Established by the Gillard Government, the panel will consult local governments, stakeholder groups and the Australian community to ascertain the level of support for a constitutional change to recognise local government and options for that recognition.

Local government currently has no federal constitutional status as it was not incorporated in the Constitution, made law on 1 January 1901.

A High Court decision in Pape v Commissioner of Taxation (2009) highlighted the risk to current and future federal funding and support programs for community infrastructure because of an absence of general federal power to directly fund local government.

The Australian Local Government Association (ALGA) supports a national campaign for constitutional reform, advocating that without this recognition, direct Commonwealth funding of local government may be technically invalid.

"Local governments need certainty and security in funding in order to provide the range and level of services expected by the community," it said in the discussion paper of the 2011National General Assembly of the ALGA held yesterday in Canberra.

Speaking yesterday (21 June) at the Assembly, Minister for Regional Affairs Simon Crean said the new panel (which will report to Government by the end of the year)would comprise representatives with a range of expertise and that the outcomes of its consultations would "help shape any proposal to put to a referendum".

Since 1977, no referendum question has been passed. The last, proposing a republic and establishing a preamble to the Constitution, was defeated in 1999.

Constitutional change to the Australian Constitution requires support by an absolute majority in the Australian parliament and the approval in a referendum by a majority of electors nationwide, in a majority of states.