Australia became an independent nation on 1 January 1901 when the British Parliament passed legislation allowing the six Australian colonies to govern in their own right as part of the Commonwealth of Australia.
The Commonwealth of Australia was established as a constitutional monarchy. 'Constitutional' because the Commonwealth of Australia was established with a written constitution, and 'monarchy' because Australia's head of state was Queen Victoria.
The Australian Constitution is the most important document in Australian government history. It established the Commonwealth Government (now known as the Australian Government), defined its structure, powers and procedures, and defined the rights and obligations of the states in relation to the Commonwealth.
The Constitution was brought into existence through a British Act of Parliament, the Commonwealth of Australia Constitution Act. This Act granted permission to the six Australian colonies, which were still then subject to British law, to form their own Commonwealth government in accordance with the Constitution. The text of the Constitution (which was clause 9 of the Act) was written by representatives of the six colonies during a series of conventions in the 1890s, and accepted by a referendum in each colony.
Under the Constitution, the reigning British monarch is also the Australian monarch, and therefore Australia's head of state. The Constitution grants the monarch certain governing powers that place them above all other levels of the government. Because of the large distance between Australia and Britain, the monarch is permitted to appoint a Governor-General who can exercise the monarch's powers in their absence.
The birth of our nation is often referred to as 'federation'. This is because the Constitution created a 'federal' system of government. Under a federal system, powers are divided between a central government and several regional governments. In Australia, power was divided between the then Commonwealth Government and the governments of the six colonies, which were renamed 'states' by the Constitution.
Specific areas of legislative power were given to the then Commonwealth Government, including taxation, defence, foreign affairs and postal and telecommunications services. A complete list of Commonwealth power is at section 51 of the Constitution. The Australian Government also has power to make laws for Australia's territories (section 122).
The states retained legislative power over all other matters that occurred within their borders, including police, hospitals, education and public transport.
The wording of the law has often created situations where both the Australian Government and the states claim the authority to make laws over the same matter. See State and territory government for a discussion of the federal-state relationship and how these conflicts are resolved.