminated and ‘ownership’ of all Australian land is seen to remain with ‘The People’.

Another advantage of this type of land title is that land ceases to be ‘capital’. And ‘capital’ currently tied up in land could be redeployed into more productive activities.

Land values increase as a result of the efforts of the whole community. Under the current system of ‘freehold title’, land-holders reap huge profits for doing nothing and purchasers of land are faced with ever-increasing prices for land. Conversely, the increase in rent from ‘leasehold titles’ as the value increases, would provide substantial revenue that could be used for the good of the community as a whole.

Another advantage of the annual or monthly collection of ‘rent’ rather than a lump sum on purchase, is highlighted when land usage is to change. Currently. speculators invariably buy up freehold title to land around our cities. When the city expands and there is a need for, say, farmland to be redeveloped for housing, the speculators make huge profits and new home-buyers pay inflated prices for land. Under a leasehold system, the farmer’s lease would be bought out by the State and the land rented to home-buyers. The farmer would be happy to move on. Firstly because he would not need a huge amount of capital to acquire another farm and secondly, because the annual revaluation of the original farm would have gradually made farming there unprofitable.

The granting of only ‘leasehold’ title may also allay the fears held by many in the community when foreigners or ‘overseas interests’ acquire large tracts of land or important urban blocks. The ‘purchase’ of land by other than Australian citizens is an area of concern, and should also be addressed in our ‘Model Constitution’. In the ‘globalised’ world, we have no control over the relative value of our currency. Thus it is possible for foreigners enjoying a very favourable exchange rate to buy up property in Australia very cheaply. Not only is this a classic example of ‘selling the farm’ and ‘the rich get richer and the poor get poorer’, it causes unnatural fluctuations in the domestic land market. This has already been experienced during periods of wide variation in the relative exchange rate of the Australian dollar against American and Japanese currencies.

’Home ownership’ is a well-ingrained concept in the Australian culture. There is also a deep psychological attachment to the concept of ‘owning’ land. It may well prove impossible to convince people who currently own their own home, of the advantages of a leasehold system. On the other hand, however, if a leasehold system were to be introduced for all new developments, new homebuyers would be relieved of the burden of finding huge sums of money to buy the land. Loan repayments and interest would be reduced proportionately and this would offset land rent charges.

The conversion of commercial and agricultural land to a leasehold system would probably be a much more viable proposition with those in business welcoming the injection of capital and with the ability to factor land rent charges into their costs.

Currently, commercial timber companies harvest trees from ‘State Forests’ on payment of a very nominal fee that bears no relation to the value of the timber or the cost of replacing those trees. As a result, although we have enjoyed relatively cheap timber, our forests have been devastated and the waste has been horrendous. It is also increasingly apparent that trees play a significant role in reducing the deleterious effects of green house gas emissions. It therefore seems logical to suggest a different approach. In the long term, it could be that timber companies are required to grow their own timber. If this philosophy was introduced now, a viable industry based on timber sellers growing their own timber or buying trees specifically grown for the purpose. could be operative in 20 years or so. Flow-on advantages would be; the preservation of native forests, the planting of tens of thousands of trees, a serious impact on green house gas emissions, a reduction of salinity problems, an effective use of degraded farm lands and the encouraging of research and development into materials to replace the use of timber.

In the area of fisheries, current practice is for fishermen to on-sell their license to others at greatly inflated prices. This would have to be the most blatant example of individuals instead of the community as a whole benefiting from nature’s resources.

Task 21 - Ownership, Control and Exploitation of Australia’s Natural Resources

In this Task you are asked to indicate your views on this topic. In the paragraphs above, some indication of possible problems and some ideas for overcoming these problems have been canvassed. However, it is a complex issue and a wide range of views is expected.

In addition, to give an indication of general views on this topic, Members are asked to answer the following questions.

Question 1. With the exception of one’s ‘principle place of residence’, do you consider that ‘ownership’ of land and other natural resources of Australia is a subject that should be covered by provisions in our ‘Model Constitution’?

Question 2. Is it consistent with your opinion that ownership of land (other than one’s ‘principle place of residence’) in Australia should remain with ‘The People’ and that title to land should be restricted to ‘leasehold’?

Question 3. Should new developments of residential land be sold with only leasehold title to the land?

Question 4. If your answer to Q 3 is ‘Yes’, should ‘lease’ payments on (new development) suburban house blocks be collected:

1. As a lump sum?
2. Annually
3. Monthly?
4. Weekly?

Question 4. If you agree that farmland and grazing properties should be available only on a ‘leasehold’ basis, should lease payments on these properties be collected:

1. As a lump sum?
2. Annually?
3. Monthly?

Question 5. If you agree that industrial and commercial land should only be available on a ‘leasehold’ basis, should lease payments on commercial and industrial properties be collected:

1. In a lump sum?
2. Annually?
3. Monthly?

Question 6. If you agree that city blocks should be available only on a ‘leasehold’ basis, should lease payments on city blocks be collected:

1. In a lump sum?
2. Annually?
3. Monthly?

Question 7. Should mining leases be a saleable item?

OR

Question 8. Should mining rights revert to ‘The People’ when no longer being used by the leasee?

Question 9. Should licensed fishermen be able to on-sell fishing rights at great profit?

OR

Question 10. Should fishing rights revert to ‘The People’ when no longer used by the licensee?

Question 11. Should timber companies continue to have cheap access to ‘State Forests’?

Question 12. What other views do you have on the question of Australia’s natural resources?

Question 13. If you agree that it is desirable that ‘ownership’ of the natural resources of Australia should remain with the People in perpetuity, have you any recommendations to make regarding the transition from the current system of ‘freehold’ title to ‘leasehold’ title?

Question 14. We haven’t explored the vexed question of determining the ‘unimproved value of land’. Local Councils and Shire offices currently use a variety of systems to arrive at ‘Rates’ charges on this basis and there seems to be some controversy in this area. If you have any views on this question, they would be welcome.

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Last updated: 3 May 2006