In 1932 Australia came close to civil war as NSW and the Federal Government fought over defaulted loans and tax rolls. The tensions between Jack Lang and Joe Lyons escalated until Sydney was rife with militia for both sides and the Lighthorse had been moved outside of Canberra to halt any invasion of the ACT from NSW. In the end Phillip Game, the Governor of NSW, dissolved Lang's government.
There is no real simple telling of the whole episode as it was during the Depression, a period of civil turmoil anyway, and there were competing bodies of power; federal vs state, federalism vs anti-federalism, Governor vs Premier, appointed executive vs democracy, practice vs emergency, empire and dominion, not to mention the differing moral visions of Lang and Lyons.
So like many of the things that go into emergency is was a confluence of events and tensions from many sources. The incident that became the sticker was when NSW refused to pay London an interest payment until the interest rate could be renegotiated. Unfortunately, the Federal Government had under-written the loan, and was compelled to collect the interest directly from NSW.
It was an act of anti-federalism, or the mixing of government structures and responsibilities, that led to the showdown. While me may complain about the High Court in the last thirty years, the federal government was prepared - as the US federal government had been in America - to use military force in order to assert its sovereignty over Australia's biggest and wealthiest state.
If the loans had not been under-written by the Federal Government then Joe Lyons would not have legal compulsion to pursue the interest payment. It would have been an issue between Lang and London - and there was sympathy in London for the interest rate to be renegotiated. The London banks were charging Australia and NSW higher interest rates than other nations and had been least forgiving of Australian war debt.
Lang and Game had been at loggerheads over their constitution roles as well. Labor's platform at the time was the abolition of the Legislative Council - an appointed body with entrenched pedigree from Wentworth's squattocracy days. Labor had managed to 'suicide squad' the Queensland upper house, but Game resisted the adding of new positions to the NSW Legislative Council so it could be abolished.
The other part of that platform was that the Assembly was sovereign over the upper house and Governor as it was democratically elected by the sovereign - ie the people. Which is a simple reading of the Westminster system and as we have seen in 1932 and 1975 - untrue.
The best outcome, and less contentious, would have been for the Lang Government to make the Legislative Council a democratically elected body, as was done in the the 1970s - approximately 150 years too late. Bicameral parliaments are superior to unicameral ones.
I consider the reserve powers a constitutional
race condition
and believe that a ceremonial executive needs the inflexibility of constitutional limits slapped on them.
However, it is silly to think there are not other competing sovereign powers in the mixed constitution of a Westminster system and sovereignty at any one time is determined by 'accidents of personality' as much as anything else. Especially when the actions are not constitutionally tested, as Game's was not.
Unfortunately
austlii
doesn't have the Financial Agreements Enforcement Act of 1931 (passed by Scullin) in its database, nor is the NSW Constitution the same as it was in 1932. I also cannot find the actual text of the proclamations that Lyons and Lang issued to cut each other off as they played ping pong with NSW public servants and hide-n-seek with the tax monies.
To top it all off, I cannot find the High Court case, so no discussion of the constitutional and legal details from me.
