Labour market reform in Australia has to be achieved within the federal system of industrial relations. The Australian constitution limits the power of the Commonwealth government to making laws for the prevention and settlement of interstate industrial disputes. The residual powers lie with the states. This system creates the conditions for forum shopping, inconsistency, varying standards and tension between federal and state jurisdictions. These factors can make it difficult for a Commonwealth government to work towards a 'national' system of industrial relations. The article argues that the existing federal constitutional system need not prevent a Commonwealth government implementing a national policy of labour reform. Nevertheless, the fractures of federalism are sufficient to create tension and conflict that can best be managed by a cooperative approach involving a 'closer partnership' with the states.
