Section 92 and interstate trade 

Section 92 provides that "trade, commerce, and intercourse among the States … shall be absolutely free". Those words produced a century of unstable doctrine before the High Court settled their meaning in a single unanimous judgment.

The two limbs

Section 92 contains two distinct guarantees, and they are analysed differently:

• trade and commerce among the States; and
• intercourse among the States — the movement of people and communications across borders, independent of any commercial character.

Do not treat the section as a single rule. A law restricting movement of persons engages the second limb and is tested by a different standard.

Trade and commerce: discrimination and protectionism

Cole v Whitfield (1988) 165 CLR 360 abandoned the earlier individual rights theory and held that "absolutely free" means free from discriminatory burdens of a protectionist kind.¹

The test has two components, and both must be present:

• Discrimination — the law must treat interstate trade differently from intrastate trade, whether on its face or in its practical effect; and
• Protectionism — the differential treatment must operate to protect local trade against interstate competition.

A law that burdens interstate trade equally with local trade does not offend s 92, however heavy the burden. In Cole v Whitfield itself, a minimum size limit for crayfish applied to Tasmanian and imported crayfish alike; the burden fell on the interstate trader but not discriminatorily, and the law was valid.

Conversely, a law that discriminates but serves no protectionist end — a genuine quarantine measure applying to imports because the risk comes from outside — may be valid, provided the discrimination is appropriate and adapted to the non-protectionist purpose and there is no reasonably available less discriminatory alternative.

Practical effect

Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 confirmed that discrimination is judged by practical effect, not merely by the law's terms.² A prohibition expressed in neutral language may operate almost exclusively against interstate competitors, and that is enough.

Betfair also imported a reasonable necessity inquiry: where a discriminatory effect is asserted to be justified by a legitimate protective purpose, the court asks whether the measure was reasonably necessary for that purpose, and whether a less restrictive alternative was reasonably available. The Western Australian prohibition on betting exchanges failed because the asserted integrity purpose could be served by less restrictive regulation.

The reach of the reasonable necessity inquiry has since been debated. Palmer v Western Australia (2021) 272 CLR 505, concerning border closures during the COVID-19 pandemic, applied s 92 to the intercourse limb and upheld the directions, with the Court divided on method and on the intensity of scrutiny appropriate to a public health measure.

The intercourse limb

The intercourse limb protects cross-border movement and communication as such. Its content is less settled than the trade limb.

A law that imposes a burden on interstate intercourse by reason of its interstate character is the core case, and such a law will be closely scrutinised. Restrictions that fall on movement generally, without singling out crossing a border, are treated more leniently and assessed for whether they are reasonably necessary for a legitimate purpose.

The limb does not confer an absolute right to cross a border. Quarantine, public health, and law enforcement measures may validly restrict movement, and Palmer confirms that the analysis accommodates a serious threat to health.

What s 92 does not do

• It does not protect against non-discriminatory burdens, however severe.
• It does not confer an individual right to trade free of regulation. The theory that it did was abandoned in Cole v Whitfield and should not be revived in an answer.
• It does not apply to trade wholly within a State, nor to trade with other countries.
• It constrains the Commonwealth as well as the States, so a federal law may be tested against it.

What counts as interstate trade

The guarantee attaches to trade, commerce and intercourse among the States. Three points follow.

The movement must genuinely cross a border. A transaction wholly within one State is untouched, however much it competes with interstate suppliers, and a law regulating purely local activity does not engage the section merely because interstate traders also do business locally.

Trade with other countries is outside s 92 entirely; it is regulated under s 51(i) and is not protected by the guarantee.

The concept extends beyond the sale of goods to services, the movement of capital, and the conduct incidental to trade — advertising, transport, and the arrangements by which a transaction is performed. A law that burdens an essential incident of interstate trade burdens the trade itself.

Section 92 and the Commonwealth

The section binds the Commonwealth as well as the States. That is often overlooked because the litigation has overwhelmingly concerned state laws.

A Commonwealth law that discriminated against interstate trade in a protectionist sense would be invalid, though in practice the Commonwealth rarely has a motive to protect one State's industry against another's. The more realistic Commonwealth application is to the intercourse limb, where a federal restriction on movement between States would need justification.

Section 92 is not, however, a general guarantee of freedom from Commonwealth economic regulation. A uniform national scheme applying equally throughout Australia discriminates against nobody.

Remedies and standing

A person affected by a law said to contravene s 92 may seek a declaration of invalidity, and may raise the point as a defence to a prosecution or enforcement action under the law.

The consequence of contravention is that the law is invalid to the extent of the inconsistency, not that the trader is entitled to compensation. Where the offending operation can be severed or read down, the remainder of the law stands.

Because the section is a limitation on legislative power rather than a personal right, the question is always the validity of the law. A plaintiff does not need to establish that their own trade was burdened in a particular way, though in practice standing requires a sufficient interest.

Applying this in a problem question

1. Identify which limb is engaged — trade and commerce, or intercourse.
2. Establish that the trade or movement is genuinely interstate.
3. For the trade limb, test discrimination first, examining both terms and practical effect.
4. Then test protectionism separately; discrimination without a protectionist operation is not enough.
5. Where a non-protectionist purpose is asserted, ask whether the measure is appropriate and adapted and whether a less discriminatory alternative was reasonably available.
6. For the intercourse limb, distinguish a burden imposed by reason of interstate character from a general restriction, and apply the correspondingly different scrutiny.

The justification stage has developed since. In Palmer v Western Australia [2021] HCA 5³ a majority applied structured proportionality to a s 92 burden, including adequacy in balance. Edelman J went further and questioned the protectionist limitation itself, but expressly declined to resolve it at [255]: "[i]n the absence of any challenge to the protectionist element … this issue need not be finally resolved". Cole and Betfair still state the test; they do not complete the modern analysis.

Self-check

• Have I identified the limb before choosing a test?
• Have I treated discrimination and protectionism as two separate requirements?
• Have I examined practical effect rather than only the law's terms?
• Have I named a less restrictive alternative rather than asserting one exists?
• Have I avoided the abandoned individual rights theory?