The court upheld a decision by the Administrative Appeals Tribunal (AAT), which ruled that The Australian newspaper's freedom of information editor, Michael McKinnon, was not entitled to access certain Treasury documents under the Freedom of Information Act.
At the centre of the case is sensitive Treasury information relating to personal taxation bracket creep and the number of wealthy people claiming the first home buyer's grant.
Mr McKinnon sought access to the documents in 2002, but his request was denied by Treasurer Peter Costello.
Mr Costello issued a certificate over the documents that barred their release and he argued that to reveal the documents would be contrary to the public interest.
Mr McKinnon appealed to the High Court after the Federal Court dismissed his appeal against AAT decision, arguing that the AAT should have considered competing facets of the public interest.
The High Court ruled 3-2 the AAT was not permitted to do that but was instead required to find whether there were reasonable grounds for the claim that disclosure would contradict the public interest, and that it had not made any error in this case.
'Nothing new': Costello
Treasurer Peter Costello defended his original decision, saying the move to bar the release of certain Treasury documents was nothing unusual and followed a tradition of his Labor predecessors.
Mr Costello said he did not want to release the documents in question because they were in draft form.
"These are drafts, which are replaced. And because they're drafts, quite often they're not even accurate and that's why the FOI (Freedom of Information Act) has an exemption for working
documents."
'Threat to free press'
News Ltd chairman John Hartigan said the decision was an “extremely disappointing outcome” and highlighted that freedom of speech was under intensifying threat in Australia.
"At issue were some fundamental public rights to know how the nation is governed and to hold elected representatives accountable for their decisions," Mr Hartigan said.
"With this decision it is difficult not to conclude that the Freedom of Information laws are now effectively lost as an avenue for making governments open, transparent and accountable.”
Press council slams decision
Meanwhile the Australian Press Council said today’s ruling would give governments fresh impetus to suppress politically inconvenient information.
The press council, which was a party to the case, said it was dismayed by the court's decision, which showed the need for urgent freedom of information reform.
"The true losers are Australia's voters and taxpayers," the council said in a statement.
The council also said the court failed to give adequate weight to the aims of the FOI Act in giving people the right to access government information.
Politicians respond
The Labor opposition has pledged to overhaul FOI laws to improve accountability.
Labor's legal affairs spokeswoman Nicola Roxon said the decision was a loss for the public.
"The whole community, not just The Australian newspaper, who took this case, are the losers today, as the government has been given more encouragement to keep flouting the basic tenets of democracy," Ms Roxon said.
"FOI has become a joke under this arrogant, out-of-touch government, but the law will clearly allow this to continue unless it is changed."
Mr Costello said if Labor was serious, the state and territory governments would introduce such legislation tomorrow.
"If that's the Labor Party policy, why are there eight state Labor and territory governments that don't follow it?" he asked.
Australian Greens leader Bob Brown says he will seek to amend FOI laws.
"I call on Attorney-General (Philip) Ruddock to amend the FOI act so that any reasonable public interest would ensure the information is released,” Senator Brown said.
"Information is the currency of democracy. Beyond clear defence of national security, it is difficult to argue that ministers should be able to keep the public in the dark."
Democrats senator Andrew Murray said the decision was a "terrible blow for accountability" and warned the decision could lead to increased secrecy of government documents.
"The upholding the right of the executive to withhold matters from the public which are of great public interest and which do not affect our national security and safety is regrettable," he said.