BBC News, Sydney
Australia's highest court has ruled that the federal government in Canberra has the power to override work place regulations put in place by the states.
John Howard's industrial relations law have been controversial
The High Court dismissed a challenge to Prime Minister John Howard's contentious industrial relations laws, ruling them constitutionally valid.
The ruling is seen as shifting power from state to federal government.
Opponents said the laws would erode the rights of workers but Mr Howard said they will help boost the economy.
Power has been divided between the state governments and the national governments ever since 1901, when Britain's separate colonies in Australia were federated into a commonwealth.
John Howard's controversial industrial relations laws have not only revealed the ideological divisions between the main political parties here, but raised the constitutional question of who makes the law in Australia.
The state governments and territories, all of which are controlled by the Labor party, had argued they should determine their own industrial relations regulations.
The federal government, led by the Liberal party, maintain that a clause in the constitution allows it to override state-passed legislation in the work place.
Mass rallies were held in many Australian cities against the labour laws
This landmark ruling by Australia's highest court resolves that dispute in favour of the Howard government.
The court rejected the concerns of two dissenting judges that the industrial relations laws represented an unwelcome encroachment of federal power.
Mr Howard said Australia needed a national industrial relations system.
"The laws are not only fair and good for the Australian economy," he said, "but they recognise the reality of 2006 that we are a nation before we are a collection of states, whatever may have been the historical sequence. "
Backed by the union movement, the Labor party had argued that the new laws would make it easier for companies to sack workers and reduce benefits.
But this ruling could have much broader meaning beyond the realm of industrial relations.
It could mark a major shift in power from the states to the federal government and alter the delicate balance set down by the writers of the Australian Constitution.