House of Representatives
7 August 1906

2nd Parliament · 3rd Session



Mr. Speaker took the chair at 2.30 p.m., and read prayers.

page 2370

QUESTION

CUSTOMS PROSECUTIONS AT PORT ADELAIDE

Mr HUTCHISON:
HINDMARSH, SOUTH AUSTRALIA

– In connexion with the Customs prosecutions at Port Adelaide, I wish to ask the Minister of Trade and Customs the following questions : -

  1. Was Forwood a recognised Customs agent, acting solely for himself ; or
  2. Was Forwood a’ servant?
  3. If so, who was his employer, and was said employer a recognised Customs agent?
  4. Who were the owners of the goods in volved?
  5. Have the suspended Customs officers been reinstated ?
Sir WILLIAM LYNE:
Minister for Trade and Customs · HUME, NEW SOUTH WALES · Protectionist

– I have been furnished by the Comptroller-General - to whom the honorable member evidently forwarded a copy of these questions - with the following replies: -

  1. He was a licensed Customs-house agent.
  2. It is not known to the Department whether he was a servant.
  3. See replytoNo.2.
  4. It is not considered desirable to mention names until the investigation is completed.
  5. The officer originally suspended has not been reinstated.

page 2370

PAPER

Mr. DEAKIN laid upon the table the following paper -

Correspondence with the Premier of Queensland, and a departmental memorandum, relating to the repatriation of kanakas.

Ordered to be printed.

page 2370

QUESTION

COMMONWEALTH FINANCIAL PROBLEMS

Mr KNOX:
KOOYONG, VICTORIA

asked the Treasurer, upon notice -

  1. How and when does he intend to take action with regard to his proposals for dealing with the financial problems of the Commonwealth, which were circulated with the Budget papers and referred to in his Budget speech?
  2. Is it his intention to introduce legislation for the purpose of securing the necessary powers to give effect to bis proposals? -
Sir JOHN FORREST:
Treasurer · SWAN, WESTERN AUSTRALIA · Protectionist

– Action will be taken as soon as possible, and in part by legislation.

page 2370

LAUNCESTON MAILS

Mr. BAMFORD (for Mr. Kins

O’Malley) asked the Postmaster-General, upon notice -

Whether he will supply the House with information showing -

The times of the delivery of the mails at the Launceston Post-office for the” last six months?

The times they should be delivered according to mail contract- if not at. Post-office, on Launceston wharf?

Mr AUSTIN CHAPMAN:
Postmaster-General · EDEN-MONARO, NEW SOUTH WALES · Protectionist

– Inquiries are being made, and answers will be furnished at the earliest possible moment.

page 2370

QUESTION

BRITISH OFFICIALS IN PAPUA

Mr WEBSTER:
for Mr. Brown

asked the Prime Minister, upon notice -

  1. Whether the particulars of case and claims in connexion with the suit, Strachan v. the Commonwealth of Australia, had been submitted to the Government prior to instituting legal proceedings in the High Court?
  2. If so, will he cause the papers relating tosuch claim to be made available to members prior to asking the House to vote moneys for the maintenance of the British New Guinea Civil Service?
Mr DEAKIN:
Minister for External Affairs · BALLAARAT, VICTORIA · Protectionist

– The answers to the honorable member’s questions are as follow : -

  1. Yes,to the Prime Minister’s and Attorney-

General’s Departments.

  1. Yes.

Mr. WEBSTER (for Mr. Brown) asked the Prime Minister, upon notice -

  1. Whether his attention has been called to a. telegram in the Age, of the 2nd instant, stating that the High Courthad delivered judgment in the case of Strachan v. the Commonwealth of Australia, in whichplaintiff was non-suiterf on the plea that the Commonwealth was not responsible for acts committed by British New Guinea officials?
  2. Was this plea of non-liability raised by theCommonwealth Government?
  3. Was it known or supposed that this nonliability existed when Parliament was asked to vote the salaries of those officers?
  4. Is it proposed to ask for are-vote of salaries, under the conditions disclosed by this decision?
  5. Is it proposed to bring British New Guinea under Commonwealth control; and, if so, when is it proposed to take the necessary action to this end?
Mr DEAKIN:

– The answers are as follow : -

  1. Yes.
  2. Yes, by its counsel.
  3. and 4. Parliament has not voted the salaries of British New Guinea officials. The fact that the Commonwealth was not legally liable for the actions of British New Guinea officials has always been known.
  4. Yes, immediately.

page 2371

QUESTION

HAWKER BOARD

Mr MALONEY:
MELBOURNE, VICTORIA

asked the Minister representing the Minister of Defence, upon notice -

  1. What sums (including expenses) were paid to each of themembers of the Board appointed to inquire into the Hawker case?
  2. Were any officers of the Permanent Forces paid any sums for expenses in connexion with such inquiry, and who were such officers, and how much did each receive?
Mr DEAKIN:
Protectionist

– The answers to the honorable member’s questions are as follow : -

  1. The following sums, which include expenses, werepaid to the members of the Board: -
  1. The following sums were paid to officers of the Permanent Forces, as expenses, in connexion with the inquiry : -

page 2371

QUESTION

MAJOR BRUCHE

Mr MALONEY:

asked the Minister representing the Minister of Defence, upon notice -

  1. . Is there an Adjutant-General, an Assistant Adjutant-General, and a Deputy Assistant AdjutantGeneral in Melbourne, for Commonwealth and State, and how many of them, and who are they?
  2. What necessity is there for all these officers, and what are their duties?
  3. Could not the duties of Major Bruche, Deputy Assistant Adjutant-General, be carried out bya junior military clerk?
  4. What pay does Major Bruche receive, and what would be the pay of a military clerk?
  5. Are there, any, and if so, what increases on the Estimates for any of these officers?
Mr DEAKIN:
Protectionist

– The answers to the honorable member’s questions are as follow : -

  1. There is no Adjutant-General in Melbourne for Commonwealth or State. In the district of Victoria there is an Assistant Adjutant-General (Brevet Lt.-Col. Lee, D.S.O.) and a Deputy Assistant Adjutant-General (Major Bruche).
  2. These officers are necessary in connexion with the administration and instruction of the Military Forces of Victoria. Their duties are as follow : -

The Assistant Adjutant-General is the chief Staff Officer, and deals with matters relating to discipline, returns and statistics connected with the personnel appointments, transfers and promotion of officers, training of the troops, drafting and issue of district orders and circular memoranda, distribution of duties and correspondence. The Deputy Assistant

Adjutant-General prepares examination papers and superintends examinations for the appointment and promotion of officers, conducts schools and classes of instruction, deals with questions relating to musketry, training of infantry, and is the officer supervising Rifle . Clubs. Acts as member of Boards for examination of officers and non-commissioned officers of the Permanent Forces, and is often a member of Boards of Examination for candidates from other States.

  1. No.
  2. Major Bruche receives£450; the salary of a military clerk in the Victorian District Staff varies from£70 to£260 per annum.
  3. Yes, in accordance with regulations anincrease of£25 for both the Assistant AdjutantGeneral and the Deputy Assistant AdjutantGeneral.

page 2371

BUDGET

In Committee of Supply:

Debate resumed from 31st July (vide page 2048), on motion by Sir John Forrest -

That the item, “President,£1,100” be agreed to. .

Mr HARPER:
Mernda

.- By arrangement with the honorable member for-Parramatta, I have agreed to open the debate this afternoon. It is not my intention on this occasion to deal generally with the Budget, and I shall say little in regard to it beyond congratulating the Treasurer upon its delivery, and the people of the Commonwealth upon the great prosperity which it indicates. In my opinion, it must take second place when compared with the important issues raised by the right honorable gentleman at the conclusion of his speech, and by the publication of his memorandum on the financial problems of the Commonwealth, dealing with the assumption by the Commonwealth of the debts of the States. The questions which he has well entitled the financial problems of the Commonwealth are, to my mind, of surpassing importance, and I think that there is a general feeling amongst honorable members, and throughout Australia, that they should be faced and dealt with in the interest of the States and of the people. I have, since the passing of the Constitution Act, taken a considerable interest in these matters, and it has been one of my chief objects in remaining in politics to give my aid and help, if possible, in their settlement. The seriousness of the position, as affecting future loans, altogether apart from the difficulties arising between the States in connexion with financial adjustments, ought to be pressed upon the attention, not only of honorable members, but also of the public at large. During the fourteen years from 1907 to 1920 no less a sum than , £124,000,000, or an average of £9,000,000 per annum, will have to be provided for in connexion with loans falling due- in addition to any requirements for new works and obligations. Honorable members will thus see that it is important that this question should receive not only serious, but immediate, attention. We are approaching the time when the first of thegreat obligations contracted bythe various States during the years of socalled prosperity will have to be met. We have had the pleasure of spending the money, and we shall soon have to face the less attractive duty of meeting our obligations. The outlook for the immediate future is not a pleasant one, and I think that the Treasurers of the States, when they realize what is before them, must come to the conclusion that it is their duty to join with the Commonwealth Government in facing the situation. I observe that some of the States Treasurers are making arrangements on the assumption that they willnot meet with difficulties. But we have to remember the enormous sums that are about to fall due, that the lending classes, who have given us the use of their money, are well aware of the obligations that the States have to meet, and that during the next fourteen years there will be not one borrower, but in many cases five, in the London market. Therefore, the competition between the States in order to secure the renewals of their loans must of itself bring about the most serious and dangerous difficulty.

Mr Fisher:

– But there is no indication that the people who have lent their money in the past will not continue to do so.

Mr HARPER:

– I shall deal with that point later on. For the present I would merely tell the honorable member that it is impossible for us to say what the lending classes may think twelve or fourteen years hence. We know, however, that the money market is managed by a comparatively small circle in London, to whom our necessities are well known, and that if the States compete one with theother in endeavouring to obtain renewals of loans, the financiers will endeavour to make the best possible terms. They may be quite willing to lend their money, but may require high rates of interest. It has been said by representatives of the States, at the Premiers’ Conferences and elsewhere, that the credit of the States is as good as that of the Commonwealth. I think, however, that ifthey rely upon that assumption they will find themselves most grievously mistaken. J am in entire accord with the Treasurer, who, as the result of inquiries made by him in London recently, has come to the conclusion that it is most dangerous to seek to obtain large renewals of loans in the London market, when there are a number of competitors, each endeavouring to do the best he can for his own State. In my opinion, if the States compete one with the other in obtaining renewals, they will probably not only be unable to do as well as in the past, but have to renew their loans at a rate of interest considerably higher than they are paying at present. Therefore, the question of placing the finances of the States on a satisfactory footing should be dealt with without delay. I believe that without some organization, and the assistance of the Commonwealth, the States will runvery seriousrisks of disaster. I have already referred to the statement of the Treasurer in this connexion, and I may further point out that my view is supported by Mr. Coghlan in the paper that he recently issued on the question of the States debts. He says -

This is a most seriousdanger - one which can only be adequately metby the Commonwealth intervening and taking up the renewal of these loans, and dealing with them in the future.

Itseems to me that the time has come when this Parliament ought to grapple with the question, and decide upon the best course to be adopted. The following table shows the amount of loans falling due each year,, from 1907 to 1920, and the number of competitors in each case : -

Mr Fisher:

– Has. the honorable member prepared figures for later years?

Mr HARPER:

– I have not dealt with the loans falling due ‘beyond 1920, because the Treasurer spoke only of the first twenty years from the establishment of the Commonwealth. The loans falling due between 1920 and1930 run into enormous figures.

Sir John Forrest:

– In 1924. £31,000,000 will fall due.

Mr HARPER:

– Exactly. Therefore, for some considerable time, we cannot look for any relief. I do not wish to overstate, but rather to understate, the case. What I have said should be sufficient to indicate the importance of this question, and the necessity of dealing with it forthwith. I think we are indebted to the Treasurer for having brought the matter forward upon the present occasion. In delivering his last Budget, it was scarcely to be expected that he would be in a position to deal with it, inasmuch as he had only assumed office a few days previously. However, be has since been giving it his consideration, and the result of that consideration is before honorable members in the memorandum which he has included in the Budget papers. I have to thank the right honorable gentleman for his attitude towards me in connexion with the discussion of the question. As he informed the Committee the other evening, he consulted me in reference to it, and he found that his views and my own were not in accord, but he magnanimously - and with great public spirit, I think - declined to dismiss the proposals which, at his request, I had formulated. On the contrary, he has afforded every facility for their consideration by having them printed, and laid before honorable members.

Mr Fisher:

– He was quite fair.

Mr HARPER:

– He was exceedingly fair, and his magnanimity indicates that he realizes - as indeed we all do - the vast importance of this question. He is anxious to hear all that can be said upon it, quite regardless of the particular side of the Committee from which criticism may come. I say that this question is pre-eminently a non-party one. It is a question in which every honorable member is interested, and we should be failing in our duty if we did not face it fairly, and - after having given it full consideration - decide what is the best course to adopt. The difference between the Treasurer and myself is not as to whether one scheme is better than the other. From the first, our difference was that the right honorable gentleman - owing to circumstances to which I shall presently allude - viewed this matter from a different stand-point from that at which I looked at it. Therefore, it was impossible for us to’ amalgamate our proposals, to blend them one with the other. The right honorable gentleman said -

My reason for not making any proposal of a permanent character is that I do not believe it possible at the present time to formulate a plan that would be acceptable for all time, to both the Commonwealth and the States. The difficulties in the way at present are too great, and we are only beginning to think federally.

He afterwards stated that he disagreed with me because he did not think that the scheme which I proposed - and which is designed to secure finality as far as that is possible, because there can be no absolute finality in a matter in which Parliament is concerned - was practicable. He added that there was plenty of room for criticism and for differences of opinion in respect to this matter, and declared that he merely desired that those who did not agree with him should suggest some better scheme. Evidently he has an open mind upon the subject, and if he were satisfied that a scheme which would secure finality as nearly as it is possible to obtain it were practicable, he would be prepared to consider it. That being, so, I am relieved of all hesitancy in dealing with this question. The right honorable gentleman having indicated his views in this reasonable and friendly manner, I can assure both himself and the Committee that the criticisms to which I shall in a few moments subject his proposals, are only such as I deem to be necessary in order to show why I differed from him ab initio. The Treasurer’s proposals seem to me to be dominated by the opinion expressed in the remarks which I have just quoted - that no scheme of finality would at the present time meet with success, and that to secure some settlement of the question it was better to allow things to continue as nearly as possible under present conditions until public opinion was better prepared to deal with a final solution of it, and until we had begun to think federally. I admit that there is a good deal of force in his contention. I acknowledge . that in many respects we have not yet acquired the habit of thinking federally. But it seems to me that the best way to encourage, not only the people, but the Governments of the States, to think federally is to propound schemes which are Federal in their principles, and which will, by their beneficent effects, induce them to conclude that, after all, Federation is the right thing. Then they will begin to think federally. The way in which we deal with the task which we have to face in dealing with this question will, I trust, have the effect of inducing a more favorable view to be taken of the aims and objects of our Federal Government. Having taken up the position which I have indicated, the ideas to which I have referred evidently dominated the Treasurer’s mind. In drawing up his scheme, so far as I can judge, the right honorable gentleman had constantly pressing upon him the obligation to meet the objections which have, from time to time, been urged against any action in the direction o.f altering the existing state of affairs, which is dominated by what is known as the “ Braddon clause.” If I may be permitted to say so without giving offence, and without any sinister meaning being attached to my statement, I would say that, in dealing with this matter, the Treasurer, owing to the pressure of these ideas upon him, has followed what I might call the provincial lines, whereas I think - and here is where the difference between us comes in- this question should, and can, be approached from the Federal standpoint. I propose to deal first with the financial relations of the Commonwealth to the States, because it seems to me that the sections of our Constitution which relate to this matter dominate the position. The Treasurer’s proposals cover a period of ten years, namely, from 19 10 to 1920. Dealing with the question of the financial arrangements

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– If we could settle the other question, that to which the honorable member refers would regulate itself, I think.

Mr HARPER:

– I will deal with the other question at a later stage. I am quite willing to deal with it first, but perhaps it will be better if I am permitted to work the matter out in my own way. The Treasurer’s proposal is to pay annually to each State from the end of 1910 to 1920 a fixed sum equal to the average annual amount of three-fourths of the net revenue from Customs and Excise which that State has contributed during the five years preceding 31st December, 1910. In addition to this, he also proposes that if the three-fourths of the total net revenue collected by the Commonwealth exceeds the aggregate amount of the fixed sum so payable to the States, it shall be distributed among them.

Sir Philip Fysh:

– On a per capita basis.

Mr HARPER:

– That is so; but that fact makes verv little alteration in the position. It might affect individual States, but my opinion is that it would not do so.

Mr Knox:

– It is an unnecessary complication.

Mr HARPER:

– I recognise that from the stand-point of the Treasurer, it is necessary to do something in that direction, but it is an exceedingly embarrassing; proposal. While it would do away with the Braddon section, it would re-create it i,:i a more objectionable, form. That can bc easily demonstrated. The Treasurer’s proposal is, I think, inequitable to the Commonwealth, and I propose to give an illustration in support of that view. Let us assume, for the sake of simplicity of calculation, that the fixed sum is based on a revenue’ pf’ £8.000,000 per annum. Three-fourths of that amount is £6,000,000. That amount, according te the right honorable gentleman’s scheme, would be the fixed sum payable to the States for ten years plus any increase beyond the total revenue of ,£8,000,000 per annum. It might well be that for some years the revenue would reach £9,000,000. In that case the States would receive not only the £6,000,000, but £75°>000; representing three-fourths of the additional amount of £1,000,000, or a total of £6,750,000. On the other hand, the Commonwealth would receive £2,250,000 instead of the £2,000,000, which it would retain if the revenue were only £8,000,000. We have to consider, however, what would be the position if in any one year the revenue fell, away to £7,000,000. It is not unreasonable to assume that such a decrease, which represents only 12J percent., may take place. I have known the revenue of this State to fall away for a number of years to the extent of something like £2,000,000 per annum. What would be the result if, under the Treasurer’s scheme, the Commonwealth had a similar experience? The position would be that we should have a net revenue of £7,000,000; that the fixed proportion going to the Slates would be £6,000.000, and that the balance of £1,000,000 would be retained by the Commonwealth. In other words, the whole of the shrinkage would come out of the proportion retained bv the Commonwealth, with the result that this Parliament might suddenly find itself in a position of verv grave difficulty. In such circumstances, the only way under the Treasurer’s scheme, so far as I can see, to overcome the difficulty, would be to impose a special tax, which would be ear-marked to make good the deficiency.

Sir John Forrest:

– The Treasurer of the Commonwealth would have to do what every Treasurer has to do when faced with a deficit.

Mr HARPER:

– Under any scheme there might be a deficiency in the revenue, but the gravamen of my objection is that under the right honorable gentleman’s scheme the whole of the deficit would be home bv the Commonwealth. The Commonwealth Parliament would thus have to adopt one of two courses. Since it could not, under the Treasurer’s scheme, impose a general increase of duties to raise the sum necessary to make good the deficiency, it would have to promulgate a new tax on some specific article or articles and ear-mark the revenue so obtained to make good the deficiency or impose a direct tax tor the purpose.

Sir John Forrest:

– Or curtail expenditure.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But there would be no inducement to the States to curtail expenditure.

Mr HARPER:

– I should like the right honorable gentleman to enlighten the Committee as to the course he would pursue in the contingency I have named. How could he so curtail expenditure-

Mr Higgins:

– How could the Treasurer curtail his expenditure from £2,000,000 to £1,000,000?

Mr HARPER:

– Exactly. The risk is enormous, and is one that ought not to be run. It is all-important that the Commonwealth - if it is to take over the liabilities of the States, as we know it ought to do - should show the outside world that it can meet its obligations, and that it is not subject to the danger of deficits which may disorganize its finances and upset its general business arrangements. When the right honorable gentleman considers this phase of the question - as he will do if he has not done so already - he will see that this is a position that would be absolutely subversive of the best interests of the Commonwealth. As the honorable member for Parramatta has said, the Treasurer’s scheme would impose on the States no obligation to economise.

Sir John Forrest:

– As the population increases, our Customs revenue must increase.

Mr HARPER:

– I have great sympathy with my right honorable friend. He has spent the greater part of his life in a State which began to ascend rapidly only during his career as its leader and guide. For many years Victoria and other States also experienced a constant accession of prosperity ; but the day came when there was a great reverse, and all who had any responsibility, however sanguine they may have been before, had then a lesson which they will never forget. Whether it be in regard to the affairs of an individual or a State, we can never reckon upon continual prosperity. We may rest assured that the greater the prosperity the nearer we are to a. reaction. That is the experience of Australia, and in view of that fact it behoves us to be careful that in arranging the finances of the Commonwealth, in its infancy we shall proceed on lines that will be suited not only to fair weather conditions, but will also enable us to withstand the blasts of adversity.

Mr Higgins:

– There has been a drop in Victoria from £9,000,000 to £6,000.000 odd.

Sir John Forrest:

– How did they manage in Victoria?

Mr HARPER:

– Very badly, I think.

Sir John Forrest:

– I suppose that other people would not manage too well, under such conditions.

Mr HARPER:

– The right honorable gentleman misses the point, which is that the necessity for retrenchment would fall on the Commonwealth, which, from its circumstances, could not retrench. Here I call the right honorable gentleman’s attention to the fact that the Commonwealth is steadily, year by year, taking over from the States nearly all the non-remunerative and expensive Departments, and leaving the States with but a comparatively few of the Departments which involve very heavy expenditure. I suppose that the Education Departments chiefly cause the large expenditure in most of the States. If we take over these obligations, and carry on the work for the benefit of the whole, of the States, they must be paid for, and, by the operation of this provision in the right honorable gentleman’s scheme, he would, in a time of adversity, throw the whole of the strain on the Commonwealth Parliament and Government, and leave absolutely untouched the States, which would have greater ability than we shouldhave to retrench in other directions.

Sir John Forrest:

– The States have great obligations placed upon them.

Mr HARPER:

– That is so; and I shall refer later on to what the States have to do. In the meantime. I am not under-rating the functions of the States, but calling attention to the functions and obligations thatwe are assuming. Under the circumstances, it would be dangerous for us to deal in the way proposed with the finances of the States. It would be preferable to leave the Braddon section as it stands.

Mr Watson:

– The States share the loss under the Braddon section.

Mr HARPER:

– Let me use the same illustration I have already presented to honorable members to illustrate the working of the Braddon section. If we take the basis of £8,000,000 - that is, £6,000,000, and £2,000,000. or three-fourths and onefourth - and there were a fall of revenue to £7,000,000, the States, under the Braddon section, would get only £5,250,000 - they would suffer three-fourths of the loss - while the Commonwealth would get £1,750,000. In other words, though the amount of our one-fourth would be decreased, the States’ receipts would also decrease - in other words, there would be a partnershipin losses as well as in profit. Under the scheme of the right honorable gentleman, however, a certain revenue, whether the receipts were large or small, would go to the States, and the Commonwealth would be leftto do as it best could.

Sir John Forrest:

– We have the right to raise revenue for specific purposes.

Mr HARPER:

– But my right honorable friend has not provided for that, and that is what I find fault with. In addition to giving the States a fixed sum, and making no provision for a deficiency, the Treasurer would tie the hands of this Parliament, because then, either a direct tax) would have to be imposed, or certain sources of revenue would have to be earmarked to meet the deficiency. But it might well happen that if the scheme of the right honorable gentleman were carried out, and the practice of ear-marking were introduced into the finances - a practice which I do not think we ought to introduce - the Treasurer for the time being, whoever he might be, who was short in revenue, might find that all available sources had been ear-marked prior to his necessity arising.

Sir John Forrest:

– Does the honorable member mean to infer that the scheme is too liberal to the States?

Mr HARPER:

– I am criticising the scheme as a financial proposal, and trying to bring the probable effects of it before honorable members. I am not dealing with the question of liberality orparismony, but with the question whether or not this is a sound business, financial proposition.

Sir John Forrest:

– Does the honorable member say that the scheme is too libera! to the States?

Mr Watson:

– The honorable member says that the scheme is unsound.

Mr HARPER:

– I have never used the words “too liberal.”

Sir John Forrest:

– But the honorable membersays that we have done more than we ought to have done - that we guarantee more than we should guarantee.

Mr Fisher:

– It is quite evident that the Treasurer is getting near to an election !

Sir John Forrest:

– Why doss the honorable member for Wide Bay say that ?

Mr HARPER:

– I hope this is not regarded as an election question, because it relates to a very serious business. I hope that we shall not be diverted by any consideration of that sort to the right or the left in our decision regarding whatis, or should be, a business proposition.

Sir JOHN FORREST:
SWAN, WESTERN AUSTRALIA · PROT; WAP from 1906; LP from 1910; NAT from 1917

– Hear, hear !

Mr HARPER:

– In the case I have supposed, there would be a community or partnership in losses, as well as in profits. It would be far better, so far as the point under consideration is concerned, to permit the Braddon clause to continue, than to adopt the proposal of the right honorable member.

Sir John Forrest:

– The States would have no security.

Mr HARPER:

– With regard to the question of security-

Sir John Forrest:

– That is the object.

Mr HARPER:

– Then the object is not attained, as I shall show in a few words.

Sir John Forrest:

– That is the object.

Mr HARPER:

– That may be, but we very often have objects, and do not take the right way to attain them. I shall show that the scheme does not give the certainty that the right honorable gentleman thinks it gives. For the sake of argument, let us take another illustration. I trust that honorable members will forgive me “for using illustrations, but, in dealing with this matter, they bring more clearly before us the working out of any particular proposition. Let us suppose that we have a series of prosperous years after this scheme is adopted, and that the revenue, instead of being £8,000,000, remains steadily at £9.000,000 for a number of years. Let us further suppose that in each of the years, the States are receiving, not only their guaranteed amount, which is a certain and fixed sum, but £750,000 a year in addition. Under such circumstances, if there were a sudden change, and the States began to receive only £6,000,000, their finances would be more or less deranged. Does the right honorable gentleman think for one moment that the States would then be satisfied? As a matter of fact, they would be crying out. as they are now, that their finances were deranged, and that we ought to have done something different. The right honorable gentleman has only diminished the margin of variation ; he has not removed it. In our everry-day life, a man who is receiving £400 a year may grumble, but if his salary is raised to £500, and after remaining a few years at that figure, is reduced by £25, he feels more aggrieved than if his position had never been improved. And so it would be with the States. We must look at this matter from a reasonable ‘ and sound business standpoint, and I contend that the scheme is inequitable to the Commonwealth, and does not give stability to the finances of the States, except to a limited extent.

Sir John Forrest:

– The honorable member must remember that the amount returned would not be influenced by our expenditure, but only by our receipts ; the position would not be as it is now, when, if we spend the money, the States do not get it.

Mr HARPER:

– That does not meet the point I am discussing. My point is that the scheme does not give fixity to the amount received by the States. I am not going into the causes. That is a different matter altogether. I come now to the proposal relative to ear-marking special items of revenue to provide for certain specific objects. I submit that it is one that ought not to be adopted. It is a clumsy and unsatisfactory way of attaining the object in view. The case of old-age pensions was mentioned by the right honorable gentleman. Suppose that under his scheme certain duties were imposed, and were ear-marked for the purpose of paying old-age pensions. What would be the effect? Parliament would impose certain taxation which it would be assumed would meet the object in view. If it should happen that the amount estimated was not obtained - that the amount required for the object in view was larger than the amount of theduty realized - then either the payments would have to be limited to that extent or theduty would have to be increased, or some other duty would have to be imposed. The result would be to disturb all commercial transactions, so far as concerned the article or articles affected by the duties. If, for instance,a duty were placed on tea for the purpose of providing old-age pensions, and 3d. per lb. were the amount of the tax which was estimated to be sufficient, and if it were found not to be sufficient, would not every tea merchant in the country say - “ Parliament will now be imposing a. duty of 6d. per lb?” Uncertaintywould be introduced into trade, because people who observe these things - even the man in the street reading the indications - would know that something else would have to be done. Another objection is this : Suppose the amount of the duty imposed for the purpose of old-age pensions proved to be more than sufficient for the purpose. Then it is likely that the whole amount would be absorbed, perhaps by extravagant administration or in some other manner. I cannot conceive a more mischievous way of endeavoring, to give reasonable facilities to the Commonwealth than this, because it would, in my humble opinion, be always a disturbing element in business operations. The proper and systematic way to attain the object is that the Commonwealth Parliament should provide enough out of its general revenue - out of the whole proceeds of its taxation - to meet the object in view. I think that these questions are deserving of the very careful attention of Parliament. I am sorry that I have not had an earlier opportunity to put my views before honorable members, but I express them now with confidence that the considerations I put forward will receive attention. As to the inconvenience of the present position, I am in thorough agreement with the right honorable gentleman that the Braddon and bookkeeping sections have caused, and are likely to cause in the future, considerable embarrassment to this Parliament in carrying out its legitimate duties. The reason for that is that we in this Parliament cannot do anything as a matter of policy with the freedom we ought0 to have as men responsible to our constituents, and to them alone. In seeking for an illustration of this inconvenience, it struck me that I might take the right honorable gentleman’s proposal to institute penny postage. I am in thorough agreement with it, because I think that it is in accordance with the spirit of Federation that the same rate of postage should prevail in all parts of the Commonwealth. It does seem to be absurd that in Adelaide one should have to pay 2d. to send a letter from one street to another, whilst in Victoria a letter is carried to any part of the State from any other part for id. There are similar inequalities in other directions. When I make the remarks to which I am about to give utterance it will be understood, therefore, that I am not hostile to the proposal to reduce the postage rale. But I wish to use the proposal as an illustration of the embarrassment which will be caused ; and my re- -marks’ are applicable not only to this, but to any other proposal which this Parliament, as a matter of policy, may favour under existing circumstances. I find on looking into this question of the postage, and reading the paper circulated by the Postmaster-General .after the Treasurer’s Budget speech, that he says that it is estimated by the officers of his Department that-

If penny postage were established, the immediate reduction in revenue would be £265,000 a year if limited to the Commonwealth, or about .£300,000 per annum if extended to all places within the .Empire and to other parts of the world.

The proposal of the Government is to adopt the higher scale, giving penny postage, notonly within the Commonwealth but outside of it, involving a loss at first of £300,000 en year. I find, on looking through the paper circulated by the PostmasterGeneral, that a curious mistake has been made. I discovered it only this morning. It does not alter my position, nor does it affect the desirableness of carrying out the proposal ; but it is just as well to point out the error. Three instances are quoted as precedents for the proposed action in reducing the postage rate. The first is Canada, the second New Zealand, and the third Victoria. In each case statistics are given, but the curious thing is that in each instance the average increase stated is wrong. In Canada the returns are set out, and are said to show an average increase of 51.18 per cent, per annum. The average should be 15.18 per cent. In New Zealand, the average increase is stated to be 54.04 per cent., whereas it is 13 per cent, per annum. . In Victoria, the increase is said to be 35.25 per cent, but it is 9.87 per cent.

Sir John Forrest:

– Perhaps it is the total increase from the beginning which is meant?

Mr HARPER:

– It places the PostmasterGeneral in the unfortunate position of saying, “ In view of the experience in other countries, which has just been quoted, I venture to think that the increase of 40 per cent, in correspondence in the first year may be safely anticipated, which would reduce the amount for that year to £150,000.”

Mr Austin Chapman:

– It will be found that the percentages are correct.

Mr Watson:

– Is it the increase per annum or for the total number of years?

Mr HARPER:

– It is the increase for the total number of years. An increase from 150,000,000 to 285,000,000 letters is not an increase of 51.18 per cent.

Mr Watson:

– Over how many years?

Mr HARPER:

– That increase is spread over six years.

Sir John Forrest:

– I expect that it is the total increase from the beginning to the present time.

Mr HARPER:

– I admit that I read the figures very hurriedly, but it does not alter my position. I merely call attention to the fact that there must be some mistake.

Mr Austin Chapman:

– I have checked the figures very carefully, and I think the honorable member will find that they are absolutely correct.

Mr Watson:

– They do not prove much, even if they are correct.

Mr Austin Chapman:

– That is a matter of opinion.

Mr HARPER:

– I do not wish to dwell upon the matter. The Treasurer is, I believe, entitled to assume that in the first year there will be an increase of 15 per cent., although he estimates that it will be from 30 to 40 per cent., but that, in my opinion, does not affect the question very much. I consider that the reduction is justifiable, even if the increase should be only at the rate of 15 per cent, per annum, because I believe that in five or six years the deficiency would be ‘wiped out.

Mr Austin Chapman:

– If the honorable member’s figures were correct, how could the new revenue of Canada increase in a period of four years to very much mere than the old revenue?

Mr HARPER:

– The increase referred to in the number of letters - of course, I do not know how the calculation was arrived at - is from 150,000,000 to 285,000,000, but that would not work out at 51 per cent, per annum.

Mr Austin Chapman:

– I am very glad to hear that the honorable member supports the proposal even with a smaller percentage of increase.

Mr HARPER:

– I thought that there was a mistake, but it does not affect the position. The point to be considered is how would the proposal affect the States. To show .how inconvenient it is to continue the Braddon section or any arrangement similar to that, let me point out the way in which this one proposition, which the Committee in its wisdom might adopt, as a mat ter of public policy, in the interest of the Commonwealth, would affect, to a certain extent, the revenue of all the States, and would necessarily have a bearing, on their view of the matter. Take, for instance, Queensland, which, according to the Treasurer’s statement, has already a deficit of £81,934. By adding its proportion of the loss on penny postage, the deficit would be increased to about £113,000. It is facts such as these which cause anti-federal feeling. Every Federal proposal which affects a State Treasurer’s financial statement, especially in those States which have been hardly hit by the arrangements necessary under the Commonwealth, causes the State to feel aggrieved, and to think that it is suffering unjustly at our hands.

Mr Higgins:

– The State Treasurer says, in effect, “ You are spending our money.”

Mr HARPER:

– That is the position. The question is, how is it best to deal with the subject, so as to get rid of, as far as we can, the feeling of irritation and the disturbance which arises in connexion with the present financial arrangements. I shall come presently to the suggestions which seem to me to be desirable for the accomplishment of that purpose. Before doing so, however, I would mention briefly the arrangements proposed for taking over the States debts. The Treasurer wants power to take over the whole of the States debts, but he does not propose - in fact, that would be impossible - to take them over al once. He proposes to take them over as they may fall due, or as he can convert them. That process, of course, would take a long time. In the meanwhile, the States would pay their own interest, and the Commonwealth, as it assumed the obligations, would pay its own interest, receiving that interest back with one-half per cent, sinking, fund to meet the obligation. The sinking funds to be provided’ under this scheme would be vested in trustees, with power to invest the money and ear-mark each fund for the purpose of liquidating its own particular debt. By this means, unfortunately, the separate treatment of the different States would be continued. That is a defect in the proposal which, if possible, should be surmounted. With regard to future loans, all that is proposed is that the Commonwealth shall be empowered to float loans for the States on terms to be agreed upon, that the States shall not borrow in London until 1920, and that the States borrowing within the Commonwealth shall be liable for their own, debts. The scheme in this respect seems to me to.be one to gradually take over the debts as they fall due, and nothing else. But the debts, as they were assumed, should be practically unified. In that case, as they fall due they would become Commonwealth debts. It seems to me to be very much more desirable to manage the debts as one common fund, than to deal with, each one ear-marked for a particular State, and so make special arrangements for the liquidation of the debts separately. The right honorable gentleman proposes to meet these obligations by the establishment of consols at 3 per cent., interminable, except at the wish of the Commonwealth, or, upon six months’ notice, in thirty years. In regard to that proposition, I find myself entirely at one with him. I believe that it would be wise to have only one denomination. It is true that the consols mightnot at first reach par, because, being a new stock, they might not attain their proper value. But it is better to fix a stock at a rate of interest like 3 per cent., which, as things go, is a fairly low rate, and then the prices given for the stock from time to time would indicate its value in the market. Although it might not fetch par at the commencement, still I believe that with proper management and the fact being made absolutely evident to the investing public that it was a first class security, the time would not be far off when 3 per cents, would be floatable at very close to, if not at, par. I therefore thoroughly agree with the proposition. The information which the Treasurer obtained in London is valuable, because he has ascertained beyond question that any movement in the direction of the unification of the debts or the taking over of them by the Commonwealth would be received with the greatest favour in London financial circles. He has also arrived at the conclusion, after inquiry, that 3 per cent, stock is the one which would be the best for the purpose which we have in view. With regard to the proposals embodied in my paper, which has been circulated to-day, and which a few honorable members have had the opportunity of looking through since we last met by getting early copies, I may say briefly that the objectives I had in view in dealing with thisproblem were first of all to take over all the existing debts, and practically unify them.

Mr Higgins:

– Does the honorable member mean to include those debts which have been incurred since Federation?

Mr HARPER:

– Yes. The Treasurer proposes to do the same thing, but only after an alteration of the Constitution. I, though not a lawyer, have ventured in my proposal to suggest that it may be unnecessary to alter the Constitution for that purpose, because in section 96 it is specially enacted that the States may receive financial assistance fromthe.Commonwealth on such terms and’ conditions as the Parliament thinks fit, and it seems to me that there is nothing to prevent the Commonwealth from lending money on terms to the States in lieu of the obligations which mayhave been taken up on their behalf.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Commonwealth, could be said to be lending money to the States only if, and so long as, it gave them a better credit. If something occurred to lower the credit of the Commonwealth, so that it became unable to give the States a better credit than they have now, it could not be said to be giving them financial assistance, and might, in having taken over the debts, have acted to their financial disadvantage.

Mr HARPER:

– I had not conceived that the Commonwealth might ever be in circurnstances, or might ever do anything, which would make its credit lower than that of any State. The honorable member has suggested to my mind a possibility which I had not calculated upon.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We are told that the Commonwealth credit would not be better than that of a State.

Mr HARPER:

– We have not yet been able to test the matter. It is because I consider it of paramount importance that the Commonwealth credit should be well and soundly established that I am anxious that we shall follow lines which will impress the public mind of Australia and other countries with the thoroughness of our financial position. My desire is that the existing debts of the States shall be taken over and practically unified in time as a Commonwealth debt, represented by 3 per cent. bonds, terminable after, say, twenty years - the Treasurer would prefer thirty years - and not earlier except at the option of the Commonwealth.

Mr Higgins:

– What mode of financial assistance does the honorable member pro- pose in regard to States debts which did nob exist when Federation was inaugurated? Would the honorable gentleman lend the States money?

Mr HARPER:

– I propose to lend them money.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– To take the place of the States with a better credit.

Mr HARPER:

– Yes . If the honorable member reads my memorandum, he will see that those debts are covered. As a matter of fact, the Commonwealth will in time become the creditor of the States, because the existing debts will be paid off, Commonwealth bonds taking their place, and the interest will be met out of the revenue of the Commonwealth. That is a position which must ultimately be reached in regard to both the debts which can be taken over by the Commonwealth and those which, according to one reading of the Constitution, cannot be taken over. The average rate of interest payable on the debts of the States at the present time is about £3.6 per cent.

Mr Bamford:

– It is very difficult to arrive at the average rate.

Mr HARPER:

– The calculation is a simple one. So many millions of money have been borrowed, and so much is annually being paid as interest on the sum, the average rate being. £3.6 per cent. If Commonwealth bonds can be floated at par, bearing interest at 3 per cent., the saving which will result will provide for the interest and the extinction of the present debts of the States in sixty years, without any sinking fund. We have to face the contingency that the Commonwealth may have 10 pay more than 3 per cent., or the equivalent of a higher rate, but in that case all that would happen would be that the States debts would not be extinguished within the period I have named, andthe annual sinking fund payment, amounting to £8,500,000, would have to be continued for a somewhat longer period. This, however, would not derange our finances in any way. Commonwealth consols, for the first few years, may have to be sold under par, which may add a. few thousands of pounds to the debt ; but as they reach par the difference will become inconsiderable, and will not derange the general plan. My idea is to take over the debts of the States as they stand, making them a Commonwealth obligation, and freeing the States thenceforward from all obligations connected with them. Instead of returning money to the States, as we do now, we shall pay the interest on their debts as it falls due. ‘We should determine the amount coming to the States under the Braddon provision, upon the basis of the . payments of the last four years. The States, instead of paying to their creditors the difference between the amount I have mentioned, and the total amount of the interest on their debts, would pay it to the Commonwealth, which, by adding it to the amount payable to the States under the Braddon section, would be able to meet the interest on the debts.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Would it be more satisfactory for the States to pay us the money, than for the Commonwealth to pay the States?

Mr HARPER:

– I think it would be much more satisfactory, because it would place the States and the Commonwealth in their proper positions. If we assumed the States debts, and removed from their balance-sheets the big debits for interest, that now appear annually, it would be only right for the States to pay to us the difference between the amount to which they are entitled under the Braddon section, and the sum that would be dueby them to their loan creditors. Under this plan, instead of having an uncertain sum to provide for, as would be the case under the proposal of the Treasurer, we should, year by year, give to the States a cumulative rebate which would ultimately reach the sum of £1, 860, 000. To this extent we should relieve them of their financial strain. Each year, as the States went on making their payments to the Commonwealth, the liability would be reduced by 5 per cent., and ultimately the whole obligation of the States with regard to interest payments would be wiped out.

Sir John Forrest:

– When the debts were paid off by means of the sinking fund, what would become of the Customs and Excise revenue?

Mr HARPER:

– That could be remitted to the people of Australia.

SirJohn Forrest. - Would any part of it go to the States?

Mr HARPER:

– No.My assumption is that the sinking fund would be created by the use of the credit of the Commonwealth. At present the States pay interest on their debts at an average rate of £3.6 per cent. If we could borrow money at 3 per cent. and credit the sinking fund with 0.6 per cent. we should create the fund by the use of our credit.

Sir John Forrest:

– Would not the honorable member give back to the States any part of the Customs and Excise revenue, after the debts have been paid off?

Mr HARPER:

– At the end of the twenty-year period, I would allow the Parliament to determine what should be done. If, after having been relieved of its obligations, Parliament had a large sum of money in hand, it might determine to make a grantper capitato the States. But we cannot look into the future, at any’ rate, so far as that.

Sir John Forrest:

– Would the whole of the States debts be pooled, or would each State pay off its own debts as. it went along - would Queensland pay off , £80 per head and Victoria £50 per head, or would both share alike?

Mr HARPER:

– If the right honorable gentleman refers to my statement, he will see that the whole position is made clear.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Commonwealth would merely act as a trustee for the States.

Mr HARPER:

– Yes, we should take over the whole ofthe debts. This question may seem somewhat subtle, but in reality it is very simple. The Commonwealth Government would take over the whole of the States debts as they stood.

Sir John Forrest:

– But, in some States, the debts have reached £80 per head, whilst in others they represent only £50 per head.

Mr HARPER:

– If the right honorable gentleman will follow my argument, he will see how the difficulty can be overcome. Assuming that I am correct in my view that we could borrow money at 3 per cent., we should save one-sixth per cent. interest on £233,000,000. My belief is that, if there is no organization on the part of the Commonwealth to take over the debts, the States, when they renew their loans, will have to pay quite as high, if not a higher rate, of interest, than at present. If, as 1 say, we can save 0.6 per cent. of the present interest charge, we shall in sixty years be able to pay off the whole of the debts of the States. I contend that we shall not be robbing any of the States, or doing them any harm if we devote the amount savedby the exercise of the Commonwealth credit to this purpose. We shall be doing it for the benefit of the whole of the people of the Commonwealth. With regard to the question that has been raisedby the Treasurer, I would point out that we ought to remember the position of some of the States. From the very outset I have felt the greatest sympathy with Queensland and Tasmania, because they have suffered most severely at every turn. I think that we should deal with this question in a generous spirit. We should not look into every detail with a microscopic eye, in order to see that this or that State does not gain a shilling at the expense of the others.

Sir John Forrest:

– That is not in accordance with section 105 of the Constitution.

Mr HARPER:

– With regard to that point, I would repeat what I have already stated. Assuming that we can borrow money at 3 per cent.-

Mr Wilks:

– Is there any reason for that assumption ?

Mr.HARPER.- Yes. In addition to the information obtained by the Treasurer, when in London, we have the experience of Mr. Coghlan, who thinks that ere long the Commonwealth will’ be able to borrow money close up to par at 3 per cent. I believe that that is an accurate view of the situation, and I think that the forecast is more likely to be realized if this Parliament propounds a scheme of finance which will commend itself to the investors of the old world.

Mr Bamford:

– What . attitude would be taken by a State now paying31/2 per cent. interest on its loans as against, say. South Australia, which is paying 5 per cent. ?

Mr HARPER:

– South Australia is not paving 5 per cent, for her loan money.

Mr Bamford:

– She is paying that rate upon some of it.

Mr HARPER:

– We should take over the whole of the obligations of the States, and create a fund which would enable us without doing injustice to any State, to confer a benefit upon those States which at the present time have much the heaviest per capita burden of debt. Then we have to weigh another consideration. Queensland and Western Australia are per capita much more heavily indebted than some of theother States, but what will be the position twenty years hence? What are the probabilities? Is it not likely that in the great States I have mentioned, with theirlarge areas of land suitable for settlement, population will increase at a very much morerapid rate than in Victoria? Certainly it will. There is another point thatwe ought to remember, namely, that up to the present time;New South Wales and Victoriahave been the largest gainers by Federation. The complaint of Queensland was - and) there was some justification for it - that many manufacturing industries which were being established were retarded by the operation of Inter-State free-trade, under which Sydney and Melbourne obtained’ the trade which otherwise she would have built up within her own borders. The same remark is applicable to the other States. We ought to recollect that. If there be a big population in Victoria and New South Wales, we should remember that a considerable portion of it is the direct result of those States manufacturing and selling goods which, but for Federation, would probably have been made in Queensland, and would have employed an increasing population there. In considering this matter, I desire to deal with the States in a large-hearted and generous manner, so that, after all, they may be led to believe that Federation, has not been a bad thing for them.

Mr Henry Willis:

– The duties are credited to the States in which the goods are consumed.

Mr HARPER:

– But the people are not employed there. I trust that I have made my meaning clear concerning, the existing debts of the States. I hold that the Commonwealth should take them over, and handle them in its own way. Bv the use of the Commonwealth credit, a profit would be derived which, in a certain number of years, would be sufficient to wipe off the total amount of the States indebtedness. The profit which is derived from the use of the Commonwealth credit should be appropriated to equalizing the conditions of the different States. Can anything fairer than that be proposed? In the Argus to-day I read a letter regarding my proposals from Senator Pulsford. I am afraid that he has rushed in before he knew what he was attacking. As a matter of fact, his communication shows that he has not yet begun to grasp the idea which underlies my scheme. My proposition seems to be a sound business one, and one the adoption of which will overcome the enormous difficulties which will “beset us, if each State acts separately and independently for itself. With regard to future borrowing. I have sought to give effect to the same idea - that is to say, that whilst the Commonwealth credit is being built up and put upon a sound basis, we cannot expect - as was proposed at the

Premiers’ Conference at Hobart - the States to arrest the development of their territory by means of public works which for many years will require to be undertaken with money which has been borrowed either in the Commonwealth or outside of it. My proposal is that the Commonwealth shall borrow for the States upon the conditions which are set out in my paper, and which are similar to those with which the States comply when they issue a prospectus for a loan upon the London market - that is, they state the purposes for which the loan is required, how it expects to meet the interest, and what the revenues from the undertaking are likely to be.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The honorable member suggests more than that in his paper.

Mr HARPER:

– Possibly. My proposals are before honorable members, and I shall be glad, at a subsequent stage, to explain any point upon which information is desired. I do not wish to enter into a discussion of all the details. The principle with which I am concerned is that the Commonwealth shall borrow the money, and that a sinking fund of per cent, shall be established. .

Mr Wilks:

– The honorable member would «ar-mark the sinking fund ?

Mr HARPER:

– No; there would be no ear-marking.

Mr Wilks:

– The honorable member says that when the money is borrowed for a specific purpose a sinking fund of per cent, should be provided.

Mr HARPER:

-The Commonwealth Debt Commissioners would deal with the matter. Let us suppose that an application were made for the loan of, say, £500,000, with which to build a railway. The Commonwealth would raise that amount by floating bonds. The Debt Commissioners would then .hand it over to th’e State which had made the application, and which, under my scheme, would merely be required to repay to the Commonwealth the exact cost that had been incurred in the flotation of the loan, plus J per cent, for a sinking fund, and any little .additional charges which may have been involved.

Mr Carpenter:

– Does the honorable member propose to restrict the States in borrowing locally?

Mr HARPER:

– I do not. Referring to the mode of dealing with a loan to a State, an actuarial calculation would have to be made. The State would annually repay to the Commonwealth an amount representing 3 or £3.6 per cent, upon the loan. By doing that for sixty years they would extinguish the whole of the debt. In short, my proposal is to make use of the terminating annuity principle. I am assuming that if the Commonwealth credit were established upon a 3 per cent, basis, and the States paid back at the rate of 3J per cent. - they would not be able to borrow upon their own account for less than that - they would in the course of sixty years pay not only the interest, but the whole of the principal. It seems to me that we have a unique opportunity in public finance, one which has not been enjoyed bv any other country. We have to deal with £233,000,000, and we can provide for paying that sum out of our revenue by making a permanent annual appropriation of £8,500,000, the sum the States have heretofore paid for interest alone. We should gradually pay off the entire sum by means of the savings which we effected. In this connexion I may mention that Mr. Coghlan, in his paper, says that by-and-by we could effect a. saving of £1,300,000 per annum. That money would need to be re-invested. ‘ It could - under the scheme I have outlined - be reinvested either in our own obligations or in loans to the States, and the latter would simply be required to annually pay to the Commonwealth 3^ per cent, upon such loans, which rate, in sixty years, would not only cover the interest charges, but also wipe out the principal. The result would be that in forty or fifty years the original debt of £233,000,000 would be greatly diminished, and it is quite conceivable that sixty or seventy years hence we might have public works valued at £500,000,000, upon which there would be a debt of not more than £250,000,000. It seems to me that now is the time for us to face these ques-‘ tions in a broad patriotic spirit. We should deal with them as large questions which affect not only to-day, but the future. The works for which the Commonwealth would raise loans must be reproductive works, and I have defined that term in my paper. In regard to other works, or to temporary loans, the States should be at liberty to borrow within their own borders, as they would be responsible for them-

Mr Carpenter:

– What dees the honorable member call non-productive works?

Mr HARPER:

– I would call a lunatic asylum, or a school-house, or anything which did not return a> revenue, a nonproductive work. Honorable members will observe that, under my scheme, the fullest liberty would be given to the States. I do not think that we ought to hamper them, but, on the contrary,- we ought, by evenmeans in our power, to stimulate them to develop their own territory. For that reason I make no proposal to interfere with their railways. Under my scheme they would have all the railway revenues with which to do the best they could, and they would be able to obtain more money whenever they had a sound proposition for which they were prepared themselves to accept responsibility. They would merely be called upon to provide interest and sinking fund, which would enable both themselves and the Commonwealth to wipe out their obligations within sixty years. Sixty years is a long time in the life of an individual, but it is nothing in the life of a nation. If we lay down proper lines, and build upon a sound foundation, this country, .a couple of generations hence, will have great public works, and comparatively little public debt. Surely that is an object to be sought for, and, if possible] attained. To the uninitiated, itseems an uncanny statement that if they have a debt of £100, and pay it off at the rate of per cent, per annum, in sixty years they will wipe it out; but it is a mathematical fact. The point is, of course, that that result is achieved by means of compound interest. If we got in any money in respect of the States debts of £233,000,000, we should immediately invest it in the purchase of either State or Commonwealth loans, or by way of loans to the States. In this way we should derive 3 per cent, interest, so that the money would be fructifying from the first, and the result would be that sixty years after taking over these obligations, we should have our debt paid off. If we reinvested, the money, the resuit would be that in a comparatively short period we might have a very large amount of public works with a very small debt upon it, and that debt mainly owing to the Commonwealth. I trust that honorable members will not consider that I am too enthusiastic with regard to this proposal. It is a matter of calculation, and any one mav make the necessary calculations for himself. It seems to me that we have a unique opportunity to put our public finances on a foundation that may be exceedingly beneficial to us in the future.

Mr Henry Willis:

– Has the honorable member taken into consideration the question of brokerage?

Mr HARPER:

– I have. Suppose, for the sake of argument, that bonds are quoted at par, and that we have to pay 1 per cent, by way of brokerage, that 1 per cent, is added to the price of the loan.

Mr Henry Willis:

– In that case, the loan would cost £101.

Mr HARPER:

– I am not discussing details of that kind. It is, after all, a matter of calculation. The money, whatever it costs the Commonwealth, must be repaid, plus the £ per cent, which will go into a sinking fund. I think I have dealt sufficiently with the Question of what should be substituted for the Braddon section, and the steps wc should take with regard to the amounts at present paid to the several States. I may be accused’ of being too liberal to .the States. Under my proposal, we should, after 1910, give back to them annually a very large sum. In the first year, we should give them back £90,339; in the second year. ^£180,678; in the third year, ,£271,017; in the fourth year, £361,356, and in the fifth year, ,£451, 695. Let us take, by way of illustration, the position of Queensland, and consider what effect my proposal would have upon it. She “ would have to pay to the Commonwealth £736,000 to meet her debt obligations. At the end of 1911, under my scheme, she would have to pay to the Commonwealth £699,438; in the second year, ,£662,625 ; in the third year, £625,813; in the fourth vear, £589,000; and in the fifth year, £552,188, and so on.’ It will thus be seen that there would be granted annually to the States relief aggregating a very large sum. The relief so received would be quite as much as could be fairly expected under the Braddon section, or any other scheme. It would be a fixed sum upon which the States could reckon, and the States Treasurers could make up their Budgets twelve months ahead if they chose to do so, since they would know exactly what they had to pay back to the Commonwealth in a particular year. They would -run ..no risk. The Commonwealth would undertake any risk that might accrue ; but that risk would not be very great. The relief afforded to the States annually for twenty years would be provided for by ari annual increase of 41,000 to our population. The average of our Customs and Excise taxation per capita is £2 4s. per annum, so that anannual addition of 41,000 to our population would practically cover the amountwhich the States had to receive from theCommonwealth through the 5 per cent, rebate. From 1891 to 1901 we had a: gi eater average increase in population than 41,000.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Meantime this increase of population; would mean, at the end of twenty years, greater cost of government.

Mr HARPER:

– To all parties, but mainly to the Commonwealth. If our population increases to the extent of 41,000 per annum, the amount which the States are to receive from the Commonwealth will be covered. On the other hand, we have to remember that, as local production is encouraged by protective duties, the quantity of dutiable goods coming from abroad will be decreased. Making a fair allowance for that fact, however, I think that the Commonwealth would be perfectly safe in undertaking to pay back to the States a large sum annually. My proposal really means that a large sum annually would be returned to the States. Although it would take the form of our remitting the charges which we. had upon them, still, when reduced to its simple elements, it would mean their receiving a large sum annually. I have provided in the simplest way for the machinery necessary to give effect to my scheme. In order to avoid expense, I have provided for the appointment of debt Commissioners, who would form practically a branch of the Treasury. The Treasurer himself would be a member of the Commission, and its executive officer would be the Under-Secretary to the Treasury. There would also be four other members, two of whom might not be Members of Parliament.

Sir John Forrest:

– They would be paid Commissioners?

Mr HARPER:

– I have not entered into that question, which is, after all, a matter for consideration. No doubt if we secured the right men they would be worth paying. It is desirable to have continuity of management in connexion with a scheme of this kind. It is desirable that it should have a tradition; it should have men who are accustomed to carryontheparticular work that is required - the floating of loans, the paying of interest, and the genera! management of loan transactions. In view of the facts that I have, put before the House, I think that honorable members will recognise that the Commissioners for someyears would not have a very easy task. Their duties would require the exertion of the very best ability to finance the enormous transactions, to meet the obligations as they fail due, and to make reasonable provision for any additional requirements. Therefore, we desire to have the best men ; and it ought to be a branch of the Treasurer’s Department, and semiindependent - that is to say, free from political influence.

Mr Fisher:

– It is ability, as well as stability that we desire.

Mr HARPER:

– I agree with the honorable member that we shall require both. As a matter of fact, my proposal provides all the requisite machinery. It occurred to me that disputes might arise through different States desiring to raise money at a time when it might be inconvenient to float loans ; that is, one State might wish to get more than a fair proportion of loan money at a particular time. Under such circumstances, disputes might arise ; and I suggest the appointment of a board of arbitrators ; and in order to get the most detached and neutral body I could think of-

Mr Skene:

– A second board?

Mr HARPER:

– Not a board, but arbitrators to be called to act only when required ; and it is very likely they would be seldom required. As these would be appeals from sovereign States against the Commonwealth, or vice versa, I propose that, on being approachedby an appellant, the GovernorGeneral should appoint four arbitrators with himself, he being President. I do not know whether the Governor-General would be allowed to undertake such a duty under the Colonial Office regulations ; but, if he were allowed, there is no doubt that would be the right course to pursue. The ChiefJustice and another Justice of the High Court would be arbitrators, and then I suggest the appointment of two gentlemen, one of whom should be the manager of one of the leading banks. This would not be a continuingbody. but one called together by the Governor-General, or, if the

Governor-General could not act, by the Chief Justice,as occasion required.

Mr King O’Malley:

– As a rule, Judges are not good financiers.

Mr HARPER:

– The arbitrators would be called upon to settle, not questions of finance, but such questions as whether a State had a right to a loan while another State was, as it were, kept back. The questions to be settled would be questions of fact, calling for reasonable arbitration and the exercise of sound judgment.

Mr Henry Willis:

– Does the honorable member think, in such cases, there would be any difficulty in obtaining money sufficient for our requirements?

Mr HARPER:

– I cannot answer, that question.

Mr Henry Willis:

– I should think there would not be.

Mr HARPER:

– I should think that if the credit of the Government were good, and the demands were reasonable, there would, under such a scheme, be created a security second to none in the world. The States whichborrowed would be responsible to the Commonwealth for the interest ; and if the undertaking did not pay, the particular State, out of its funds, would have to find the interest. The Commonwealth would have themoney, and would be responsible; and its credit would also be behind the security. I cannot conceive of any higher security that could be given ; because a gilt-edged security of the first class would be created. Under such circumstances, the money could be got, I think, at 3 per cent., and the whole of our financial business would be brought to a focus, one section being the complement of the other. The Commonwealth would borrow on interminable securities, while the States would borrow from the Commonwealth on terminable annuities; and one would work into the other in such away as to reduce the debt continuously, and more or less rapidly.

Mr Skene:

– The Commonwealth would act as banker for the States ?

Mr HARPER:

– Not as banker; the Commonwealth would simply be the medium for the collection of interest, and itspayment.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Commonwealth would be the agent?

Mr HARPER:

– The Commonwealth would be the creditor of the States, and, as the honorable member for Parramatta points out, to some extent also, . the agent for the States. The Common- wealth’s credit would enable the States to get such terms that they would probably pay no more than they would have to pay if they borrowed on their own account, and the debt would be cleared in sixty years. I am afraid I have trespassed too long on the time of the Committee; but I feel, as I said at the opening of my remarks, that it is the duty of a public man to give these questions the utmost consideration. I should have liked to promulgate these views earlier, because I quite admit the difficulty, in dealing with such a huge subject, of being able, in one speech, or even half-a-dozen speeches, to meet all the points that may arise. I trust, however, that honorable members will give me credit for not seeking, as a faddist, to bring forward a proposition simply because it is my own, or anything of that sort. I have thought this matter out as a businessman, and I desire to place my views before honorable members in a business aspect, with the desire that I shall be given the credit, at any rate, for having simply submitted these views as a matter of public duty - for no other reason, and with no other purpose. I am sure that the Treasurer will feel that the remarks I have made about his scheme are the result of conviction and of the necessities of the case. That scheme is, I think, intended to solve in a temporary way a question which, in my opinion, ought to be settled finally. The difficulties that have been created in the Treasurer’s scheme are, I think, as I said at the beginning, the result of the difference between his position and my own. The position I take is that the question should be settled now, without the delay of an hour. In my paper I say that by the 30th June, 1907, the whole matter ought to be settled ; but, as a matter of fact, it ought to be settled at once, because £12,000,000 falls due next year, and then follow £8,000,000, £5,000,000, £10,000,000, and so on. Under the circumstances there will not be breathing time, and anything which may be done ought to be done at once, to be effective. Consider the result upon the minds of financial people of the promulgation by the Commonwealth of a clean-cut, clear, definite policy. They would see that we knew where we were going - that we were not intending to drift into London, like waifs on the financial sea, one AgentGeneral endeavouring to raise money as against another Agent-General. If we put before the world a sound business proposition, which commends itself to financial authorities, and show that we intend to create a security second to none, we shall succeed in placing the credit of this country on the soundest possible basis.

Mr King O’Malley:

– What would the honorable member propose if our 3 per cents. were refused?

Mr HARPER:

– The buyer of bonds is like the buyer of anything else - he desires to buy as cheaply as he can, and would not refuse Australian securities. But we can not blame lenders if we are sufficiently foolish and idiotic to delay our arrangements so that they, knowing that loans have to be met on certain days, and that we have not a sou to meet them - we could not blame them, Isay, if they then demanded 4 per cent. instead of31/2 per cent.

Mr Bamford:

– Does the honorable member not think that financiers might be afraid of labour legislation?

Mr HARPER:

– I think we can leave that question out of consideration.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

Mr. Coghlansays they are afraid.

Mr HARPER:

– They may be. I do not say whether they are or not. If we are under labour legislation, we shall have to do the best we can. I do not know what the effect may be. I express no opinion upon that point. But if we put ourselves in the best position as borrowers, show that we understand our business, that we mean to meet our obligations, and to pay our interest, and that the Commonwealth, backed up by the States, will be responsible for all these debts, I have no doubt that we shall succeed in placing ourselves in an exceedingly favorable position. There may be points that I have missed ; and if, in Committee, honorable members choose to ask me any questions that may occur to them, I shall be pleased to give them any further information that I can give.

Mr Fisher:

– Did the honorable member mean to convey that it is possible that the Commonwealth will have to pay more in consequence of labour legislation?

Mr HARPER:

– I do not know. I said in reply to an interjection that I expressed no opinion as to that.

Mr Fisher:

– The honorable member, I understand, had no intention to convey that the LabourParty would repudiate the responsibilities of the Commonwealth?

Mr HARPER:

– I certainly had no such intention. I am pleased that the honorable member has put that question. The interjection was whether labour legislation would make a difference, and it was said that Mr. Coghlan had stated that it would. I replied that if people believed it, they might make us pay more for tlie use of their money. But I express no opinion whatever upon the point. The fact is that people who wish to lend money generally look to the security, and if they think that the Labour Party’ is likely to impair their security, they will form their own opinion, and act accordingly. If they do not think so, thev will take no notice of the legislation referred to. I express no opinion upon the point.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It amounts to this : “ If it does, it does.”

Mr HARPER:

– If it does, it does, and if it does not, it does not ; and there is an end of the matter.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I think that the Committee is indebted to the honorable member for Mernda for a very able and very lucid speech. In my experience of Parliament, I have before to-day learnt that a House is never better occupied than when listening to an honorable member who has made a subject peculiarly his own. That is one of the reasons which induced me, not merely to stand aside for the honorable member this afternoon, but to urge him to take an early opportunity to explain his scheme more fully to the Committee than he had already done in his memorandum that has been circulated. After listening to him, I feel that I have been well repaid in inducing him to deliver at this stage a speech of the character and calibre of that to which we have just listened. I do not pretend to any special financial ability, and, therefore, my observations upon the proposals of the Treasurer will occupy only a very short time. There is one matter to which I wish first of all to allude, and I do so the more readily because neither the Treasurer nor the honorable member for Mernda has touched upon it to any great extent. I refer to the book-keeping question, and the determination of the book-keeping period which takes place this year.

Mr Higgins:

– Which may take place this vear, but need not.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Yes. Generally speaking, I think every honorable member will arrive at the conclusion that the present financia’l arrangements with the States cannot continue. They are not upon a satisfactory basis. They are anomalous. The)’ were never intended to be permanent in their present form. As the honorable member for Mernda has mentioned quite clearly in his paper, they were only intended to meet a temporary and tentative condition of things until a more permanent order could be safely ushered* in. The anomaly consists iri this, to put it briefly : that the less we have to spend the more the States have to spend. If we give them more, the tendency is for them to spend it upon an extravagant basis - and I am speaking plainly now, I hope - as witness the political Largesse which is being distributed now out of the surplus by the .two large States in particular. On the other hand, if we give them less, there is a tendency ‘ arising within the Federal arean, towards extravagance. I am afraid that we have more than a suspicion of that in the Budget proposals of my right honorable friend the Treasurer. No one, I think, will, for a moment, say that they are of an extremely simple and economical order. Rather do they take a plunge in the direction of extravagance, as I hope to point out a little later on. At present we have one authority whose obligation it is to raise the money, and another authority whose function it is to spend it. The Commonwealth raises the money ; the States spend it. Each authority is at present watching the other with a degree of jealousy and irritation which, if it be continued, cannot bode any good either to the States or to the Commonwealth. The inevitable tendency, wherever there is plenty of money to spend, is, of course, to spend it. The Treasurer never said a truer thing than when he said the other day that that was his own experience in connexion with his own affairs. His experience is that of every one else. Where there is plenty to spend it becomes the easiest thing imaginable to live up to the amount of the income, and so naturally extravagant ways are entered upon. A question arises in connexion with this Budget as to whether we, as a Commonwealth, may not as well spend some of the money, which results from our booming trade and conditions just now, as hand it all over to the States, and leave ourselves in an attitude of Spartan simplicity as regards expenditure, while they are doling out money in a very extravagant way. The present arrangements cannot continue. They will be provocative of irritation as long as they exist, and the sooner they are ended the better for all concerned. I have already said that the present arrangements were intended to be temporary. That is made plain by the book-keeping sections, which, it is contemplated, will expire at a later period of this year. We must all admit that these book-keeping provisions, as long as they remain in> force, constitute neither more nor less than a negation of the Federal principle. We are put by them in the position of mere trustees for the States. Nay, more, they put us in the position of mere book-keepers - mere clerks - for the States. The result can only be a continued derogation of the proper dignity of this Commonwealth; and, as I have already said, there must continue to be irritation between the two entities. The irritation arises in this way : At present we have absolutely no Inter-State free-trade. There is no such thing as Inter-State freetrade to-day. It is true that the barriers at the borders only exist now for the purpose of regulating the disposition of imported goods. In other words, after we have collected the duties on imports into this State, we have to follow the goods to their point of consumption, and credit the consuming State with the amount of such duties. I suppose that the adoption of the bookkeeping provisions was necessitated by the diverse conditions of the various States, and a feeling of jealousy regarding their own revenue and financial stability. We have had an experience of Federation extending over five and a half years, and, as the figures show, there has been a constant effort at equality in the financial conditions of the States. We are coming more and more to a per capita basis in regard to spending and earning. To my mind, the question is whether the time has not already arrived when we should put an end to the bookkeeping system, and destroy at once the irritation and trouble consequent upon its operation. Here is one of the troubles which it occasions. I am told that last year 90,000 entries, relating to Inter-State trade had to be put through the Sydnev Customs House, and that in each year 300.000 entries are passed through the various Customs Houses in the Commonwealth. When we think that each entry carries with it a liability to prosecution for error we can understand the degree of irritation which is produced throughout the trading community. Not only is there that liability to error in the making up of the entries.,- but there is also involved therein a very acute and detailed analysis of the various dutiable articles which enter into the manufacture of composite garments. For instance, a suit of clothes has to be analyzed for bookkeeping purposes. It is necessary to assess the duties which have been paid on the buttons, the thread, the cloth, and every other dutiable article which has entered into the manufacture of the suit. We can readily see what enormous expense, trouble, and irritation are involved in making the analyses, and the risks which are run in consequence of the liability to which persons are subjected.

Mr Fisher:

– How does the honorable member propose to adjust the matter?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I confess that I have not a proposal to submit.

Mr Fisher:

– The honorable member is aware that the greater proportion of the goods is landed in the big States - Victoria and New South Wales.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Yes. It could only be done, I think, by a rough and ready striking of a balance as between the various States. If all the factors to which the bookkeeping system relates were taken into account, I do not think that it would be very difficult to strike a balance. But even if we could not balance, the matter without resorting to some other method of adjustment, I do not see why offers could not be made to those States which would be the heavier losers by the transaction. After four or five years’ experience of the system we could very readily strike an average as to the loss that would probably occur to the large States. I do not think, however, that a narrow view ought ta be taken. Suppose, for instance, that to-morrow we were to sum up the pros, and cons of the effects of the bookkeeping system upon the various States. The first point which strikes one is that in the year 1904-5 Queensland paid £84,000 more than her proportionate share of the defence expenditure. Again, take the case of South Australia, which, for very many years, has been struggling with the Northern Territory, at an enormous cost, for its upkeep. We are all interested in the upkeep of the Northern Territory, if only from the stand-point of defence alone. So one might go on enumerating things as to which individual States are handicapped compared with those which are in easier circumstances. The expenditure on defence in Victoria last year was, I believe, very light indeed. However, the expenditure on this head has been very much more in other States than it has been in that State. Yet, in the matter of defence, the States are equally interested. If we were to make up the sum, it would not be very difficult to strike a balance such as would enable us to be within easy reach of the solution of the bookkeeping system. Again, suppose that the large States would be affected adversely. It must never be forgotten, as the honorable member for Mernda has just pointed out, that, from the manufacturing and producing point of view, the two large States are becoming very rapidly the manufacturing centres of Australia. That is one of the outstanding features of our Federal evolution, so far: Both Queensland and Tasmania have been hit very hard indeed, from the manufacturing point of view. Indeed, one of the things which handicap Tasmania so much to-day is the fact that her manufacturing interests have been so heavily hit by Victoria since the abolition of the Inter-State borders. Therefore, one does not need to take too narrow a view in order to be just with regard to the abolition of the bookkeeping system. I believe that nothing would contribute so much to the development of good-feeling between the States as would the abolition of that irritating condition of affairs. In this connexion I should like to say I am not sure whether we have any moral right to institute penny postage while the bookkeeping sections of the Constitution continue in force. As I have said, we are only in the position of bookkeepers for the States while those provisions operate, and I doubt if we have any moral right to begin to spend the moneys of our principals in a way such as is contemplated by the Postmaster-General. If we were free, and we had no bookkeeping obligations to the States ; if we were each independent in our own sphere, I should hold up both hands for penny postage the more readily as being a great and immediate gain to the bulk of the people within the Federal sphere. But I doubt whether we have any right to so cut into the revenues of the States while those provisions exist. I propose to say more about that matter directly, and I only make these remarks in passing. At the present time our principals are the States, and there arises a question pf political morality in taking their re- venues and disposing of them in the way which the Postmaster-General contemplates.

Mr Austin Chapman:

– Does the honorable member mean that New South Wales, with a surplus of £1,000,000, cannot afford the cost of penny postage?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– New South Wales and Victoria can both afford to bear the cost of penny postage, and under our present anomalous condition of affairs it i= just a question, particularly as regards the larger States which have surpluses, whether we should not spend the money available to the Commonwealth rather than allow them to distribute political largesse as they are doing. Every one knows how Mr. Bent, the Premier, is acting the part of My Lord Bountiful in Victoria. We have to consider not only the view point of the States which have surpluses, but the view point of the States which are in financial difficulties. We ought never to forget that we are, in the broadest and highest sense, trustees for the solvency and security of the States, and should give the most earnest and close examination to the weakest links in the financial chain. I shall not make more than one or two criticisms of the general financial proposals of the Government. I agree with the honorable member for Mernda, and the Treasurer, that there is no room for dogmatism, or for an autocratic, know-all attitude in regard to the financial relations of the Commonwealth and the States. On the contrary, there is need for the fullest inquiry, and the most complete scrutiny of any proposals that may be brought before us. The importance of the subject will not be questioned. Much depends upon striking out upon right lines in the first instance. If we commence upon wrong lines, our troubles may be incalculable and interminable, while, if our financial machinery is properly started, the gain will be an increasing one. Our finances in the future will be better or worse, as the scheme adopted is a .good or a bad one. According!)’, the Treasurer very properly invites suggestions, and all who can should try to help him in the elucidation of. the problems which have to be faced. I agree with the honorable member for Mernda that thev are neither very clear nor very simple. The ideal to be aimed at is independence on the part of both Commonwealth and States. The States now grumble because they do not receive enough from the Federation ; but I am afraid that if we adopted a system necessitating the ear-marking of their finances, they would grumble at having to pay money to the Federation.

Mr Harper:

– They have to pay it to their creditors now.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Yes; but the reason for the payment would be removed from their balance-sheets, and that would soon lead to a different view being taken of the matter. At the present time there appear on their balance-sheets both the payments and the reasons for them, and if the Commonwealth took over their debts those reasons would disappear from their balance-sheets, and’ they would grumble as much as they are now doing. It has occurred to me that there is a happy mean between the proposals of the honorable member for Mernda and those of the Treasurer, though I have borrowed the sug gestion which I am about to put forward rom Mr. Coghlan, Mr. Nash, and some others. It is a proposal to take over so much, of the debts of the States as would strike a balance, leaving practically no payments to be made from the Commonwealth to the States. Last year the States paid in interest on their London debts £7,291,000, while the amount returned to them by the Commonwealth, was £7,308,000, so that if the Commonwealth had paid the interest due in London it would practically have squared the ledger. Such an arrangement would enable us to at once proceed to the abolition of the Braddon, section, and of the bookkeeping provisions of the Constitution.

Mr Harper:

– The Commonwealth paid to the States £600,000 more than they were entitled to under the Braddon provision, so that the arrangement which the honorable member suggests would pinch our finances.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It might do s0 temporarily; but the difficulty would be very small, considering our powers for righting ourselves, in comparison with the great advantage which would be obtained by freeing the Commonwealth from obligations to the States. The arrangement is one which, in the nature of things, would expand, and would pave the way for any further adjustment that might be required. It would have the advantage that it would lead to the Commonwealth at once monopolizing the London market. The honorable member for ‘ Mernda has spoken eloquently of the chaos now existing, and of the foolish and’ excessive competition which is damaging Australian credit in London. The Commonwealth could regulate borrowing as the States cannot, and that would increase our security and credit in London. The first thing that we have to do is to establish a Commonwealth credit such as we have not to-day, judging by the utterances of authorities on the subject. Our first task is to make for the Commonwealth a credit superior to that of the States. We must do that before dealing with the difficulties in which the mechanical part of the scheme will involve us. The monopolization of the London market is the first step towards establishing a Commonwealth credit. Following upon that will come the ability to convert at a decreased interest, and the substitution of the Commonwealth consol, suggested by the honorable member for Mernda. We should offer a stock of greater attractiveness than any now placed upon the London market by the States. The States would then have an inducement to cultivate the Commonwealth instead of fighting shy of us. If we had something of a tangible character to give to them, the public would soon compel the States to come to the Commonwealth, instead of it being necessary for the Commonwealth to run after the States. In other words, we should be able to give the States greater facilities for the transfer of the balance of their loans, and they would be swift to take advantage of the situation. We should at once be able to do away with the necessity for the back payments which are contemplated under the schemes of both the Treasurer and the honorable member for Mernda. The honorable member for Mernda proposes that the States should ear-mark, for the purpose of paying interest to us, revenue amounting to- nearly £2,000,000 per annum. If any such action were taken, it would be bound to create dissatisfaction and friction between the States and the Commonwealth. My point is that if we can do aW;lv with the necessity for back payments of interest by the States we shall assist to restore that good-will which, unhappily, has disappeared, and shows no sign of making an immediate return. .

Sir John Forrest:

– Under my plan, the States would pay their own interest until we converted or redeemed their stock.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But when we did convert the stock, the States would have to pay us the interest. Under the Treasurer’s proposal the States would be separately liable for all time. We should be their agents until the loans were liquidated. Our object should be to at once establish a better credit for the Commonwealth. It has always occurred to me that it was unfortunate that, when we took over the postoffices we did not also assume control of the savings hanks. If we had done this we should have had at our disposal money which would have enabled us to steady the London market at any time. There is now a total of £37,000,000 to the credit of investors in the -savings banks of. the various States.

Mr HUME COOK:
BOURKE, VICTORIA · PROT

– Not in post-office savings banks.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am perfectly aware of that. We could have taken over the whole of the savings banks, and would have been able to form a financial nucleus for the future operations of the Commonwealth, which would have enabled us to take advantage of a falling market to buy up securities.

Mr Austin Chapman:

– There is no reason why we should not establish a Commonwealth savings bank now.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It would be an entirely different matter for us to enter into competition with the States now. We should have taken over the Post-office Savings Banks at the beginning.

Sir John Forrest:

– The States might not have been agreeable.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– They could not have helped themselves. The Treasurer seems to forget that the States made over to us the telephone service, and many other things which do not come strictly within the Federal domain.

Mr HUME COOK:
BOURKE, VICTORIA · PROT

– We have power to legislate with regard to banking.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We have the power to do a great many things, but I am pointing out whatwould have been the line of least resistance. If we had followed that, we should have found it much easier than to adopt any of the new-fangled schemes that have been put forward by honorable members. The honorable member for Brisbane would settle the whole question in quick time by means of a printing press. The honorable member for Bland would begin byforcibly extracting £8,000,000 from the coffers of the banks.

Mr HUME COOK:
BOURKE, VICTORIA · PROT

– What is the difference between the honorable member’s pro posal and that of the honorable member for Bland?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– In one case we should deal with public money, and in the other with private money.

Mr HUME COOK:
BOURKE, VICTORIA · PROT

– Private money would have to be dealt with in either case.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Not at all. Of course, the deposits in the savings banks are the property of private persons, but they are in public institutions, whereas the investments in the banks are in private institutions. I do notknow that the depositors in the savings banks would object to handing over their money to the Commonwealth ; but I can conceive of grave objections on the part of bank shareholders to having their money commandeered in the manner proposed. Then, again, it seems to me that if the States were let loose on the London market after a term of ten years, as proposed by the Treasurer, our credit would be absolutely ruined. What would be easier for the States than to save up a lot of floating debts, and at the end of the ten-year period rush the London market with a view to take advantage of the Commonwealth credit. If any such thing were even suggested our credit would be ruined.

Sir John Forrest:

– The honorable member does not trust the States at all. The people of the States are also the people of the Commonwealth, and are as trustworthy and as capable of looking after their own interests as we are.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Treasurer has shown that there is a great difference between the States and the Commonwealth. He says that our credit would be very much better than that of the States. Therefore, the question is not one as to whether the people of the States are also the people of the Commonwealth.

Sir John Forrest:

– The Commonwealth credit is the credit of the people of the States - they are the same.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– If they are the same, why should all these elaborate proposals , be introduced? Why should the Treasurer formulate his scheme unless he can do better for the States than they are doing for themselves ?

Sir John Forrest:

– That is the object in view.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I say that if the States go to the London market at the end of the ten-year period they will entirely break up the credit which in the’ meantime we shall have been steadily fostering.

Sir John Forrest:

– Why do they not do that in Canada?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– There is no analogy between our case and that of Canada. Our States are a great deal more like sovereign States. The Canadian States stand in a position resembling that of our city corporations.

Sir John Forrest:

– The honorable member has not been to Canada or he would not say that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not speaking of their general importance, but of their financial relations with the London money market, as compared with that of the Dominion. There is no analogy between our case and that of Canada, as I shall show when I refer to the precious penny postage scheme of the Postmaster-General. However, I do not wish to be diverted from the thread of my present argument. The first essential is that we should create our London credit - and this cannot be done by financing alone - at least, so Mr. Coghlan says. He is clear and emphatic that political considerations are affecting our credit in London at the present time. They may be doing it improperly, but they are doing it, and it is with facts rather than with reasons that we have to deal in our financial relations with the mother country. Mr. Coghlan points out that before we can hope to create a better credit in London, we shall have to pay some respect to the government of Australia, and to the legislation which we enact from time to time. I should like to read an extract from his paper in this connexion. Speaking upon the subject of the causes which are influencing the price of our stock, he says: -

No class of persons are less influenced by sentimental considerations than are the investing public and their brokers ; nevertheless, there is no class whose political predispositions and prejudices more largely affect their dealings. It is, therefore, not to be wondered at that, of the considerations affecting the price df Australian stocks, not the least important, so far as concerns the London market, is the repute of the State to which thev belong, and the policy of its Government. If for any cause that repute should be low, then the conjunction of various other conditions usually looked upon as favorable would not avail to maintain the price of its securities. Such being admitted, it is therefore evident that so long as Australia seeks further money from the London market, either fo, new undertakings or for renewing old Joans, attention will have to be paid to the opinions of the British investor on certain political matters.

I think that that statement is as clear as language can make it. He continues -

It must be confessed that the difference in the attitude of the British investor towards Australia can be accounted for only on the supposition of mistrust arising from considerations, not of the resources of the States, but of their politics.

Nothing can be clearer than that. lt means that our Commonwealth legislation is affecting our credit in London.

Mr Bamford:

– From what is the honorable member quoting?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– From Mr. Coghlan’s paper which reached Australia a few weeks ago. I do not think that the honorable member will accuse Mr. Coghlan of belonging to the “ stinking fish “ party. If the latter has any sympathy at all, it is with radical. Australian democracy. Yet, with every disposition to make the credit of Australia stand as high as possible in London, that is what he writes concerning the causes influencing the prices of our stock. Mr. Coghlan, who spends almost every week cf his life in answering the animadversions of our- critics in London, declares that our politics are unquestionably influencing the price of our stock, and that before we can hope to improve our credit, we shall have to pay. more heed to our legislation. I now propose to quote another statement of his bearing upon the same matter. Speaking of the transfer of the State obligations to the Commonwealth. He says: -

If the Commonwealth were to take the place of the various States in the London loan market, it would probably not be able at first to obtain money on better terms than the States could do for themselves. Some of the leading brokers who deal with Australian stocks in this country - men of wide knowledge of financial conditions - have been consulted in this matter, and their views are in agreement with those herein expressed, which have been formed from independent observation ; but thev also say that in the course of time the Commonwealth will undoubtedly stand in a superior position to that of any of the States, provided that the confidence of the investor in the policy of the Government remains unimpaired. Should there be an immediate transference of the States debts, the Commonwealth must be prepared, for a few years at least, to content itself with results no better from the point of view of price than the States new obtain.

That is another declaration that our credit in London at the present time stands at zero - that, in point of fact, we have no credit beyond that which the States themselves enjoy.

Sir John Forrest:

– The honorable member should not quote one portion of Mr. Coghlan’s paper bearing upon that matter, and omit another portion.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

Mr. Coghlan says nothing which qualifies the statement that I have quoted.

Sir John Forrest:

– He says that’ the Commonwealth credit will be better” than that of the States by-and-by.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But he also says that we must first create our credit in London. One of the means which he suggests for accomplishing that object is the consolidation of the States debts. We need to rehabilitate our credit–

Sir John Forrest:

– We have notyet commenced operations in London. How can the honorable member use the word “ rehabilitate”?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We must rehabilitate our Australian credit - the credit which compels us toborrow to-day at 4 per cent. where we used to borrow at 3 per cent.

Sir John Forrest:

– The honorable member must know that money is dear at the present time.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It seems to me that our first step should be to monopolize the London market for Commonwealth purposes. We must do that before we can hope to create a Commonwealth credit. When we have done that, we shall begin to beget confidence there. After all, the chief difficulty which we have to encounter does not lie in the formulation of financial schemes, but in securing their acceptance. I admit that the Treasurer has formulated a scheme which will stand a much better chance of acceptance by the States than will that of the honorable member for Mernda. The right honorable gentleman drags political considerations into his proposals, pays a good deal of respect to the feelings of the States as such, and leaves them loopholes by. means of which they may escape from the thraldom of Commonwealth financial control if they choose to do so. Yet it does not follow that in its essence the scheme propounded by the Treasurer is sounder from a financial stand-point than is that of the honorable member for Mernda. I admit that the supreme difficulty which must be faced by anybody who is charged with the practical solution of this problem lies in formulating a scheme which will be acceptable to the ‘ States. This leads me to say a word or two in regard to the plan which has been outlined by the honorable member for Mernda.I am afraid that it is too good a scheme - that it is too ambitious and too complete, that it involves too much in the way of surrender on the part of the States, and too complete a control of their present functions by the Commonwealth, for them to accept it within, a measurable period. The scheme rises to boldness, and even to audacity, in some particulars, with its Board of Commissioners, Board of Arbitration, its payments by the States, its rebating by the Commonwealth, its practical determination of the railway building of the States, and its exaction of guarantees. The scheme seems too much like putting in a receiver upon the States, with regard to some of their financial undertakings.

Mr Harper:

– That could be altered.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I admit that these are only details, and I must confessthat the more I look into the principlesunderlying the scheme submitted by the honorable member for Mernda, the more fully I concur in their soundness. But it is these details which make all the difference between an acceptable and an unacceptable scheme. I am afraid that my honorable friend’s proposal would be satisfactory only if we could eliminate the prejudice and political feeling now existing between the Commonwealth and the variousStates.

Mr Harper:

– Education will do much.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The process of education is not so easy, particularly whenthe Commonwealth and the States are at arm’s length. Whenwe get closer to the States we may educate them much morereadily than we are likely to “do while our relations are, as at present, somewhat distant. My honorable friend’s scheme seemsto be an admirable one from the point of view of a bank or other large financial institution; but I am afraid that, in working: out his details, he has not made sufficient allowance for political motives, which mustalways colour and enter into the consideration of these supremely difficult mattersThere is a difference between a purelyprivate concern and our system of government, as conducted under political’ conditions. I am afraid that the scheme submitted by the honorable member for Mernda is altogether too good to permit of its beingat present acceptable to the States. In some of its details, it rises to heights of audacity. For instance thehonorable member proposes that the States shall give us for nothing all the transferred properties.

Mr Harper:

– I forgot to refer to that and one or two other points, but shall do so later on.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I hope that the honorable member will. He not only asks that the States shall give us the transferred properties, but proposes that South Australia shall give us the Northern Territory.

Mr Harper:

– If would be a very good thing if she did so.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Then there is the suggestion of my honorable friend that we should construct the Transcontinental Railway, and guarantee its finances for twenty years.

Mr Harper:

– For fifteen or twenty years.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Does the honorable member think that there is any likelihood of Western Australia, at the end of fifteen or twenty years, taking over the financial obligations in respect of that line? She would regard it as an affront to be asked to do so.

Mr Fowler:

– The honorable member for Mernda, as a level-headed business man, recognises that the line will be a great business success.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I expected such a comment from a representative of Western Australia.

Mr Harper:

– We should confer no favour on Western Australia.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am afraid these detail’s will require to be more closely scrutinized before they will prove acceptable. The scheme is an able, large, and complete one, but the gravest difficulty will be experienced in inducing the States, at present, to accept it. The next best thing to do is to find some proposal which will fit the existing condition of affairs. The more I look into it, the more it appears to me that the monopolization of the London market, and the management by the Commonwealth alone of the London debt, would be a self-regulative proposal.

Mr Watson:

– That could be done only by an amendment of the Constitution.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I know that, and I think that that would be the least difficult object to achieve.

Mr Watson:

– Hear, hear.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The advantages which would at once begin to accrue would be so great that the remaining diffi culties would very speedily solve themselves. ‘ The moment that we can give the States a credit that is better than their own, that moment we shall have them seeking to obtain it, and they will be ready to propose terms for taking over of their debts, instead of waiting, as they are doing now, for the Commonwealth to take the lead. The honorable member for Kooyong put a very pertinent question to the Treasurer, when he asked this afternoon when he contemplated making a beginning. The Treasurer had no reply to make.

Sir John Forrest:

– I said that we would take action as soon as we could.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That was a very safe answer to give ; it carries us no further. In criticising that reply, I am not underrating the difficulties in the way. I know that they are very great, but there are reasons why this matter is urgent.

Sir John Forrest:

– Hear, hear; we recognise that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– They were furnished to-day by the honorable member for Mernda when he referred to the debts that are maturing at a very early date. We have had this problem under consideration for six years. Various Treasurers have discussed it, and in view of the multitude of financial counsel which inheres in this Parliament, and out of it. we should have arrived by this time at a definite starting point. All that we get from the Treasurer is the statement in his Budget that his proposals are not final. He does not say that they are the best. It is time we decided upon some scheme which would furnish a starting point.

Sir John Forrest:

– I was quite definite in my statement, without being absolutely dogmatic.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I hope that I am not doing the right honorable gentleman an injustice. He said that he did not regard his scheme as the final or the best one.

Sir John Forrest:

– I said that I believed in it.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The right honorable member expressed his most emphatic belief in it. He told us, I think, that he had made up his mind, and that when he did so there was a tendency on the part of some people to regard him as an autocrat. If the right honorable gentleman has made up his mind as to the soundness of his financial scheme, that is an additional reason why he should be able to tell the House when he proposes to take ‘action, and what he proposes to do.

Sir John Forrest:

– I suppose that the honorable member will give me a day or two?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– So far as I am concerned, the right honorable member may have until after the general election. I entirely agree that the Board of Control which would have to manage the debts could not be appointed too soon. After all, these further proposals which have been formulated are simply amplifications of the proposals made some time ago in skeleton form by the honorable member for Kooyong. The sooner we have these commissioners the better. If they are to be the best financial experts that we can secure in the Commonwealth, surely we might even appoint them before we actually make our preparations in the way of legislation. Why could the Board not undertake a preliminary inquiry with a view to framing legislation, or suggesting lines on which legislation shall pro ceed ? If we are to have the financial ability of experts placed unreservedly at our disposal, why not have it in the initiation of the scheme, as well as in its future working and operation? I see no reason why the appointment of experts should not be undertaken at once, so that their ability might be brought to bear on the consideration of the initiatory proposals which must precede the final accomplishment of such a scheme as this. In the meantime consolidation itself would mean a saving? It is said that consolidation is unnecessary ; but I do not agree with that view. I think the mere consolidation of the debts, and the management of them by one authority alone, would tend to very great saving indeed in London. But the urgency arises from the fact that in the next five years 4 per cent, leans to the amount of £34,000,000 fall due. That, I submit, is a very serious outlook for the States. As Mr. Coghlan points out. if we converted this £34,000,000 into 3 per cents., there would be an immediate saving in interest of £273,000 a year.

Mr Harper:

– The honorable member for Parramatta is quite right; there would be a saving, as he states, of £273,000 in a few years.

Sir John Forrest:

– What is the rate of interest now ?

Mr Harper:

– Nearly 4 per cent., and Mr. Coghlan says that that, capitalized, would pay £4,000,000 off in forty years.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Then, again, in eleven years £78,000,000 fall due; so that this matter is just about as urgent as it possibly could be.

Mr Skene:

– Does the honorable member mean an additional £78,000,000?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The amount includes the £34,000,000. The question arises as to who is to benefit under proposals of this kind. If there is to be a saving pf, say, a quarter of a million of money by a partial conversion scheme, who is to get the benefit? The Treasurer suggests that the saving should be handed over to the States. The honorable member for Mernda and Mr. Coghlan suggest that it would be much better and safer to make the debt redeem itself rather than to carry out the scheme contemplated by the Treasurer. It would be unfair, I think, to hand over any saving of the kind to the States.

Sir John Forrest:

– It would help the States very much, and my object was to give early relief.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Of course it would, but in a direction in which the States are not entitled to be helped. Anything done with these savings ought to be in the nature of a redemptive scheme ; and, as contemplated by the honorable member for Mernda and Mr. Coghlan, the debt ought ta be made to redeem itself bv means of the profits arising from the conversion. But I come back to mv initial point that, precedent to all this, there should be the exclusive right continued to the Commonwealth in perpetuity to convert or to renew on the London market. Once the connexion between London and the States is cut, there ought to be no more going; to London by the States except through the Commonwealth. Otherwise, the result would be disastrous to the Commonwealth credit. On this point I have already expressed myself in pretty strong terms, and I do so again, because I think that to permit the States of themselves to go to the London market would involve breaking the Commonwealth credit into “ smithereens.” I hope the Treasurer will understand that I am now merely stating points for criticism, because of the rest of the scheme I shall probably be found to approve. It is quite clear that there must be further temporary arrangements while these financial proposals are maturing and operating. As I interjected when the honorable member for Mernda was speaking, if we could settle the debts problem satisfactorily the Braddon section would solve itself - there would be no further need for it. But during the transitional period, there is need for further consideration being given to the continuation or otherwise of what is known as the Braddon section. The honorable member forMernda has already pointed out the defect, in this connexion, in the Treasurer’s scheme; and, after all, it is a very serious defect. The Treasurer proposes the abolition of the Braddon section, and the substitution of a fixed amount on the basis of the yield for the five years preceding 1910. That is to be the minimum guarantee to the States - it is to be an invariable guarantee - and that is the trouble. If three-fourths of the revenue exceeds the guarantee, the Treasurer proposes to distribute it per capita; and, in my opinion, that would set up a troublesome system of bookkeeping to begin with.

Sir John Forrest:

– It would be very simple.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It would not be so simple. We should have to deal with the States in two distinct relationships ; we should have to distribute one part of the revenue on the basis of a fixed amount, and distribute another part on a per capita system.

Sir John Forrest:

– At the end of the year.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That would lead to a great deal of unnecessary trouble and bookkeeping, and cause misunderstanding and friction.

Sir John Forrest:

– Not at all.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– And that is not the smallest trouble, in connexion with the scheme. The great difficulty is that this has to be an invariable amount - an amount that does not vary with the conditions of the Commonwealth revenue, as such. There is every indication that the next five years are to be very good years - there is every reason to hope and believe this - but there is also every reason to fear that the succeeding five years may be lean years - and it is the lean years for which the Treasurer makes no provision in his scheme.

Sir John Forrest:

– I do not believe that those years will be so lean as the honorable member fears.

Mr Bamford:

– The Customs revenue increases in leanyears, as hasalready been shown.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am afraid that that is not always the case. My right honorable friend guarantees the States that, however bad the seasons may be, they shall not suffer, so far as the Customs revenue is concerned. However good those years may. be, they are to share in the benefit. “ They shall share,” my right honorablefriend says, “ but they shall not under any consideration suffer.” We have to do the suffering. I point out as the honorable member for Mernda did, that it is not merely a question of paying liberally to the States. This may prove to be in itself the very essence of an illiberal proposal. Even from the States’ point of view, supposing we were. ‘ left with £1, 000, 000 revenue instead of the £2,000,000 or £3,000,000 necessary to meet our requirements, what would happen.

Sir John Forrest:

– As far as I can judge, there is nothing to fear.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not know what my right honorable friend means by going back. There may be, there must be, there always have been, very serious fluctuations in the revenue of every country.

Sir John Forrest:

– Our population will increase.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am afraid my right honorable friend does not appreciate the ebb of the financial tide as we do in those States which have had that bitter experience. My right honorable friend has been with the flowingtide. During the whole of his experience in Western Australia, that State has been progressing by leaps and bounds. Abnormality has characterized all its financial relations. On theother hand, we have had to contend with the ebb of the financial tide as well aswith its flow. What has happened may readily happen again in Australia; and the trouble in connexion withmy right honorable friend’s scheme is that it contemplates continued booming prosperity, and makes no provision for years of stress and’ strain. Five years is not a period long enough for whatmy right honorable friend proposes to do. In striking an average, ten years would be a fairer period to take.

Sir John Forrest:

– Ionly say, “ Say fiveyears.”

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– If a fixed amount is to be paid, a ten years’ period would be far better in which to ascertain the rise and fall of the revenue, in a country which is likely to be affected by changing seasons and by drought, as well as, 011 the other hand, by prosperity. If there is to be a fixed payment, the longer the period on which the average is calculated the fairer to the States, as well as to the Commonwealth. The more I look into the matter the more I incline to the belief that if we could fix a -per capita distribution on the basis of, say, a ten years’ average, it would simplify all our arrangements infinitely, and the result would not be anything but what would be substantially fair as between the States and the Commonwealth.

Sir John Forrest:

– We might do that in 1920.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I think we may do it in 1910.

Sir John Forrest:

– I considered that idea, but it was not satisfactory to me.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We are constantly coming nearer to a per capita basis in our spendings and our revenue, in our earnings -and in our general conditions ; and I believe that by the time 19 10 arrives we might get an average, extending, say, over ten years, and, on that basis, strike a per capita allowance for the States as a whole. I do not care whether it is made an allowance of 35s. per head, or whatever the amount is. Make it a fixed allowance for a fixed period, subject to revision at the end of that period ; and then, I think, we shall have arrived at a much simpler arrangement than that contained in my right honorable friend’s proposal.

Sir John Forrest:

– There is not much room for greater simplicity. My proposal is all contained in one paragraph.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– My right honorable friend’s is a very simple proposal in that respect, but it is a very farreaching one, and, as I think, very unfair to the Commonwealth. I am concerned to suggest a means which would be fair both to the Commonwealth and the States. I can see no fairer and simpler way of doing what we desire than to take a period of, say, ten years - it would give a better average than five years, in all probability, five prosperous years. If, on the basis of an average of ten years we struck a per capita allowance, we should have arrived at a much simpler and fairer arrangement than that contained in the Treasurer’s proposal. The first step, as I think, to a better understanding, between the States and the Commonwealth, is to cut this knot - and it is largely a financial’ knot - by which we are tied up in our present irritating financial bonds and relationships. We must stop trenching on each other’s domain, particularly in these matters of finance, before there will be a good understanding and general good feeling. There must be complete financial independence of the States on the one hand, and of the Commonwealth on the other. When that is attained, it will, I think, be the signal for a revival in the credit of, both ; and on this basis we may. proceed to the consideration of those other matters which have to do with the building up of the financial credit of Australia, to enable it to stand the stress and strain; of the future, leading us up and on to greater progress and prosperity. I hope that the honorable member for Mernda and the right honorable the Treasurer will not lose their* grip of this financial problem until, between them - with any other help that may be forthcoming - they formulate a scheme which can be propounded definitely for dealing with this most urgent, far-reaching, and vital question. Speaking, of the Budget as a whole, it indicates a period of great prosperity. My right honorable friend said that last year was the best year that we had had since we entered into Federation. Looking at both sides of this Budget - expenditure and revenue - it occurs to me that the revenues of the Commonwealth at the present moment furnish an unanswerable reply to the extreme protectionists of Australia on the one hand and to the Socialists on the other. They are a reply, also, I would say in passing, to the Treasurer’s suggestion for increasing taxation, whether for ear-marking purposes or any other. I think that they likewise furnish unmistakable reasons against the proposal of mv honorable friend, the member for Bland, in the direction of land taxation. The plain outstanding fact of the situation is that we have all that we need for” our, purposes at the present time.

Mr Johnson:

– The figures show that we have too much taxation already.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I would not say that we have too much, but I do say that we have plenty. In determining whether we have too much or too little, my honorable friend must always remember the smaller States of the group, the financially weak links of the Federal chain. We must give heed to their, needs when discussing the question whether our revenue is too large or too small. But at any rate, the outstanding feature of the situation is that we have a booming revenue, booming trade, and a great commercial expansion. From time to time we have heard a great deal about the injured and strangled industries of Victoria. Here, it seems to me, is arn answer to all these allegations. The figures of the Budget show that Victoria is advancing by leaps and bounds from every point of view, and from none so much as from the manufacturing point of view. That in itself is an unanswerable reply to all the statements made about her strangled and crippled industries. I admit that on the fiscal platform the note is constantly changing. Of late it has changed very rapidly. The other day the Prime Minister went to Sydney and told the people that all their prosperity was due to the Tariff, that all they wanted was “more Tariff, and still more prosperity.” But when he returned to this State, and went on the fiscal platform, he brought in quite other considerations. The great outstanding argument for protection nowadays, particularly in Victoria, is derived not so much from the condition of things obtaining within the State as from the condition, of things obtaining outside the State. In this respect the note is changing altogether. It must do so, because of the booming prosperity in manufacture which is seen in Victoria, perhaps more than in any other State, at the present time. So we find honorable members saying now “ We want more protection, for the purpose of peopling Australia, making, ourselves self-dependent in case of war,” and pointing to the international menaces and perils from outside, both racial and military, as reasons for further interference with the fiscal conditions of the Commonwealth. The Budget shows that manufacturing development is not fettered or hindered; but that an the other hand, in spite of what is called a low Tariff, it is going ahead bv leaps and bounds. Some of the figures presented bv the Treasurer read more like a story in the Arabian Nights than a confirmation of that terrible tale of woe which we constantly hear from some of the platforms of the country in fiscal controversy Taken from any stand-point, the figures denote the throb of those gigantic natural forces which are making Australia great, in spite of all the gloomy vaticinations of the Socialists on the one side, and of the pessimistic statements of the protectionists on the other. From the protectionist, in some quarters, we hear nothing but tales of woe and disaster; but as .Macaulay said concerning England at one time, “ We see nothing but prosperity and progress on every hand.” Listening to the recital of these interesting facts by the Treasurer, it would seem as though the blue skies of Australia laughed in derision at those persons who are making such a fuss about nothing to-day, and for purely political purposes. I can conceive of nothing which, in my judgment, will tend so much to dissipate the pessimism of the moment as will this Budget. In the financial columns of the Sydney Morning Herald, the other day, I read an article on the value of hope and enthusiasm as a commercial factor. There is no gainsaying the fact that the pessimistic, gloomy business man is one who very soon will find himself upon financial rocks. All those honorable members who have had to do with large business operations know the value of hope, springing “eternal in the human breast,” when they are beset with temporary difficulties. I can conceive of nothing ‘so calculated to stimulate the hopes, and to dissipate the pessimism of Australians, as will this Budget. *I hope I may be forgiven for saying that all this booming prosperity must not be attributed to the Government policy.

Sir John Forrest:

– I did not say that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am’ only speaking apropos of the statement made by the Treasurer’s leader in Sydney, that the policy of the Government had led to this prosperity. That was a ridiculous, and, of course, incorrect, statement to make.

Sir John Forrest:

– Governments always take credit for anything that is good.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We are all, including the Government, unconscious instruments of large natural forces, which, luckily for the country, operate in spite of all Governments. They, of course, cannot be facilitated or hindered by anything that we may do. It occurs to me that the magnificent tale of steadily advancing prosperity is the best argument which we can offer to those who would upset our social order, and set up a new one in its place. Looking at the operation of these gigantic forces, making as they are for the prosperity and solidity of the State, one wonders why people should desire to put themselves in the grip of the steel casing of repressive Socialism, and so strike a blow at their present prosperity. The great lesson of the Budget is a lesson of individuality, of freedom to take advantage of the throb of these great forces, gliding and moulding them for individual ends, always seeking, of course, in its broadest aspect the prosperity of the country as a whole. In a period of prosperity like the present, the usual temptations follow. My honorable friend was absolutely accurate when he said that his experience was that the more a man has the more he spends. That is the experience of nations as well as of individuals, and I am afraid that the Budget furnishes evidence of that.

Sir John Forrest:

– I have left a good balance - £311,228, I think.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Commonwealth is enjoying an era. of prosperity, and the policy of the Budget is to let fly and make things hum merrily. And in consequence, we have, what I think I shall be pretty safe in describing as nothing more nor less than an electioneering Budget.

Sir John Forrest:

– Not at all.

Mr Austin Chapman:

– Do not say that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Let us take a brief glance at the revenue returns for last year. We are told by the Treasurer that the receipts amounted to £11,879,000, there being an increase of .£199,000 in the amount raised from Customs duties. That increase may seem a large one, but it is really small in proportion to the increase in population. The figures have been alluded to as an indication that the rates of duty are too low, and that, consequently, our importations are too high ; but, in reality, the increase is a normal one for a time of prosperity such as we are now passing through, having regard to the increase which has taken place in the population. The returns of the Post and Telegraph Department are a better index to the prosperity of a free country than any other revenue returns, and ours unmistakably point to the existence of booming times. Last year the receipts from duties of Customs and Excise exceeded £9,000,000, but I venture to say that, when Federation was first accomplished, it was not thought that those figures would be so soon reached.

Mr Watson:

– Thev were exceeded in t902’-3, the year of the drought.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That was because of abnormal conditions. There has been nothing exceptional to inflate the revenue of last year. It is instructive to note that the large increases have taken place in New South Wales, where they amount to £200,000, and in Queensland, where they amount to ,£87,000. Those States naturally import more than do the other States, because their exportations are larger, since they rely greatly upon primary production. In Victoria the increase is only_ £^48,000, and in South Australia only £9,000; while in Tasmania there was a decrease. The inference which cannot be escaped is that a Tariff facilitating exchange with the markets of the world is the best for a young country like Australia. Where there is an abundance of virgin country, and few hands to till it, there must be a great surplus for export, and the more facilities given for the exchange of our surplus products in the markets of the world, the more nearly is an ideal condition of things for our people brought about. To fasten upon a particular State, and argue from its conditions that our Customs duties should be materially and radically altered, is to take a one-sided view of a very big and complex question. The figures I have given freely indicate what is the right policy for Australia as a whole, and make it apparent that we should not fetter or hinder the exchange of our natural products in the markets of the world. It is estimated that next year the increase in our revenue will amount to only £90,000, or £ per cent. - a very small increase. The receipts from Customs duties are likely to be larger by £115,000 than those of the financial year just concluded ; but the introduction of penny postage and other proposed expenditure will bring down the total increase to only about i per cent. In this connexion it is worth while to consider the effect of Federation upon the revenue of the States. New South Wales has had a roar.ing, roystering, time ever since Federation was inaugurated, but some of the other States have had to suffer stress and strain. For instance, the Treasury of New South Wales has received from the Commonwealth £7,500,000 more than it would have received had there been no Federation. The Victorian Treasury has also received a slight surplus ; but the Queensland Treasury has lost, in the aggregate. £2,600,000.

Mr Wilkinson:

– Yet Queensland is the most solvent State in the Commonwealth.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not think that there is any doubt about the solvency of Queensland ; but the Premier of the State complained very much at the recent Conference of the manner in which its finances have suffered because of Federation.

Mr Wilkinson:

– We have paid our debts, and are going on all right.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The falling off of revenue has caused a great deal of trouble and inconvenience. The Tasmanian Treasury has also suffered heavily, it being estimated that by the end of the next financial year its losses will have amounted to £1,000,000. These figures have an important bearing upon the proposal to establish penny postage. In considering proposals for increased expenditure we must bear in mind the position of the States which are weak financially.

Mr Wilkinson:

– Is the honorable memmer in despair about Queensland?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not in despair about any State. There is no need for despair. But there is reason for the exercise of caution and prudence. The finances of Tasmania have been entirely dislocated by the Federal Tariff. I have been told that her direct taxation amounts to-day to 24s. 3d. per head. If New South Wales imposed direct taxation at the same rate, she would be raising £1,800,000 from direct taxation, while Victoria under the same conditions would be raising more than £1,500,000. A State which has to resort to direct taxation at that rate is in a very serious financial position.

Mr Watson:

– Which is largely due to unproductive loan expenditure.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Does it help us to be told that?

Mr Watson:

– It shows the unwisdom of borrowing.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– And the unwisdom of proposing a land tax of 4d. and 6d., as the honorable member has done.

Mr Watson:

– Many of the Tasmanians themselves say that the best thing that could happen to the State would be the imposition of a land tax.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– No doubt the honorable member thinks so; but I differ from him. In my opinion, seeing that the direct taxation of the State provides 60 per cent. of its total local revenue, the time is not opportune to propose to increase it. The proposal of the honorable member and hisparty has neither justification nor principle to recommend it. It has -no justification so far as financial considerations are concerned, and no principle from an economic point of view. I make these remarks merely in passing. The financial position of Tasmania requires all the sympathy that we can give. The people of that State are shouldering in a manly and heroic fashion the burdens which have been imposed on them by Federation. Turning to the expenditure side of the balance-sheet, I should like, in the first place, to refer to what I consider the misleading statements of the Treasurer and the PostmasterGeneral.

Sir John Forrest:

– Not intentionally misleading.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Of course not. The Treasurer, for instance, mentioned the fact that last year we gave the States £829,925 over and above the three-fourths of the Customs and Excise revenue to which they are entitled under the Constitution.

Sir John Forrest:

– That is right.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But the Treasurer put it in this way -

We returned to the States£826,925 more than was constitutionally obligatory.

That is a very misleading way of putting it. We are constitutionally obliged to return to the States every penny that we can. The obligation rests upon us to return every penny above the three-fourths limit, as well as every penny under it.

Sir John Forrest:

– The Constitution merely provides that the Commonwealth shall not spend more than one-fourth of the total Customs and Excise revenue.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Exactly; and we are obliged to return to the States all we can over and above the three-fourths to which they are entitled.

Sir John Forrest:

– Not if we spend it ourselves.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am objecting to the way in which the Treasurer has put the matter. The Postmaster-General falls into the same mistake. The Treasurer is assuming an attitude of great generosity towards the States, because the Commonwealth is not spending the full amount of one-fourth of the Customs and Excise revenue. That, however, is not what is intended by the Constitution, which requires that we shall give back to the States all the revenue that we can possibly spare, but that, in any case, we shall not spend more than one-fourth of the total amount. Therefore, the constitutional obligation extends below the limit as much as above it.

Sir John Forrest:

– That means nothing.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We shall see whether it means nothing when we consider trie manner in which the Treasurer has distributed this amount. He goes on to say -

In other words, if we had spent that sum of ^829,925 which we had a right to do under the Constitution, the States would have received that much less from the Commonwealth.

I say that we had no right to spend it at all for the mere purpose of spending it.

Sir John Forrest:

– I did not mean that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not so sure that the Treasurer did not mean it. He went on to say -

I only mention this to show that the facts do not bear out those charges of recklessness and carelessness which are often levelled against this Parliament by ill-informed people who criticise us. If this House wanted to get kudos for itself by spending as much as it could throughout the different States, thereby gaining to some extent the approbation of the people, we could have spent very much more than we did. But, instead of so doing, we have handed over to the States an immense sum during the past 6£ years, allowing the States Governments to spend the money, and thereby to gain any kudos that might be attached to the expenditure

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We could not help ourselves.

Sir JOHN FORREST:
Protectionist

– I beg the honorable member’s pardon ; we could easily have spent the money ourselves.

We could easily have wasted it ourselves.

Sir John Forrest:

– We have been very economical.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Does the Treasurer suggest that we could have reasonably spent the high sum that we have handed to the States ? We have no right to spend any money except economically, and, therefore, it is totally misleading for the Treasurer to assume an attitude of extreme generosity to the States because, after spending all that ought reasonably to be spent, he gives back to them more than three-fourths of the Customs and Excise revenue to which they are entitled.

Sir John Forrest:

– I was merely defending the Commonwealth against the charges of extravagance that had been preferred.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not know that it will help us to overstate our case.

Sir John Forrest:

– I hope I did not overstate the case;

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I should like to remind the Treasurer that when he speaks of this £829,925 as having been returned to the States, he does not take into account the fact that we are occupying certain buildings for which we pay no rent. A great proportion of this £829,925 should be passed over to the States as rent for buildings .which they have handed over to us, and which we are now occupying.

Mr Bamford:

– If the money returned to the States in excess of three-fourths of Customs and Excise revenue had been devoted to paying for the transferred properties, it would have been good business.

Sir John Forrest:

– Yes, suppose that we had done that?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We should have had no right to do such a thing.

Sir John Forrest:

– Hew shall we pay for the transferred properties except out of our one-fourth of the Customs and Excise revenue?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The right honorable gentleman’s leader proposes to pay for the transferred properties by ‘ wiping out the debt incurred in respect to them.

Mr Deakin:

– When you pay a debt you wipe it out.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Yes, but the Prime Minister does not propose that any money shall pass. He expects the transferred properties to buy themselves out. That is no doubt a very easy solution of the difficulty, but I am afraid that it will not prove satisfactory. The Treasurer thinks that in view of the generous attitude that the Commonwealth has taken up in regard to the States, he is justified in proposing to spend £525,000 more than last year. This is an increase of 12 per cent, oyer the previous year, whilst our revenue shews an increase of only f per cent. I say that in view of this proposal, a charge of audacity and recklessness might be fairly levelled against the Treasurer. All the defence he puts forward foc this huge outlay is that “We are well within our constitutional rights.” I say that we have no constitutional rights to spend money unless we lay it out economically, wisely, and well.

Sir John Forrest:

– We claim that we are doing so.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That is the whole question. To begin with, I doubt the morality of our spending money in the way proposed by the Treasurer, -whilst we are acting; as the agents of the States. It must be remembered that, in a financial sense, the States, as I have already said, are our principals whilst the bookkeeping period lasts.

Sir John Forrest:

– We are spending the money in the interests of the people.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That would be all- very well if we had a common fund.

Mr Deakin:

– Who gets the benefit of the expenditure? - the same people.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– No doubt it is the same people, but they stand in an entirely different relationship to the Commonwealth and the States respectively. I admit that the present arrangement is only a temporary one, but while it lasts, it should be observed. I doubt whether the Treasurer is observing it in proposing before the bookkeeping period is brought to an end to make use of the money in the manner contemplated. However, the smaller States are more concerned than are the larger ones. New South Wales and Victoria can afford to put up with the consequences, but I doubt whether the smaller States will be in the same happy position. The Treasurer proposes to return to the States during the current, year only £311,000, and I say that in so doing he is deliberately overstepping the limit fixed by the Constitution. I refer, of course, to our liability in connexion with the transferred properties. At the very lowest estimate, an amount in excess of the ,£311,000 would be required by the Commonwealth te meet a fair interest charge in regard to the transferred properties.

Sir John Forrest:

– That would be robbing Peter to pav Paul.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– What would the Treasurer do in any and every relation that the Commonwealth holds to the States ? He must see that there are spheres to which the States and the Commonwealth respectively are limited under! the Constitution. Within these spheres, the same public stand in different relationships to the Commonwealth and the States respectively. There is no use in saying that we shall be “ robbing Peter to pay Paul.” We have taken over the States’ property, in respect to which no payment ‘ has yet passed. We are not charging ourselves with the. interest as we should do. If we had to meet the interest charges, instead of leaving the States to do so. we should be deliberately overstepping the line which is clearly marked out for us in the Constitution as that beyond which we must not go. If we wanted a lesson in how not to do things, we could not do better than refer to our dealings with the transferred properties up to date. After six years’ experience of Federation, we have formulated no scheme for taking over those properties, and yet we are discussing schemes for taking over States debts aggregating £233,000,000. After the lapse of six 3’ears we seem to be no nearer the formulation of a practicable scheme for taking over the transferred properties than we were originally. My honorable friend rightly says that new obligations are fast approaching, that new taxation will probably be rendered necessary, and that, therefore, the sooner we straighten out the financial relations between the Commonwealth and’ the States the better.

Sir John Forrest:

– Where does he say anything about new taxation ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– In connexion with his proposal to ear-mark the fund for the redemption of our indebtedness. Now I come to another little figment which is contained in every Treasurer’s Budget - the figment relating to the cost of Federation. The Treasurer tells us in a cockawhoop st) le that Federation to-day is costing only one shilling, and sixpence a head. We have not nearly reached the cost of keeping the dog yet, and I am afraid that we never shall if we continue to adopt the clever method of covering up the legitimate expenses of the Commonwealth which is constantly resorted to by succeeding Treasurers. In saying this, I am not accusing the present Treasurer of having done anything which has not been done by preceding Treasurers. We have the same sort of table presented in each Budget, and every Treasurer tells us that Federation is costing so much per head. Of course, they take care to ded!uct from the expenditure upon which th’at amount is based, the cost which has been incurred in consequence of Federation. For instance, they say that the cost of the sugar bounties must be excluded from the calculation. I apprehend that we should never have had to pay those bounties if we had not entered into Federation. Similarly, we should never have been burdened with the cost of administering New Guinea if the States had not federated.

Mr Bamford:

– Some of the States had to bear that cost before Federation.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– We should never have had to provide for the repatriation of kanakas, which, next year, will absorb £25,000, nor should -we have been faced with the huge expenditure for new works which will come out of our revenue next year. These items of expenditure “have to be eliminated from the amount that is regarded as “ new “ expenditure before it can bo reduced to the dimensions set down by the Treasurer. I hold that that is a misleading way of putting the matter, and the sooner this little bit of cant is obliterated from the Treasurer’s Budget the better will it be for all concerned. The cost of Federation is that whi’ch has been incurred because of Federation, and which would not have been incurred but for Federation. That is the only test which ought to be applied to the question of what constitutes Federal expenditure. When we come to discuss what Federation has cost, we ought to consider the question from the stand-point of the taxpayers. Both the Prime Minister and the Treasurer have told us that the taxpayers of the States and the Commonwealth are the same persons. Applying that argument to the cost of Federation, what is the position ? The cost of Federation seems to me to be the difference between the total cost of governing Australia before we entered into the Federal bond and its cost to-day

Mr Webster:

– What about the increase of population ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I will deal with that point presently. To-day, the cost of governing Australia - State and Federal - is 20 per cent, more than it was when we entered into the Union. A year ago it was £33,500,000, whereas its cost when we entered into Federation was only £28,000,000.

Mr Watson:

– What does the honorable member count as “ cost “ ? Does he eliminate payment for services rendered?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I include everything.

Mr Watson:

– Does the honorable member exclude payments on account of the services rendered ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– No.

Mr Watson:

– Then the test is not a fair one.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is fair for the purposes of comparison as between the two periods.

Mr Watson:

– It mav or may not be. There may be more services rendered today.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– There are more services in that some of the services have been duplicated, but the honorable member should recollect that the same persons have to pay for that duplication.

Mr Watson:

– There may be additional services of different classes.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But the same taxpayer has to provide the funds. There has been an increase in our population during the period in question of 8 per cent.

Mr Watson:

– The Post Office to-day spends a little more than it did a few years ago, but it also receives much more on account of the services rendered.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am dealing with the total cost of government. I am not altering the basis of the computation in any way, and I am not bringing in anyextraneous matter. I simply say that the cost of governing the whole of the States when we entered into Federation was £28,000,000, whereas it is to-day nearly £34,000,000. In other words, there has been an increase in our expenditure of 20 per cent., and an increase in our population of only 8J per cent. If we could point to an increase of population corresponding with the increase in our expenditure, the position would not be so bad, although, as a matter of fa.ct, any increase of population ought to mean a decrease in the cost of government.

Mr Webster:

– Is not the increased cost of government due to extravagance on the part of the States?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That does not matter. I am merely pointing out that the same taxpayers have to pay the increased cost. It does not matter whether the States are extravagant or not. The total cost of Federation is the cost by which the government of Australia as a whole has increased, between the period when Federation was accomplished and the present time. The figures show an alarming rate of increase in. our expenditure - an increase of 20 per cent - as against an increase of 8 per cent, in our population. That increase, I think, is due to the financial relations which exist between: the Com- monwealth and the States. The latter are receiving the moneys which we raise. They have no obligation to raise them for themselves. Theirs is the privilege of spending them. No doubt a great deal of their expenditure is upon a verv lavish scale, so that the statement of the honorable member for Gwydir is quite right, so far as some of the States are concerned. There is no doubt that the States Governments spend money freely and make themselves popular by so doing. But the people have to pay. So much for the result in figures of the cost of governing Australia as a whole.

Sitting suspended from 6.30 to 7.30 p.m.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I think we ought to have a quorum. [Quorum formed.’] The cost of governing Australia when the Federation was established amounted to £28,000,000 ; to-day it is

;£33>5°°>°°°-

Mr Higgins:

– What proportion of that increase is due to Federation?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not dealing with that point just now, nor am I offering these observations in criticism of any action taken by the Government or the Parliament of the Commonwealth. I am pointing out to the people of Australia, who have to foot the bill, that Federation, at any rate, has resulted in no economies, either in the State or Federal arena.

Mr Higgins:

– I said nothing about the Government; all that I asked was what proportion of the increased cost was due to Federation ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not prepared to say what is the proportion. I am simply pointing out that there is an increased cost, and that the same people have to meet it. For the taxpayers - apart from their State and Federal relations - this is a very ugly fact to face.

Mr Fisher:

– Do the honorable member’s figures include the cost of railway management ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– They include everything.

Mr Fisher:

– The railways are a trading concern., and their cost might be increased by £10,000,000 without the cost to the people being increased bv one penny.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not referring to that point. I am simply grouping the estimates of the States at the time that Federation was established and those of to-day

Mr Mauger:

– The inference that the cost of governing Australia would not have increased had there been no Federation is purely hypothetical

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– There would have been a natural increase, due, if .to nothing else, to the increase in population. Whilst the increase in our population since Federation amounts to only 8 per cent., the cost of governing our people has been increased by 20J per cent. That is an important and an ugly fact to face.

Mr Wilks:

– We were promised that, with Federation, economies would be effected.

Mr Mauger:

– But we cannot force the States to economize.

Mr Poynton:

– The honorable member’s figures do not prove anything so far as this Parliament is concerned.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Not so far as we are concerned ; but they prove that the people have to pay more.

Mr Poynton:

– They do not prove that there is any greater burden on the people.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The strong probability, amounting, in my judgment, to absolute proof, is that there is a greater burden.

Mr Isaacs:

– Money may have been expended on reproductive works.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am speaking of revenue, not of loan expenditure. The borrowings of Australia have no doubt increased in due proportion. But the main outstanding feature of our Federal relations to-day is that we are duplicating functions, and not substituting Federal for State functions. That appears to be the trouble. I am not blaming the Federal system for this state of affairs; but it is time that the taxpayers took the matter in hand, and said that, if certain things are to be done by the Federation, there ought to be a corresponding saving in the cost of the government of the States. In some way or other thev ought to relieve themselves of the burden of double government which is pressing upon them so severely, as these figures appear to show. There is another matter to which I propose to make brief reference. The Prime Minister has told us of the careful way in which we are husbanding the onefourth of Customs and Excise revenue that we are entitled to spend. I think it was Mr. Peake. Treasurer of South Australia, who, during the late Conference of Premiers, said that a careful analysis of the Constitution showed that we had taken over from the States 12½ per cent, in value of the functions which they previously performed for themselves. If that is so, and if, in order to finance that 12J per cent., we have a revenue amounting to 25 per cent, of the revenues of the whole, it seems to me we are not so badly off in the Federal arena. I admit that this is only a rule-of-thumb method to apply to such a very important matter; but that was the view propounded by Mr. Peake at the Premiers’ Conference in Sydney.

Mr Fisher:

– Hear, hear ! Comparing two different things.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is all very well for the honorable member to poohpooh these statements; but we find responsible Treasurers bringing these matters forward for serious discussion. It does not help us to assume that everything we do in a governmental .way is necessarily perfect and economical, and that everything that is not economical and is imperfect is confined to the States-

Mr Fisher:

– The honorable member will not father reasoning like that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I take all this as indicating the feeling of the States towards Federation in our financial relationship. After all, this question of finance perpetually colours the whole relationship, and ramifies into every nook and cranny of tooth Federal and State government. It is the one disturbing feature of the whole situation ; and ‘ it shows tine pressing urgency to cut the financial relationship, and make each independent of the other, so far as that can be done by any scheme of human contrivance. As I have said, this is an electioneering Budget, and here are some of the items set forth by the Treasurer. I mention these items because this is a Budget delivered on the eve of an appeal to the people. For bounties it is proposed to provide £500,000.

Sir John Forrest:

– The bounties were announced before the Budget.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– And they are also mentioned in the Budget ; indeed, they are a great feature in the Budget.

Sir John Forrest:

– I do not think so..

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– -The Treasurer said more than once in his Budget speech that the Government proposed to encourage industries in every shape and form. Amongst the political favours to be distributed by the Government on the eve of an election are £500,000 for bounties, £209,000 for post offices; and £12,500 for Tasmania. I have no quarrel with the last item ; the least we can do for that small necessitous State is to make her a present of the kind.

Mr Isaacs:

– It is not a present; it is what Tasmania is entitled to.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Shall we say that it is something we have withheld previously from Tasmania?

Sir John Forrest:

– We have had this expenditure before us for a year.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The Budget goes on to provide £1,000 to send a team to Bisley; £8,000 for a trawler; and for lighthouses, I suppose, about £100,000, or £10,000 to £15,000 each, when all are built. The increase in new works expenditure is £160,000; and so the list goes on. As to the purchase of a trawler, I am prepared to say that this is a justifiable expense.

Mr Kelly:

– Where is it going to trawl ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I d0 not know, but I should certainly say, seeing that this is a proposal by the Treasurer, that the trawler will be used in the waters of the Western Australian coast. In the fitness of things, the trawler ought tq be used in those waters; and, if more be caught than fish, so much the better. The more one looks at the Budget the more one finds that it is an electioneering Budget. There would not be so much to take exception to, if it were not for the fact that the Budget shows, in my judgment, an unjustifiable increase on last year’s expenditure, while shewing, at the same time, a very small increase on the revenue side of the ledger. That brings me to the question ofl penny postage. The PostmasterGeneral has issued a memorandum of very great interest; and I propose to- make some observations, in order to show how deftly the whole matter has been wrought and how the honorable gentleman has skipped over certain factors which would have made his calculation look very different in regard to the question whether penny postage is the great success he claims for it in other parts of the world. Of course, one can appreciate the Postmaster-General’s first reason, that the adoption of penny postage would be an outward and visible sign of Australian Union. But when it comes to paying taxes, we are not so much concerned for outward and visible signs as we are for inward and spiritual grace; and I am afraid there is not much financial grace, so far as the small States are concerned, in a proposal of this kind. We are reid that our postal conditions in this connexion are a standing illustration of the incompleteness of Federation. But we should, I think, be very happy if that were the only indication of an incomplete Federation at the present time. The PostmasterGeneral, in his memorandum, goes on to deal with some of the objections which are urged against the principle of penny postage as he has heard those objections from time to time in Australia. The first objection is the loss of revenue involved, and the second is the fact that the expenditure of the Post and Telegraph Department has each year exceeded its revenue, and that, therefore, to incur anyserious loss would be inadvisable. The Postmaster-General deals with the first objection in a very easy way, by declaring that the experience of countries which have adopted the penny .rate, shows that the idea that there is a loss of revenue involved is fallacious, seeing that an increase in the amount of correspondence immediately^ commences, and, in a short time, restores the equilibrium. But has that been the case in Victoria? Later on, the figures of the Postmaster-General show that that result has not followed in the State I have mentioned.

Mr Austin Chapman:

– The revenue in Victoria is now higher than it was when penny postage was established.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I should like to ask the Postmaster-General what the expenditure is in Victoria to-day as compared with the period to which he refers?

Mr Austin Chapman:

– Let the honorable member take the case of New Zealand, in regard to which we have exact figures.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I should like, in passing, to ask the Postmaster-General whether the view expressed’ in his memorandum is departmental, or whether it is his own personal view? If the honorable gentleman were able to assure us that the Department believes the loss of revenue to be a matter of no concern, I should attach the greatest possible weight to that view ; but I am not prepared to accept his individual opinion.

Mr Austin Chapman:

– What does the honorable member mean by “ departmental view “ ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I mean the view of the officers of the Department. Is the comment in the memorandum that of the officers of the Department, or that of the Posmaster-General himself?

Sir John Forrest:

– Departments are naturally very conservative.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– And very often with abundant justification, particularly in matters of Estimates.

Sir John Forrest:

– We expect an old Postmaster-General to support penny postage.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not say that I am not going to support penny postage. I am concerned with putting the matter straightforwardly and clearly before the people of this country, and I do not think that that has been done in this memorandum. Reference is made in it to foreign countries which have adopted a penny postage rate. We are told that penny postage prevails in tine United Kingdom. But the Postmaster-General does riot tell us that when it was adopted there the United Kingdom had a population of 17,000,000. Nor does he tell us that in the United Kingdom the cost of distributing the mails is a mere, fleabite compared with the cost in a continent like Australia. In the ^United Kingdom the utmost distance to be covered is only 400 miles. Here we have 3,000 miles over which to distribute our mails. Our expense -per capita is, therefore, much in excess of the expense in the United Kingdom. I point to those facts as worthy of consideration - that in the United Kingdom there was a population of 17,000,000 when Bie penny postage rate was adopted, and that there the mails have to be distributed over a country whose greatest distance is 400 miles, whilst here we have 3.000 miles to cover. In the case of France, which is the latest country that has adopted penny postage, we have a country with a population! of 40,000,000. France does not furnish a parallel with this country either in respect of population or financial resources.

Mr Austin Chapman:

– We shall have to turn up some of the honorable member’s old speeches on this subject !

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That cheap, empty claptrap will not deter me from what I am going to say, nor will the honorable member’s ugly looks. I am appalled when I look at him.

Mr Austin Chapman:

– The honorable member should not ask a question, and then be angry when he gets an answer.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not asking a question. When I did ask one the Postmaster-General declined to answer. His memorandum goes on to say -

Our experience of cheap uniform telegraph rates has been altogether satisfactory.

I should like to see proof of that. My experience and my knowledge, so far as they go, show me that we have suffered a great loss in cutting down telegraph rates in Australia. If the honorable member has proof of his statement, we shall be willing to hear it; but he might have given us the figures in his memorandum. He also refers to Canada, and says that at’ the time when penny postage was adopted, in 1900, the population was practically the same as our own. That is not a fact. The population of Canada was very much greater than our own is.

Mr Austin Chapman:

– Very little greater.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– At least 25 per cent, more; I should say 40 per cent, more at that time.

Mr Austin Chapman:

– Nonsense !

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Facts prove what I say.

Mr Austin Chapman:

– Has the population of Canada ever reached 5,000,000?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Yes; and the honorable member should know it. With regard to Canada, here is one fact which illustrates the effect of this proposal, and which shows that it offers no parallel to our case. In Canada to-day, with her penny postage, and her largely increasing population, it is a fact stated by the Postmaster-General himself that the total annual revenue of the Canadian Post Office is only £1,053,000, whereas our revenue reaches nearly £3,000,000. These figures show that the Post Office in Canada and our own have nothing in common. What the PostmasterGeneral does not tell us about Canada, either, is that the Canadian telegraphs and telephones are privately owned. I have not been able to obtain the exact figures. Here I should like to remark that I think that mv honorable friend would do well if he would see about issuing a Post Office Year Book. The Posit Office has been six years under Federal control, and vet no report has been presented to Parliament. The Post and Telegraph Departments of the individual States used to present reports to the States Parliament every year, but since the Department has been under Federal control it has not yet been able to rake up a report to present to this Parliament.

Mr Austin Chapman:

– If I am left in the Department a little longer there will be a report, but the honorable member should not blame me for the faults of my predecessors.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am not blaming the honorable gentleman, but I am point ing out where a great improvement can be made. I do not see why we cannot have a report presented to Parliament, just as reports used to be presented to the States Parliaments. At present we are in the dark in addressing ourselves to this subject. We have no statistics with which to make comparisons. We have no information to act upon. Turning back to Canada, the information which I have been able to obtain shows the following to be the case with regard to Canadian telegraphs. The statement is made to me by a commercial man in this city. Mr. Ross, the agent of the Canadian Government, could not inform me what the rates were when I asked him. . He has been so long away from the country that he could not state the figures without looking up Canadian Acts of Parliament. But the gentleman to whom I refer informs me that in Canada, within each province, the rate for telegrams is 25 cents for ten words, and 5 cents for each additional word.

Mr Watson:

– That is 2*d. for each additional word.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is 2?rd. for each additional word, and 12^-d. for ten words.

Mr Austin Chapman:

– That is under private ownership.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That is what I am pointing out.

Mr Fisher:

– I think addresses are allowed to be telegraphed without charge.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not know. What I have quoted is the within-province rate. The inter-province rate is 30 cents for ten words; and my informant is not quite sure whether the cost per extra word is 5 or 10 cents. These are facts which ought to be considered.

Mr Watson:

– Good old private enterprise !

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– No doubt that is due to private monopoly, and shows the necessity of resuming a matter of that kind, and working it as a State monopoly instead of a private monopoly.

Mr Watson:

– Hear, hear !

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– But my honorable friend will understand that that is not Socialism.

Mr Fisher:

– The explanation is necessary.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is not necessary. I know that that is a little thing that honorable members opposite are constantly regaling the populace with when they are discussing their own form of Socialism, which, however, is a different matter. We say that things that are inherently and necessarily monopolies should be under the control of the State. Only in thatway can they be conducted with satisfaction to the people as a whole.

Mr Watson:

– That is what we want. We will take that.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The honorable member will take that, but our quarrel with him and his friends is that they will not stop at that. If they did there would be. no trouble. But the fact that Canada only gets £1,053,000 per annum from the Post Office, as against £3,000,000 which we derive from our own Department, with a very much smaller population - smaller by 50 per cent. - shows - I was going to say the absurdity, but I will not say that - the unwisdom of endeavouring to make a parallel between our own Post Office and the Canadian.

Sir John Forrest:

– The Post Office paysvery well in Canada.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not know that it pays very well. I know that a surplus of £100,000 is shown. But if the Canadian Postmaster-General adopts the same method that our own Australian Postmaster-General does, I should think his surplus would, on analysis, soon be wiped out.My honorable friend boasts - this is one of his main arguments for adopting penny postage - that the Post and Telegraph Department is this year showing a surplus. What I have to say in reply to that is this: that if interest were paid on our Post Office the Department would not show a surplus, but a very large deficit. The accumulated deficit on the Post Office, on the basis of its paying its own fair charge for interest since it came over to Federation, represents a sum of £1,750,000 sterling. That is the deficit on the Post Office in Australia since it came under Federal control, to increase which the honorable gentleman asks this Parliament to foot an additional bill. State Socialism has some advantage over private finance. If a deficit is made in a private concern, it must be taken over to the succeeding year, and liquidated out of theoperations of that year. If we make a deficit in connexion with State Socialism we wine it off at the end of the year, and nothing more is heard about it. But here is the loss on the operations of the Department as given to me by the Statistician for New South Wales. He figures out that if the Department were charged with the interest on the buildings it would be in debt at the present moment to the tune of £1,750,000.

Mr Wilson:

– What is a million to the Postmaster-General ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is nothing to the Postmaster-General since he got so near to the multi-millionaires of America and the other places which he visited. This is the Department which he declares is paying, and the success of which he furnishes as a reason why we should proceed to the dispensation of these favours. New Zealand presents no parallel in connexion with the cost of distributing mails. It is a narrow strip of country, not much more than 200 miles across at the widest point. The authorities have not to send the mails from the highways more than 100 miles in any direction, except in, perhaps, a few instances, and, therefore, the cost of distributing mail matter is at a minimum, and furnishes no parallel to the case of Australia, where the cost of distribution is so great. That fact is made apparent by the figures which the PostmasterGeneral quotes in his memorandum. He points out, as an argument, in favour of his proposal, that -

The additional cost of handling this extra volume of matter in New Zealand did not amount to 5 per cent.

The honorable gentleman shows that the cost ofdistributing and handling mail matter there is at a minimum, and that therefore it is not a parallel for Australia. He really only points to us a contrast between the conditions in New Zealand and our own. Then he goes into figures, to show what has been the increase in “Victoria during the last six years. He says that it equals an average increase of 35 per cent. per annum. I should like to know what the increase in New South Wales has been during the same term. Here, again, no figures are supplied. The honorable member makes no comparison. He leaves out all the figures concerning his own State, and gives all the figures concerning every othercountry. Therefore we are in the dark, and quite unable to make a comparison. The question arises : Is the increased postal revenue in Victoria due to penny postage, or is it a normal increase due to the better trade, the growing population, and everything elsewhich goes to make postal revenue? The same thing may apply to Canada, and I should say that it would.

Mr Frazer:

– During that term we have had the introduction of the picture postcard mania.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That is so. In Canada there has been a large increase, but that, is a country which is going ahead by leaps and bounds, both in population and in every method of development.

Sir John Forrest:

– We are just as prosperous.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I believe so; but is not that a reason why the fact should be shown in this memorandum? If our postal revenue is going ahead by leaps and bounds it would have been a good thing, I think, to have let us know all about it. Instead of that, however, we have not a figure which would enable us to make any comparison. Then the Postmaster-General goes on to say that, according to his officials, the estimated loss from the penny postage would be , £265,000 a year.

Sir John Forrest:

– They do not make any allowance for increase of business. That estimate. I understand, merely refers to present business.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Of course, I must not suppose that the officials know very much about the matter. As a rule those who devote their lives to the business do not. That is the view often taken.

SirJohn Forrest. - They are naturally conservative.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– It is always the outsider who has been at the business for five minutes who knows all about it. At any rate, the officials of the Department say that the cost would be about £300,000 a year, and the Prime Minister suggests that the loss would be a very small amount, and would continue for only a few years. We have to make up our minds as to whose figures we had better take.

Mr Austin Chapman:

– Why refer to it as a loss when it would be simply a saving of that amount to the people?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That, I admit, is another way of putting the matter. But, of course, the same thing might be said of the States in all their financial relationships.

Mr Frazer:

– It might be said that persons out back save money because postal facilities are not given to them.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– That is a compulsorysaving. Altogether, I think that the memorandum of the Postmaster-General is not of much use so far as this question is concerned. It does not help us to make any comparison. It does not show from any solid basis of the past, so far as Australia is concerned, what are the probabilities of the future.

Mr Fisher:

– Does the honorable member think that it should be headed “ Special pleader “ ?

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

-I take the estimate for what it is worth. But I think that a sum between the official estimate of £265,000 and the amount stated by the Treasurer will be found to be very much nearer the mark.

Mr Austin Chapman:

– That estimate does not take into account any increased business.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I am aware that it is an estimate of the immediate loss.

Sir John Forrest:

– My estimate was not so generous as that of the PostmasterGeneral.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– The probable loss will be a sum ranging between the amount estimated by the officials as the immediate loss and the amount estimated by the Treasurer.

Mr Austin Chapman:

– I wish that the honorable member would say “ the saving to the people,” because it would sound much nicer.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– Like the Treasurer, my honorable friend is great upon the people when he has any political favours to dispense. But here he makes a sharp distinction between the Commonwealth and the States, although they comprise the same people. For instance, one of his reasons why we should face this loss, if loss there must be, is contained in this statement, which is also found in the Budget -

The Commonwealth returned to the States for last year£827,379 more than it was required to do under the Constitution.

Here is one set of people returning to another set of people - it is the same people, I fancy, in each case - £827,879. And the same people are very generous in their Commonwealth relations to the same people in their State relations.

Mr Austin Chapman:

– We are refusing to take that sum out of the people’s pockets.

Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917

– I do not see that it makes much difference which way the ‘honorable member turns the figures if he is not going to draw a broad distinction

_ 0__ . between Federal and State finance. My only object in criticising his memorandum is to show that as a basis for any forecast it is worthless, because it furnishes no means for making a comparison, and that if we are to have the penny post inaugurated, we must make up our minds to face a very substantial loss. This is not: a matter which would affect the large States appreciably, but it would affect very materially the small States, whose Governments are straining every nerve to make both ends meet. In Tasmania, for instance, the people are bearing direct taxation to the tune of 24s. 3d. per head, and still the Government cannot make ends meet. Here is a proposal to take from them immediately £15,000. From the view-point of the smaller States, the position is a very grave one indeed. The larger States could afford to meet the burden, because in view of their surpluses the introduction of the penny post would not make any material difference. If things were equal I should applaud the proposal as being as good a way of spending the surplus revenues as any I know of within the Federal purview. I make these criticisms now because I feel that, while the bookkeeping system continues, we are but trustees and clerks for the States, so far as their finances are concerned, and should be careful how we dispose of large sums of money belonging to them, and not to the Commonwealth. {: .speaker-JX7} ##### Mr Austin Chapman: -- The people of the States and the people of the Commonwealth are one and the same. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- Yes; but we must honour the bookkeeping system so long as it remains in force. {: .speaker-KFJ} ##### Sir John Forrest: -- The Commonwealth is entitled to spend one-fourth of the net revenue from duties of Customs and {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- Undoubtedly ; but there are put forwardin the right honorable gentleman's Budget proposals for the ear-marking of special taxation, which show that he expects that the time will soon arrive when he will spend more than one- fourth. In my judgment, the financial relations of the Commonwealth and the States will never be satisfactory until the different entities are financially independent, and the sooner we approve of a scheme which will place the relationship on a proper and independent footing the better. By doing so, we shall create a better feeling and more harmonious relations, paving the way for each, within its own sphere, to move onwards to a prosperous future. {: #subdebate-7-0-s4 .speaker-F4R} ##### Mr WATSON:
Bland -- Although the honorable member for Parramatta differs from the Treasurer on some points, he views a satisfactoryBudget from practically the same aspect, the general effect upon both gentlemen being almost identical. The Treasurer sees in the record of a good financial year the opportunity to throw money about, careless of what the consequences may be, while the acting leader of the Opposition takes it as an indication that all is well with the country, and nothing more requires to be done. According to him, ail excuse for social legislation disappears with the presentation of a Budget disclosing a handsome surplus. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- I agree with the honorable member, if he substitutes " Socialism " for social legislation. {: .speaker-F4R} ##### Mr WATSON: -- Surely the honorable member must be aware that the condition of the public revenue is not an unfailing index of the condition of the people. He ought to know that, only lately, in England, a period of the greatest prosperity, judgedby statistics of imports and exports and of manufacturing, activity, was coincident with the greatest destitution and want of employment. Mere statements of revenue and expenditure showing a surplus do not go to the root of matters. The fact that we in Australia are able to raise enough money to pay our debts, and that wealth is being produced here in much larger measure than was previously the case, is no complete criterion of the conditions of the people. Although there is a greater measure of prosperity amongst our people to-day than they were enjoying a little time ago, much remains to be done before the condition of the masses will be reasonably satisfactory. {: .speaker-K99} ##### Mr Johnson: -- There is much to be done in the equalization of the distribution of wealth. {: .speaker-F4R} ##### Mr WATSON: -- Undoubtedly. The production of wealth is one thing, and its distribution another. I share the sentiments of the poet who wrote - >Ill fares the land, to hastening ills a prey, > >Where wealth accumulates, and men decay. We can congratulate ourselves upon the good seasons which have enabled our financial institutions to recover their stability, and upon the fact that money is plentiful, and that while work is not as, plentiful as it might be, there is more employment offering than was obtainable a little time ago; but there still remains the fact that Australia is not progressing as its resources should make it progress. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- The honorable member seems to have joined the " stinking fish " party. {: .speaker-F4R} ##### Mr WATSON: -- So far as I have read, no country offers opportunities for the making of homes equal to those offered in Australia to-day ; but, if we adopt the attitude of the honorable member, and say that nothing more remains to be done, because the Treasurer has shown: a surplus, the POS. tion of our people will not be likely to improve. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- I did not say anything of the kind. {: .speaker-F4R} ##### Mr WATSON: -- The honorable member said that the Budget shows that there is no need for protection, nor for repressive legislation. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- I did not say that. I said that it was an answer to those who demand extreme protection and Socialism. {: .speaker-F4R} ##### Mr WATSON: -- The honorable member said that it showed that there was no need for higher protective duties, on the one hand, nor for repressive legislation which might interfere with the development of enterprise, on the other hand. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- I did not say that. {: .speaker-F4R} ##### Mr WATSON: -- It is a new *role* for the honorable member to express himself as anxious as to the possibility of legislation proving repressive. It seems to me as yesterday when he was one of the chief advocates of legislation to repress the rapacity of individual employers in regard to the great body of the public. In my view there is need for a great deal of legislation. The honorable member said that the Budget shows that there is no need for the proposals put forward by myself on behalf ot the Labour Party for a progressive land, tax. which he condemned as lacking principle and various other valuable elements. In support of his position he advances only the fact that we have temporarily an overflowing Treasury. ' I ask him : Is Australia progressing as it should? Is settlement increasing as it should ? Is land being found for would-be settlers who are already in the country, and will land be available for those to whom we hope to offer inducements to come here? {: .speaker-K99} ##### Mr Johnson: -- It never will be, when men like W. N. Willis can get hold of it a.11. {: .speaker-F4R} ##### Mr WATSON: -- While, in the main, the land transactions to which the New South Wales scandals relate, should not have passed into the hands of those who got it, it is not such as I would select as the choicest for settlement. They were central division lands, mainly in the western part of that division, and were not suitable for farming, although adapted for small pastoral holdings. {: .speaker-L17} ##### Mr Wilks: -- The honorable member does not offer that fact as an excuse for the mal-administration of the Lands Department ? {: .speaker-F4R} ##### Mr WATSON: -- Not at all. But I say that it is idle to suggest that the land which was improperly obtained would have been available tor agricultural settlement if it had not been locked up. With regard to the Budget, it certainly appals me to contemplate the light-hearted manner in which the Treasurer proposes to throw money about. Apparently, he is so imbued with the spirit of the boom prosperity of the State with which he was so long associated that he cannot divest his mind of the idea that our revenue is going to bound along just as it did in Western Australia in the early days of the gold-fields. He does not realize that there is a possibility of a falling off in the revenue. To my idea, however, there is very great danger to be apprehended in that direction. So far as the mere programme of the Government is concerned, I think that we are within measurable distance of the end of our financial tether. If honorable members will look at the expenditure of the last few years, they will see that a steadily-increasing amount has been laid out by the Federal authorities. I am bound to admit that some of the expenditure has been inevitable from the stand-point of policy. We entered upon the payment of the sugar bounties with our eyes wide open, and in other directions there were increases that were impossible to avoid.' Some of these were due to a better recognition of the rights of public servants to fair treatment at the hands of their employers, the people, and some were attributable to other causes. Now we have placed before us a number of proposals for very large increases, which, if agreed to, will raise the total expenditure for the current year up to about £400,000 in excess of the outlay for last year. Setting on one side increases which are inevitable, such as the £130.000 in respect of the sugar bounties and £50,000 proposed to be spent upon the general elections, there are a number of proposals which seem to me to demand close attention. Take, for instance, the additional £77,000 which it is proposed to expend upon the Military Forces. Some four years ago the leaders of different parties in the House came to an understanding - and in the absence of any disclaimer from individuals, we may assume that honorable members were unanimous - that the Military Estimates should be limited to £700,000. That amount was to be exclusive of any votes for special armaments or war materiel of a specific character. Since then we have added ,£96,000 to our Defence Estimates on the account of the Naval Subsidy, and as that increase was approved of by a distinct vote of the House, no exception can be taken to it, so far as the administration is concerned. Since then, however, there have been steady and repeated attempts to increase the vote until we find that the present Estimates exceed the amount previously agreed upon by £80,000. {: .speaker-KFJ} ##### Sir John Forrest: -- The Military Estimates amount to only £676,000, because £200,000 is payable under the Naval Agreement. {: .speaker-F4R} ##### Mr WATSON: -- After allowing for an increase of £96,000 under the naval subsidy, there remains a net addition to the outlay upon the Military Forces of £80,000 over and above the sum previously 'agreed upon. I think that we should be prepared, at the earliest possible moment, to make Something like adequate provision for coastal defence. It is utterly nonsensical for us to spend such a large amount upon our Military Forces, whilst we are making practically no provision for coastal defence. I do not wish to discuss the policy of the Naval Agreement. It is there, and we have to adjust our arrangements in view of the continuance of the agreement for the full period. We must, however, provide for local coastal defence, which the Imperial Squadron on the Australian Station does not pretend to give. The Imperial authorities look upon the squadron as being intended for general defence purposes, and as available for service in the China seas at any moment if occasion should require. Therefore, it seems to me to be in the highest decree suicidal for us to spend no time or money in making provision for the defence of our harbors and coast line. If there is to be any increased expenditure, it should be upon the Naval side of our defence. If the Government had proposed to spend £100,000 or £150,000 per annum in building suitable craft for the protection of our harbors, I should have been very glad to give them all the assistance possible. While, however, remaining silent upon that important aspect of our defences, they propose to increase the estimates for the Military Forces, which, after all, are only our second line of defence, by £80,000. {: .speaker-KFJ} ##### Sir John Forrest: -- There are 50,000 rifles to be provided for. {: .speaker-F4R} ##### Mr WATSON: -- I am not speaking of the expenditure upon rifles or war materiel, but of the annual expenditure upon the training and maintenance of the Military Forces. I make no complaint with regard to the money proposed to be spent in the purchase of rifles or field .guns or ammunition, but I submit that it is altogether unjustifiable to so largely increase the Military Estimates, and leave the Naval side of our defence unprovided for. Apart from the question of spending £100,000 or £1:50,000 per annum upon the development of our Naval defences, there is need for the establishment of an ammunition factorv, a small-arms factory, and the nucleus of an arsenal. All these are items of extra expenditure for which money will have to be found at no distant date. ,1 find that it is proposed to spend an additional £167,000 upon works and buildings. I do not know how far this expenditure may be justified. In some cases. I know that not nearly sufficient care has been exercised by Ministers with regard to expenditure. T know of one case in which, whilst I was in office, I refused to sanction a very large expenditure upon the erection of a new post office, upon the ground that the report of the inspector showed that the existing building was adequate to meet all requirements. Yet the work in question has since been put in hand. {: .speaker-KFJ} ##### Sir John Forrest: -- Where? {: .speaker-F4R} ##### Mr WATSON: -- I do not wish to particularize, but I can give the Treasurer the information later on. {: .speaker-KFJ} ##### Sir John Forrest: -- Probably the necessity for its erection has become more pressing since. {: .speaker-F4R} ##### Mr WATSON: -- /Upon the inspector's report, it was estimated that with a very small expenditure, the old building could be made to serve its purpose for another ten years. There is need for us to carefully scrutinize the items of proposed expenditure under that head. But I wish to draw attention to the fact that the Treasurer estimates .that at the end of the current financial year, he will have a surplus - out of our one-fourth of the net revenue from Customs and Excise which we are empowered to retain under the Constitution - of £311,000. It is well, therefore, for us to give some thought to the other items of expenditure which are practically inevitable, especially m view of the fact that the Government propose to sacrifice a very large sum of money, which is easily collected, and the payment of which is practically felt by nobody. In the expenditure which seems to me to be inevitable, I put nothing down for the establishment of an ammunition factory and a small arms factory. It is impossible for me to estimate how much their establishment would cost, or what sum we should require to spend on their maintenance. But first of all, we have to provide for old-age pensions. The Government tell us that they intend to do something tangible in that direction. I do not know of any particular method of raising money for that purpose which can be counted upon to yield all that is required. I know of no special source which will provide the necessary sum in the absence of contributions from other sources. The cost of providing for oldage pensions is estimated at £1 500,000 annually. .Payment for the transferred properties, it is calculated, will involve us in more than £300,000 per annum. {: .speaker-KFJ} ##### Sir John Forrest: -- Not so much as that, if we adopt the balancing method. {: .speaker-F4R} ##### Mr WATSON: -- If we adopt the balancing method, I admit that the cost will not be so much. {: .speaker-KFJ} ##### Sir John Forrest: -- That is the only method which "we can adopt. {: .speaker-F4R} ##### Mr WATSON: -- Personally, I am in favour of a modification of the proposal which was put forward by **Mr., now** Justice, O'Connor, . when he represented the Government in another Chamber. But, even upon the basis of any reasonable modification of that scheme, a fairly large sum will still have to be taken from the Commonwealth Treasury for some time before those properties can be paid for. Any scheme which is likely to meet with acceptance by the States, will involve us in an expenditure of at least £50,000 annually. {: .speaker-KYD} ##### Mr Poynton: -- What is there to be gained by paying foi those properties? {: .speaker-F4R} ##### Mr WATSON: -- There is nothing to be gained from the stand-point of the Federal authorities ? {: .speaker-KYD} ##### Mr Poynton: -- What is to be gained from the people's stand-point? {: .speaker-F4R} ##### Mr WATSON: -- So far as the people as taxpayers are concerned, it does not matter whether they are paid for those properties or not. But the provision is contained in; our Constitution, and it is extremely doubtful whether the States - if any of them cared to take action - could not compel us to deal with the question of paying for them. {: .speaker-KFJ} ##### Sir John Forrest: -- If we fail to agree the mode of compensation is left to this Parliament to determine. {: .speaker-F4R} ##### Mr WATSON: -- I am aware that in default of any agreement being arrived at, this Parliament has the power to decide the manner in which the debts shall be liquidated. But that does not afford an excuse for Parliament delaying a settlement of the matter. {: .speaker-KFJ} ##### Sir John Forrest: -- We are not delaying its settlement. The States have not been very anxious to make their valuations. {: .speaker-F4R} ##### Mr WATSON: -- At any rate, after the lapse of five years, we ought to have formed some idea of what we are going to do' in the matter. Under the most favorable scheme that we can put forward the transferred properties will involve us in a payment of at least £50,000 annually. The cost of coastal defence I set down at a minimum of £100,000 per annum, in addition to the amount which is already being spent. {: .speaker-KRQ} ##### Mr Skene: -- That sum would not go very far in building the fleet that is necessary. {: .speaker-F4R} ##### Mr WATSON: -- I take it that any scheme which we can adopt in regard to naval defence must be upon the lines of making steady provision in that direction. Personally, I would prefer to see a much larger sum spent, but I recognise that there is not much probability in the near future of our getting more than an additional sum of £100,000 or £150,000 per annum. {: .speaker-DQC} ##### Mr Hughes: -- How many craft could we obtain for that amount? {: .speaker-F4R} ##### Mr WATSON: -- We can get a firstclass torpedo boat for about £20,000, 1 think. {: .speaker-KRQ} ##### Mr Skene: -- I thought that they cost about £60,000. {: .speaker-F4R} ##### Mr WATSON: -- A good torpedo boat can be built for £20,000, but I understand that torpedo destroyers cost somewhere about £60,000. But even if we only spent £100,000 annually, in addition to our present expenditure, it would be better than doing nothing. {: .speaker-KHC} ##### Mr Higgins: -- Could net we hire the vessels ? {: .speaker-F4R} ##### Mr WATSON: -- When I was in office, 1 did suggest to the Admiralty authorities that we would be prepared to hire boats of that description, but for various reasons, they were not able to fall in with the suggestion, and so we must have recourse to building them to meet our own requirements. Then there is the question of the construction of the transcontinental railway. If that undertaking is to be regarded as a possibility, it will involve the Commonwealth in a fairly large deficit for some years after its completion. I do not think that even our optimistic Treasurer will argue that it will pay from the start. {: .speaker-KFJ} ##### Sir John Forrest: -- It would pay within three years of its completion, I think. {: .speaker-F4R} ##### Mr WATSON: -- I do not think so. It would be a most remarkable circumstance if it did. In any case, we should have to face a deficiency in connexion with it. The engineers who reported upon it as men who are accustomed to making estimates of that character, bearing in mind the country which it would traverse, and the population which it would serve at either end, calculated that it would involve us in a loss of £60,000 annually for ten years. I am net arguing that that is a loss which the Commonwealth should not be prepared to face. The New South Wales Government constructed a line of railway down the south coast upon which they lost £60,000 annually for a good many years, and upon which they still lose a very large sum. For the Commonwealth to be called upon to face a similar1 annual loss upon a railway constructed for developmental purposes would be a comparatively small matter. {: .speaker-KFJ} ##### Sir John Forrest: -- I do not think that the loss would be anything like that amount. {: .speaker-F4R} ##### Mr WATSON: -- That is a matter of opinion. I have merely quoted from the testimony of experts. There is no doubt that some loss would have to be faced in connexion with that line, and it is well for us to keep it in mind. Then there is the sugar bounty. The Treasurer estimates that during the current year we shall have to pay about £278,500 in this connexion. There is a very large increase in the sum payable this year, as compared with the amount expended last year, owing to the expected increase in the quantity of sugar produced by white labour. No doubt theTreasurer anticipates that next year the expenditure in that direction will be still larger. As I have said, it is estimated that the expenditure this year, when black labour will be in some measure available for the production of a large proportion of the sugar, will amount to £278,500. But next year black labour will not be available in the same degree, and consequently we shall have a larger expenditure, since every grower who employs white labour exclusively will naturally apply for the bounty. As we receive only £1 out of the £4 per ton Excise duty, and have to pay from the Federal Treasury £3 per ton by way of bounty, it stands to reason that there will be a largely increased demand upon the onefourth of revenue retained by the Commonwealth. I do not know whether the Treasurer has looked ahead to ascertain how far his revenue will be affected in this way. I am inclined to think that, owing to the greater proportion of sugar grown by white labour, he will expend next year at least ^£150, 000 more than he is paying away this year in respect of the bounty. {: .speaker-F4N} ##### Mr Fisher: -- That is to say, the States will get it. {: .speaker-F4R} ##### Mr WATSON: -- Quite so. I am only pointing out that we have ahead a number of commitments: that will affect our power to expend the one-fourth of Customs and Excise revenue to which we are entitled. {: .speaker-KFJ} ##### Sir John Forrest: -- We must try to make the payment a rebate. {: .speaker-F4R} ##### Mr WATSON: -- In the first instance it was passed as a rebate, but the Crown Law officers said that that was unconstitutional. We had therefore to retrace our steps, and describe the payment as a bounty. The right honorable gentleman may find some method of overcoming the difficulty. The leader of the Opposition once said that when he came to a stile over which he could not jump, he crawled round it. In the same way, apparently, the Treasurer thinks that if he runs himself into financial difficulties, instead of meeting them boldly, he will get round them in some peculiar way. {: .speaker-K99} ##### Mr Johnson: -- He has large ideas about money. {: .speaker-F4R} ##### Mr WATSON: -- Evidently. There are some other items of expenditure in respect of which we may expect an increase. We have to remember the natural growth of the Departments. Some of them should grow. They have very important duties to performin the interests of the people, and it is only natural that the number of their officers should be increased as opportunities for benefiting the people present themselves. We have, for instance, such proposals as the establishment of a Bureau of Agriculture in connexion with the Department of Home Affairs, and the taking over of the Department of Meteorology, which will involve an increased expenditure. That increased expenditure is essential to secure increased efficiency. And so in other directions the Departments will naturally grow. We are told by the Government that it will cost something to advertise the Commonwealth in connexion with the immigration proposals ; and a much larger matter which will demand attention in the near future is the taking over of the Northern Territory. I do not know whether the Treasurer has considered how far the taking over of the Territory will detrimentally affect the finances of the Commonwealth. SirJohn Forrest.. - The question has not vet come before me. {: .speaker-F4R} ##### Mr WATSON: -- Every honorable member must be convinced that we are doing a wrong to the people of Australia by allowing that large area to remain in the hands of one State, and practically undeveloped. {: .speaker-KFJ} ##### Sir John Forrest: -- Unoccupied, practically. {: .speaker-F4R} ##### Mr WATSON: -- It is undeveloped, and we are practically holding out an invitation to the hordes of people living to the north of Australia to occupy it. The taking over of such a Territory must inevitably involve for some time a considerable expenditure withoutany immediate result. {: .speaker-KFJ} ##### Sir John Forrest: -- We should need a loan for that purpose. {: .speaker-F4R} ##### Mr WATSON: -- The improvident financieralways falls back on a loan. {: .speaker-KFJ} ##### Sir John Forrest: -- We could not provide for the development of the Territory out -of the revenue. {: .speaker-F4R} ##### Mr WATSON: -- I hope that the Commonwealth will not have to resort to bor rowing for some years. It is all very well for the right honorable gentleman to speak in this light-hearted fashion about resorting to loans, whilst at the same time he is prepared to throw revenue into the sea. {: .speaker-DQC} ##### Mr Hughes: -- Do not say that. {: .speaker-F4R} ##### Mr WATSON: -- Practically that is what is proposed to be done. {: .speaker-KFJ} ##### Sir John Forrest: -- Why does the honorable member say that? {: .speaker-F4R} ##### Mr WATSON: -- We have to face the enormous prospective expenditure to which I have briefly alluded, and vet the Ministry are quite prepared to forego a revenue of£300,000per annum now raised by the Post and Telegraph Department in a way that has, aroused no dissatisfaction on the part of the people. {: .speaker-KFJ} ##### Sir John Forrest: -- We must observe the Federal spirit,and give some conveniences to the people. {: .speaker-F4R} ##### Mr WATSON: -- I agree with the right honorable gentleman that we should afford conveniences to the people ; but I am afraid that what he now terms a proposal to grant a convenience to the people will be used as a reason for denying conveniences to those who most deserve them, and who most need assistance at the hand of the Commonwealth. What is the invariable excuse for refusing to grant a request by country members for increased postal facilities? When an honorable member asks for an additional mail service to a collection of settlers on the rim of civilization, he is told that it will not pay, or that the Department have not sufficient money for that purpose. I am prepared to say that if the average city man were asked to choose between the granting of increased facilities to settlers in the back-blocks on the one hand and penny postage throughout Australia on the other, he would declare for the former. {: .speaker-KFJ} ##### Sir John Forrest: -- The residents of nearly all the towns in the different States have penny postage, and those in the country do notenjoy that privilege. {: .speaker-F4R} ##### Mr WATSON: -- Those living within the radius of towns, or within a certain area in country districts, in most of the States today enjoy penny postage. {: .speaker-KFJ} ##### Sir John Forrest: -Why should people in country districts be denied that which is given to those residing in the towns ? {: .speaker-F4R} ##### Mr WATSON: -- The denial of penny postage throughout Australia is. a small matter when compared with the denial to country districts of facilities in the way of postal and telephonic extension' to which they are justly entitled. The complaint will possibly come from those who to-day are quite prepared to pay the additional penny per letter. {: .speaker-KFJ} ##### Sir John Forrest: -- It is unfederal to require one man to pay 2d. for a letter, and another to pay only1d. {: .speaker-F4R} ##### Mr WATSON: -- I think that the right honorable gentleman is allowing himself to be swayed by a number of sentimental considerations which need have no place in our deliberations with respect to the financial problem. The suggestions he has made as to falling into line with the rest of the civilized world and other vague generalities of that sort do not seem, from my stand-point, to be of importance in the consideration of a matter that is, after all, one of practical working politics. {: .speaker-KFJ} ##### Sir John Forrest: -- We must cast our bread upon the waters. {: .speaker-F4R} ##### Mr WATSON: -- I am afraid that it will bemany days before this particular bread will return to us. I have no objection *per se* to penny postage. If we were makingmoney out of the Post and Telegraph Department I should say at once, " Reduce the postage, and give increased facilities in every direction." But as a. matter of fact, as has already been shown, the Department is to-day losing very considerably. As the honorable member for Parramatta mentioned, . it has lost £1,750,000 in five years, because, although the Postmaster-General talks of his Department being apayable one, he knows full well that it can only be said to be paying when we leave out of account the interest on the capital expenditure that has been incurred in respect of it. The immense capital sum that is being spent on the Department generally returns no interest, and is, therefore, contributed by the taxpayers generally for the benefit of those who use the Post Office. {: .speaker-JX7} ##### Mr Austin Chapman: -- Surely the honorable member does not say that the Post Office ought to be made to pay ? {: .speaker-F4R} ##### Mr WATSON: -- Not at all. The Post Office should be run in the interests of the people, and afford ascheap and easy facilities as possible. But. while that is so, we ought to exercise some discretion as to the sacrifice of an immense sum of money, such as is proposed on the present occasion. Mir. Austin Chapman. - Wouldthe honorable member mind saving what he would dointhe case of Victoria? {: .speaker-F4R} ##### Mr WATSON: -- I should let Victoria remain as at present. {: .speaker-JX7} ##### Mr Austin Chapman: -- Does the honorable member not approve of uniformity? {: .speaker-F4R} ##### Mr WATSON: -- I do not think that uniformity is so essential as seems to be supposed. In my opinion, it does not matter particularly, so far as the people of the Commonwealth are concerned, whether there is absolute uniformity or not. It would be preferable, I admit, to have uniformity, if it could be obtained without any undue sacrifice; but when it means giving up £300,000 of revenue-- {: .speaker-KFJ} ##### Sir John Forrest: -- Not so much as that. {: .speaker-F4R} ##### Mr WATSON: -- With all due deference to the right honorable gentleman, I prefer to accept The opinion of experts, rather than his opinion, or that of any one else. {: .speaker-KFJ} ##### Sir John Forrest: -- The experts have not taken into account any increase of business. {: .speaker-F4R} ##### Mr WATSON: -- What does the increase of business amount to? {: .speaker-KFJ} ##### Sir John Forrest: -- A good deal. {: .speaker-F4R} ##### Mr WATSON: -- Every one know that there were special circumstances in Victoria, where, owing to the protectionist policy, there were manufactures in proportion largely in excess of those of the other States, and, because of its central position, the State had a larger share of the distributing business than fell to her neighbours after Federation. The increase in the Victorian business is largely accounted for by the fact that Federation opened up *new* markets which previously had not been available. {: .speaker-KED} ##### Mr Kennedy: -- And then there must be added payment for services which was not received prior to Federation. {: .speaker-F4R} ##### Mr WATSON: -- I am glad that the honorable member has reminded me of the fact that before Federation all departmental letters were franked through the post, whereas now every letter has to be paid for, as, for instance, the enormous number of communications connected with the Electoral Department. During the short period I was at the Treasury I discovered that on the Estimates for thatyear was an item of £16,000 for postage in connexion with electoral business. That was a direct contribution in regardto one Department only ; and the greater part of that postage was in Victoria, from whence most of the communications were sent to the departmental branches throughout Australia. {: .speaker-KFJ} ##### Sir John Forrest: -- Why should the people of Victoria have an advantage over those of New South Wales ? {: .speaker-F4R} ##### Mr WATSON: -The right honorable gentleman knows that no figures have been submitted in regard to New South Wales ; but, if there had been, I am inclined to think they would have disclosed quite as large an increase as we find in the case of Victoria. {: .speaker-KFJ} ##### Sir John Forrest: -- The people of Victoria have an advantage over those of New South Wales and all other States. {: .speaker-F4R} ##### Mr WATSON: -- The people of Victoria have to pay for the loss on penny postage at present. The large proportion of the increased business in Victoria is due to the expansion consequent on Federation, while a fair amount is due to the fact that the Commonwealth Departments nowpay postage. {: .speaker-KED} ##### Mr Kennedy: -- And the States Departments also. {: .speaker-F4R} ##### Mr WATSON: -- Both Commonwealth and States Departments have now to pay postage. Itwill be a proper thing for thePostmaster-General to analyze the figures, and ascertain exactly what the departmental postage amounts to. It could be easily ascertained how much the States Departments contribute to the postal revenue now, as compared with the contribution before Federation. {: .speaker-JX7} ##### Mr Austin Chapman: -- Would the honorable member apply the same argument to the reduction in the charges for Tasmanian cable messages? {: .speaker-F4R} ##### Mr WATSON: -- No; I think we ought to treat Tasmania as we treat the other States. There are a number of long land lines which do not pay. and the loss on which is borne by the Commonwealth generally ;and if there is a short section of cable that is not remunerative, I do not seewhy there should be any distinction drawn between that and non-paving lines on the Continent. I see no difference in principle; and, therefore, I say that in this connexion Tasmania should be placed On the same basis as are the other States. {: .speaker-JX7} ##### Mr Austin Chapman: -- That is uniformity. {: .speaker-F4R} ##### Mr WATSON: -- It is uniformitv in that regard,simply because it would be unfair todeny to Tasmania a privilege which is granted to other. States. But in the caseofVictoria, thepennypostage ispaid for by the people of that State.I doubt very much whether the Treasurer and my self will see the end of the bookkeeping system for some little time to come. We may talk about the desirability of abolishing the system, but I see no prospect of any alteration for a long tune ahead. {: .speaker-K99} ##### Mr Johnson: -- We are surely not going to have the system in perpetuity ? {: .speaker-F4R} ##### Mr WATSON: -- So long as there is such a marked disparity between the contribution per head of the people of Western Australia, and the contribution of the people of Tasmania, for instance- {: .speaker-KHC} ##### Mr Higgins: -- The Western Australian contribution is going down rapidly. {: .speaker-KFJ} ##### Sir John Forrest: -- It is still double that of Tasmania. {: .speaker-F4R} ##### Mr WATSON: -- There is an enormous difference still, and the bookkeeping system must be continued. {: .speaker-F4S} ##### Mr JOSEPH COOK:
PARRAMATTA, NEW SOUTH WALES · FT; ANTI-SOC from 1906; LP from 1910; NAT from 1917 -- Tasmania is getting close up. {: .speaker-F4R} ##### Mr WATSON: -- Tasmania is still a long way behind Western Australia with a contribution of, I think,£116s. per head, as against£3 odd per head. {: .speaker-JZT} ##### Sir Philip Fysh: -- The difference is only about 3s. 6d. per head. {: .speaker-F4R} ##### Mr WATSON: -- Does the honorable member say that that is all the difference between the contribution per head of Tasmania . and the contribution per head of Western Australia? {: .speaker-JZT} ##### Sir Philip Fysh: -- I am leaving out Western Australia, and comparing Tasmania with the other States. {: .speaker-F4R} ##### Mr WATSON: -- There is not such a difference on that comparison; but the people of Western Australia have a reasonable and proper objection to the money which they contribute being divided amongst the people of the other States. {: .speaker-DQC} ##### Mr Hughes: -- Then they are not Socialists ? {: .speaker-F4R} ##### Mr WATSON: -- They are not Socialists to that degree. {: .speaker-KFJ} ##### Sir John Forrest: -- Western Australia cannot afford to lose the money. {: .speaker-F4R} ##### Mr WATSON: -- What I want to say is that, so far as the Post and Telegraph Department is concerned, we already grant reasonable facilities. We have the cheapest telegrams, I think, that are to be found anywhere in the world so far as I have been able to ascertain. {: .speaker-K8L} ##### Mr Thomas: -- There are sixpenny telegrams in England. {: .speaker-F4R} ##### Mr WATSON: -- Considering the distances and our population, I think our telegrams are cheaper than telegrams else- where. ' I do not know any place in the world where it is possible to telegraph sixteen words for is. for such a distance as that from Tasmania to the Gulf of Carpentaria or Port Darwin, or from Brisbane to _ Perth. That in itself is an extremely cheap rate; and 1 am doubtful whether we did not go too far in that direction. {: .speaker-KFJ} ##### Sir John Forrest: -- The cheap rate is very useful. {: .speaker-F4R} ##### Mr WATSON: -- In any case, great facilities are granted to the people in this way. Our mail services generally are, very properly, I think, even at a loss, taken right to the doors of our back country selectors, and further facilities in this connexion should be granted. But no reason has yet been advanced in favour of penny postage, other than the extremely illogical or sentimental reason that its adoption would place us in line with the rest of the world. Our expenditure must inevitably expand almost by leaps and bounds; and in view of the fact that a vast amount of administrative work, which should be taken over by the Commonwealth, has not yet been taken over, we are not justified in giving up the £200,000 odd, " which is the modest estimate of the Postmaster-General of the loss likely to result from the adoption of the penny postage. {: .speaker-KFJ} ##### Sir John Forrest: -- The PostmasterGeneral's estimate is less than that. {: .speaker-F4R} ##### Mr WATSON: -- The PostmasterGeneral estimates the loss at ,£209,000. {: .speaker-KFJ} ##### Sir John Forrest: -- That is my estimate. - {: .speaker-K99} ##### Mr Johnson: -- That would pay our contribution to the Naval Subsidy. {: .speaker-F4N} ##### Mr Fisher: -- I wish we could knock off that subsidy. {: .speaker-F4R} ##### Mr WATSON: -- I trust, therefore, that, in spite of the fact that the Treasurer points to an expanding revenue, honorable members will hesitate before they approve of any such scheme of penny postage. We have all those additional items of expenditure which have been mentioned, and, in addition, the Government say that within a short time they intend to introduce a Tariff that will have greater protective incidence than the present Tariff. That must mean a falling off in revenue. If it does, what becomes of the glowing anticipations of the Treasurer? If the revenue contracts, where is he going to find the money to meet this inevitable expenditure? Is ha going to confess to the people of Western Australia that the transcontinental railway will have to stand aside because there is no possibility of meeting the loss in connexion with it? {: .speaker-K8L} ##### Mr Thomas: -- He will - fall back upon direct taxation. {: .speaker-F4R} ##### Mr WATSON: -- I am extremely doubtful whether he will ; but I see no chance whatever of raising sufficient money by any. scheme of direct taxation that I can contemplate, to carry out the things which I have enumerated, and which I regard as essential for the proper development of this Commonwealth. Even though we do obtain some help from direct taxation, we shall still require all the legitimate revenue we can get hold of, if we are to carry out the many functions which are demanding attention at our hands. {: .speaker-K8L} ##### Mr Thomas: -- We have hot touched direct taxation yet. {: .speaker-F4R} ##### Mr WATSON: -- I know that; and when the Commonwealth does touch it, we shall have to supplement it before we can carry out the proposals I have indicated. I do not intend to say more with regard tothe Budget, but there are one or two other matters to which I should like to refer, and upon which the Treasurer touched in his speech. He mentioned the question of the States debts. I wish to say that I for one appreciate highly the care that has been expended in the consideration of this question, both by the Treasurer and bv the honorable member for Mernda. The two memoranda submitted by those gentlemen are highly interesting, and give evidence of most careful thought having been devoted to the question. I do not think that any one can deny them that meed of justice. I admit at once that there is an extreme difficulty in dealing in any satisfactory way with a problem with so many facets as this presents. For myself, I do not pretend for a moment to be a financial expert. I approach the question as a layman. But I am sorry to say that I cannot agree with either of the proposals that has been put" forward up to the present. The Treasurer proposes that we shall take over the debts as they mature. {: .speaker-KFJ} ##### Sir John Forrest: -- That we should take power to assume responsibility for them when they are converted or redeemed. {: .speaker-F4R} ##### Mr WATSON: -- So far as that bare proposal is concerned, I am quite at one with the right honorable gentleman. It has always appeared to me that it would be extremely unwise on our part -to assume responsibility for the debts, even to the extent that theConstitution permits us to do - that is for the debts as existing at the date of the establishment of the Commonwealth - in any lump fashion. I remember that when the Convention was debating this point, the presentleader of the Opposition stated, as his opinion, that to take over the States debts in one lump, or to assume responsibility for them as a whole, would mean making a present to the bond-holders of an immense sum of money, represented by the difference between the price that could be obtained for Commonwealth bonds and that which could be obtained for the bonds of the States. ' {: .speaker-KFJ} ##### Sir John Forrest: -- The honorable member will notice that the financial authorities in London are of the same opinion. {: .speaker-F4R} ##### Mr WATSON: -- Quite so. When that statement was made by the right honorable member for East Sydney in 1897, it struck me as being an extremely sensible remark. If we say that we as a Commonwealth will pay the interest on the debts of the States, and will be responsible for them when the money becomes due, we assume the whole responsibility for them. {: .speaker-KNI} ##### Mr Harper: -- How much is to be paid for them when they are due? {: .speaker-F4R} ##### Mr WATSON: -- That is not the question. We pay par for them when they become due unquestionably; but does not the honorable member see that if we took over the debts to-morrow - if we assumed responsibility for them to-morrow - it would not be a question of how much we should have to pay, but of how much we were presenting free of encumbrance to the bond-holders, who are now the creditors of the States? {: .speaker-KNI} ##### Mr Harper: -- I cannot see that at all. {: .speaker-F4R} ##### Mr WATSON: -- It means, it seems to me, that we forgo the opportunity of making the better terms which we have a right to expect from a Commonwealth security. {: .speaker-KNI} ##### Mr Harper: -- That idea prevailed when it was expected1 that the Commonwealth would convert on a large scale. {: .speaker-F4R} ##### Mr WATSON: -- AsI understand the proposal of the Treasurer, it is that we should take legislative power to convert and renew maturing loans. Well, I quite agree with him in that. I mentioned my belief in that method two or three times during the recess. At Hobart, for instance, and also at Adelaide, I spoke in favour of that course being taken. ButI disagree from the Treasure in thinking that that can be done without an amendment of the Constitution. {: .speaker-KHC} ##### Mr Higgins: -- Hear, hear; quite right. {: .speaker-JZT} ##### Sir Philip Fysh: -- The Treasurer, in his memorandum, proposes to amend the Constitution. {: .speaker-F4R} ##### Mr WATSON: -- No; not in this regard. The Treasurer says that legislation by this Parliament is sufficient for that; but he proposes to amend the Constitution in another matter. {: .speaker-KFJ} ##### Sir John Forrest: -- That is in taking over the whole of the debts. {: .speaker-F4R} ##### Mr WATSON: -- Yes.. . {: .speaker-KFJ} ##### Sir John Forrest: -- I think the Constitution is quite wide enough for what I propose. {: .speaker-F4R} ##### Mr WATSON: -- I do not think so. Section 105 lays it down that the Parliament may take over from the States the public debts as existing at the establishment of the Commonwealth, or a proportion thereof, according to the respective numbers of the people as shown by the latest statistics of the Commonwealth. The Treasurer will see, I think, that there are only two alternatives - (1) To take over the whole of the debts as they existed on the 31st December, 1901 ; ' or (2) to take over a certain proportion of the debts of each State. I contend that neither of those two courses would be wise. Therefore, in my view, an amendment of the Constitution is essential before the best course can be taken ; that is, that Parliament - whether Parliament sees fit to delegate that power afterwards to the Treasurer is another question - should be endowed with power to take over as much or as little of the debts of each State as it thinks desirable. Theremay be a difference in regard to the details, but the main thing is that the Federal Treasurer, with the authority of Parliament, should be enabled to step into the market at a favorable moment if he wishes to convert, and that the same authority should be able to step in and buy State bonds, keeping them up to a certain level, or taking an opportunity of, perhaps, saving some hundreds of thousands of pounds because of a temporary fall in price ; and, on the other hand, there should be power to renew on Commonwealth security State loans' as they mature. {: .speaker-KFJ} ##### Sir John Forrest: -- We have thatpower under the Constitution. {: .speaker-F4R} ##### Mr WATSON: -- I do not think so.It must be done in certain regular proportions. The Treasurer must see that, if in Victoria a £5,000,000 loan, were falling due next month, it might be - it would be, I think - desirable for the Commonwealth to take it over and renew it on its own security, but it would hamper the business to say that, at the same time, we should make ourselves responsible for a similar proportion of the debts of every other State. {: .speaker-KFJ} ##### Sir John Forrest: -- That is not proposed at all. {: .speaker-F4R} ##### Mr WATSON: -- That is what the. Constitution provides. {: .speaker-KFJ} ##### Sir John Forrest: -- The Constitution says that the Commonwealth may take over the debts which had been incurred at the time it was established; but we propose to amend the Constitution, with a view to take over the whole of the debts. {: .speaker-F4R} ##### Mr WATSON: -- As a layman, I speak with diffidence, but I think the Treasurer will find that a further amendment of the Constitution will be required. {: .speaker-KFJ} ##### Sir JOHN FORREST:
SWAN, WESTERN AUSTRALIA · PROT; WAP from 1906; LP from 1910; NAT from 1917 -- I am advised not. {: .speaker-F4R} ##### Mr WATSON: -- The right honorable gentleman may be a much better authority on this point than I am. {: .speaker-KFJ} ##### Sir John Forrest: -- The terms of the provision in the Constitution are pretty wide. {: .speaker-F4R} ##### Mr WATSON: -- As I read the Constitution, there seems no doubt but that we are confined to two courses, neither of which, in ray view, would be wise, or likely to prove economical. {: .speaker-K99} ##### Mr Johnson: -- In what way does the honorable member suggest it ought to be done? {: .speaker-F4R} ##### Mr WATSON: -- What I suggest to the Government is that, before this session closes, they should put forward a proposal to amend the Constitution so as to give this Parliament thepower to deal with the debts in the manner I have indicated. {: .speaker-KFJ} ##### Sir John Forrest: -- We may do that yet. {: .speaker-F4R} ##### Mr WATSON: -- I think that it ought to be done, so as to allow the Commonwealth to start at once with the renewal of maturing loans, and not to bother about the proportion which it is to take over. {: .speaker-K99} ##### Mr Johnson: -- That would simplify matters a good deal. {: .speaker-F4R} ##### Mr WATSON: -- I think so. The first thing to do is to get legislative power to deal with this big question in a way which would commend itself to the Parliament. If wegot that power there would be no trouble at all, I think. We should soon learn, from experience, what would be the best thing to do. In the meantime, the question of. renewing maturing loans would be quite enough for us to take up as a problem. If we were to deal with all loans as they matured we should gradually reach a position when, as was indicated by the honorable member for Mernda, the financial conditions as between the different States would have so changed that there would be no need to consider these questions at all. He put forward many other admirable suggestions. For instance, his proposal to establish a sinking fund, and to place the money in the care of debt commissioners - that is, permanent individuals, with the assistance of the Treasurer, but in the main independent of politics- is an excellent suggestion. I do not think that any sinking fund, would be safe so long as it was at the mercy of a temporarily embarrassed Treasurer. {: .speaker-KRQ} ##### Mr Skene: -- Or any one who could lay his hands upon it. {: .speaker-F4R} ##### Mr WATSON: -- Exactly, and I do not suppose that any one of us could be trusted in that regard. To secure ourselves against temptation, it would be wise to create a body which, in a measure, would be independent of Parliament, and which we could trust to perform this very important duty. It need not cost a great sum, and it would be a wise course to take. {: .speaker-KNI} ##### Mr Harper: -- It would not cost very much. {: .speaker-F4R} ##### Mr WATSON: -- No. Then, with regard to the right of the States to borrow, Ido not think that a great deal can be said for the suggestion which the honorable member put forward in that regard. It is quite hopeless to expect that any great benefit would result from the Commonwealth taking over the States debts if the States are to continue as competitors in the London market. For that reason, there ought to be some constitutional barrier placed in the way of their' appealing to that market, perhaps in competition with the Commonwealth acting on behalf of all the people of Australia. {: .speaker-KYD} ##### Mr Poynton: -- They should borrow through the Commonwealth. {: .speaker-F4R} ##### Mr WATSON: -- Yes. I am inclined to think that some such arrangement would be a wise one. There is a great need for early action to be taken in the direction of amending the Constitution. As the honorable member for Mernda very properly said, it is becoming a matter of reproach against the Parliament,- that, although this question has been in our hands for so long, we have done actually nothing towards its solution, except to talk. {: .speaker-KFJ} ##### Sir John Forrest: -- We have had three conferences. {: .speaker-F4R} ##### Mr WATSON: -- Yes, but we have taken no active steps in the direction of solving the problem. {: .speaker-KFJ} ##### Sir John Forrest: -- We are commencing now. {: .speaker-F4R} ##### Mr WATSON: -- The honorable member might just as well say that we commenced when the honorable member for Balaclava, as Treasurer, put forward a scheme the details of which had much to commend them, but we got no further ; and so we are likely to go on. I would urge upon the Government that the first step to be taken is to secure such an amendment of the Constitution as would allow a freer hand to Parliament than it possesses. There is another aspect of. this financial question which I think merits a little consideration, and that is the suggestion of the Treasurer to get over the operation of trie Braddon section. If, as I understand, it is put forward as a matter of Government policy, I am very sorry indeed that that course has been adopted. The scheme, as was pointed out by the honorable member for Mernda, seems to be so arranged that the Commonwealth ' would take all the risk of loss, while the States would take all the chances' of profit. {: .speaker-KFJ} ##### Sir John Forrest: -- We do not consider that there would be any risk. {: .speaker-F4R} ##### Mr WATSON: -- I am inclined to think that the right honorable gentleman is unduly optimistic in that regard. {: .speaker-KFJ} ##### Sir John Forrest: -- It is quite safe, we think. {: .speaker-F4R} ##### Mr WATSON: -- I notice that despite all his experience as a Treasurer, it never strikes the right honorable gentleman that it is a wise thing to start in a fat year to build up a reserve which would tide us over the lean year, which must inevitably come.' {: .speaker-KFJ} ##### Sir John Forrest: -- Yes; we are purposing to do that under this scheme. {: .speaker-F4R} ##### Mr WATSON: -- I do not understand that. {: .speaker-KFJ} ##### Sir John Forrest: -- It is proposed to have independent finance, and not to return any surplus of the Commonwealth onefourth to the States. {: .speaker-F4R} ##### Mr WATSON: -- This print must be rather badly arranged - by the typesnatchers, I suppose. {: .speaker-KFJ} ##### Sir John Forrest: -- No; the honorable member has not, I think, understood it properly. {: .speaker-F4R} ##### Mr WATSON: -- As I understand it, the Commonwealth' is to start with a fixed payment to the States from the end of 1910. The only reason which can be given for adopting a fixed payment is that it should take effect immediately. What is the objection to the Braddon section? The objection - is that it unduly hampers the Parliament of the Commonwealth in the exercise of the functions intrusted to it by the people of the States. Apart from that, there is no objection to the section. Those of us who object to it say that we are " cabin'd, cribb'd, cornfin'd," because it lays down that the Commonwealth may use only one-fourth of the net revenue from Customs and Excise duties. On principle, I, for one, object to any constitutional provision which ties the hands of the people in .. future. I object on principle. I have been prepared for some time past to support a proposal for the substitution of a fixed payment for the returns under the Braddon section, but merely as the lesser of two evils. The Treasurer wishes to provide for a fixed payment after the termination of the Braddon provision. This Parliament, however, representing the broader aspirations of the people of Australia, will have the right to please itself as to what it will do with the Commonwealth revenue after the Braddon provision has ceased to have effect. At the end of 1910 the Parliament will be free from the restrictions imposed by the Braddon section. The Treasurer wishes to make provision for a fixed payment, to take effect after that date ; but I shall resist that proposal with all the energy of which I am capable. {: .speaker-KFJ} ##### Sir John Forrest: -- We cannot provide for a fixed payment earlier, because of the Braddon provision. {: .speaker-F4R} ##### Mr WATSON: -- A fixed payment has been suggested to the Premiers of the States as something which could be substituted for the Braddon provision, to take effect at once, which would give them asecurity they do not now possess. The payment need not necessarily be the *payment* of a fixed sum ; it mav be a fixed proportional amount. But, if substituted for the Braddon provision, it would give us a free hand so far as the expenditure of the balance of our revenue was concerned. {: .speaker-KFJ} ##### Sir John Forrest: -i have not heard anything about any proposal for the repeal of the Braddon provision. {: .speaker-F4R} ##### Mr WATSON: -- Then the right honorable gentleman has been inattentive on some occasions. {: .speaker-KFJ} ##### Sir John Forrest: -- The existence of the Braddon provision is one of the conditions under which the States federated. {: .speaker-F4R} ##### Mr WATSON: -- In New South Wales, one of the chief objections taken to the draft Constitution was that it contained the Braddon provision. I do not think that the people are fond of it. They object to it as strenuously now as they did seven years ago. {: .speaker-KFJ} ##### Sir John Forrest: -- The members of the Convention desired that the Braddon provision should have perpetual effect. {: .speaker-F4R} ##### Mr WATSON: -- Fortunately for the welfare of Australia, their wishes will not be carried out. {: .speaker-KFJ} ##### Sir John Forrest: -- We must keep to the bargain or substitute something equally good in its place. {: .speaker-F4R} ##### Mr WATSON: -- I am prepared to do so; but if the people of Australia are prepared to make the constitutional change necessary to alter this arrangement, I shall beready to help them. {: .speaker-KFJ} ##### Sir John Forrest: -- I should not advise it unless every one is agreed as to its expediency. {: .speaker-F4R} ##### Mr WATSON: -- If the Treasurer intends to substitute a fixed payment for the Braddon provision only after 1910, why does he trouble us with the proposal now, when so many pressing problems are awaiting solution? {: .speaker-KFJ} ##### Sir John Forrest: -- Surely the honorable member does not object to my action in making plans for the future ? {: .speaker-F4R} ##### Mr WATSON: -- I do not believe in meeting the devil half way. The right honorable gentleman proposes to pay to the States annually for ten years after 31st December, 19 10 - >A fixed sum equal to the average annual amount of three-fourths of the. net revenue from Customs and Excise. That means, broadly, that we shall continue to pay what we are now paying. {: .speaker-KFJ} ##### Sir John Forrest: -- Yes; butwe should not return any portion of the remaining one-fourth, as we do now. {: .speaker-F4R} ##### Mr WATSON: -- This is the second proposal - >If three-fourths of the total net revenue received by the Commonwealth from Customs and > >Excise in any one year after 31st December, 1910, exceeds the aggregate amount of the annual fixed sum guaranteed to all the States, any such sum in excess to be distributed among the States *per capita.* There it is provided that any surplus is to be returned to the States. {: .speaker-KFJ} ##### Sir John Forrest: -- But we shall have one-fourth intact, which is not the case now. {: .speaker-F4R} ##### Mr WATSON: -- The right honorable gentleman ignores the fact that the onefourth would be mortgaged up to the hilt. Most of the expenditures to which I alluded the other night are inevitable, and will cause the one-fourth to disappear. {: .speaker-KFJ} ##### Sir John Forrest: -- Even admitting that that may be so, there is a third proposal. {: .speaker-F4R} ##### Mr WATSON: -- The third proposal is that- >After 31st December, 1910, the Commonwealth may impose additional Customs and Excise duties for specific purposes, and may specially appropriate and retain and "earmark" the whole of the revenue. There are to be no duties for specific Commonwealth purposes until after 19 10. Everything involving expenditure of importance must wait until then. The right honorable gentleman is so anxious about the States, and so fearful of building up a reserve fund in the interests of the Commonwealth, to enable it to tide over lean years, that he insists that - >If any surplus remains in any year after providing for such specific purposes from the revenue derived from such special appropriations, three-fourths of the surplus to be annually returned to the Statesper *capita.* {: .speaker-KFJ} ##### Sir John Forrest: -- We shall keep, our one-fourth. {: .speaker-F4R} ##### Mr WATSON: -- But there would not be any balance. {: .speaker-KFJ} ##### Sir John Forrest: -- There would be a balance if specific duties were levied. {: .speaker-F4R} ##### Mr WATSON: -- I do not think that the Treasurer can indicate specific duties which would yield anything like enough to provide an old-age pensions fund, for instance. The Government's proposals in regard to the alteration of the Tariff, so far as they can be understood, make it unlikely that the revenue from Customs duties will increase. Every step in the direction of higher protection should, and must, mean a decrease in revenue. {: .speaker-KFJ} ##### Sir John Forrest: -- But population will increase. {: .speaker-F4R} ##### Mr WATSON: -- If the population grows the charges on the Federal Government will increase, quite apart from any additional Departments that may be taken over by the Federation. The charges in connexion with the existing Federal Departments will grow at least in proportion to any increase of population. I should like to see submitted to the electors by means of a referendum the question of whether we should not have the power to deal with this question at a date earlier than that indicated by the Treasurer. I do not, for a moment, advocate that the States shouldbe left absolutely in the lurch. Indeed, I am quite prepared to make something like reasonable provision with respect to their finances for a considerable time ahead. But I contend that it is against the interests of the Commonwealth and of the people of Australia that we should be bound down in an iron-clad fashion as at present by the Braddon section. I understood the Prime Minister to suggest in Sydney that the fixed payments to the States should begin at once. I had no idea that they were proposed to be entered upon only at the expiration of the Braddon section. {: .speaker-KNI} ##### Mr Harper: -- If we paid the interests on the States debts we could easily overcome the difficulty, because we should absorb the money. {: .speaker-F4R} ##### Mr WATSON: -- That would introduce another complication. If we forthwith assumed the responsibility for the States debts - setting on one side the question of whether that would be a wise financial operation, and whether we could not make a more profitable arrangement - a complication would arise, because the interest charges in one State exceed by£750,000 the amount of Customs and Excise revenue to which the States are entitled. {: .speaker-KNI} ##### Mr Harper: -- The States would have to pay that amount in excess to us, instead of to their creditors. SirJohn Forrest. - The proposal made at the Hobart Conference was that the operation of the Braddon section should be extended until 1920. {: .speaker-F4R} ##### Mr WATSON: -- Yes, and I took every possible opportunity to denounce that proposal. SirJohn Forrest. - My proposal is better than that. {: .speaker-F4R} ##### Mr WATSON: -- If is so little better that it is not worth marine an attempt to carry it into effect. Ihopethat Parlia ment will never consent to extend the operation of the Braddon section, or to doanything that would have the effect of hampering the activities of the people in any direction. I am speaking quite apart from any narrow party aspect of the caseIt is with me a basic principle that, oncethe people have made up their minds, they should be allowed to go in whatever direction they desire in the matter of legislation. If they wish to become free-traders, well and good; if they desire to becomeprotectionists, also well and good. They have a perfect right to please themselves as to the manner in which they raise their revenue, whether it be by means of Customs and Excise duties, or by direct taxation. The people should be allowedthe utmostfreedom, and they cannot exercise perfect freedom underthe Braddon section. {: .speaker-K99} ##### Mr Johnson: -- The best way in which to get rid of the Braddon section is to adopt an absolutely free-trade policy. {: .speaker-F4R} ##### Mr WATSON: -- The honorable member's associates have never voted for, nor even advocated, absolute free-trade, so Far as the Federation is concerned. If the honorable member were ready to lead a crusade in favour of absolute free-trade and direct taxation, a number of honorable members who are not behind his leader would be ready to support him. {: .speaker-K99} ##### Mr Johnson: -- I am very pleased to hear it. {: .speaker-F4R} ##### Mr WATSON: -- It would, however, be rather a novelty for any Honorable member on that side of the Chamber to show that he had the courage of his convictions. We are in danger of being led into a serious dilemma. We shall have to provide for a number of items of expenditure which seem inevitable, and even desirable, in the interests of the people as a whole, and with these possible commitments right ahead of us, it would be unwise to forego a large source of revenue in the manner proposed in the Budget. I hope, therefore, that when we discuss the Estimates in detail, the Committee will insist upon considerable modifications of the proposals embodied in the Treasurer's statement. {: #subdebate-7-0-s5 .speaker-KHC} ##### Mr HIGGINS:
Northern Melbourne -- I have had the advantage of reading the speech of the Treasurer, and of likening- to the thoughtful and valuable contributions of the honorable members for Merndaand Bland. I am pleased that, after a long interval of talking against time, honorable members are again alert to the importance of transacting public business. The Treasurer has adopted a policy upon lines similar tothose suggested by me during the previous Budget debate, and has approached more closely to a solution of the problem than has any of his predecessors in office. However we may differ with regard to the details of his proposal, there is no doubt that the right honorable gentleman has applied his mind to this matter, and has contributed some valuable suggestions. I am glad to gather from the Prime Minister that there is no truth in the statement published in the newspapers this morning to the effect that he had stated that no proposal would be made for taking over the States debts until 1910. If that were true, this would be nothing more than a mere academic debate. I think that the Prime Minister, and the honorable member for Mernda. recognise that the question of reducing the burden of interest payments upon loans is of tremendous and immediate importance. For instance, if we could reduce the rate of interest payable on our loans by1/2 per cent., we should save the people of Australia over £:1 , 000,000 per annum. If we could reduce the interest charge by 1 per cent., we should lighten the burden of the taxpayers by over £2,100, 000 per annum. A reference to the Budget papers will show that next year £5,000,000 will have to be provided for the repayment of loans. In the following year, £7,000,000, in the next year, £3,000,000 ; in the succeeding year, £5,000,000 ; and in the ensuing twelve months, £6,000,000or £7,000,000, will have to be found for the renewal of loans. Thus, every year large loans are falling due, and the whole question will have to be tackled. If the situation is not faced by the Commonwealth, the States must act on their own behalf under all the disadvantages attached to having to go into the London market as competitors, without the backing of the Commonwealth. This problem can be dealt with, irrespective of any amendment of the Braddon section. That provision in the Constitution is an important one, but its amendment is not essential to enable the Commonwealth to take over the States debts. The Braddon section provides that the three-fourths of the Customs and Excise revenue which is now paid over to the States, may be disposed of either in that way, or by being applied to the payment of the interest on the States debts taken overby the Commonwealth. The Treasurer clothed the dry bones of his figures with a good deal of flesh and blood. He has put his whole heart into his subject, as he always does. Having said that, it is, perhaps, quite pardonable to find that he devotes one of his valuable two eyes to Western Australia, and a good portion of the other also. At all events, I shall show presently that, very naturally, he feels great concern lest his State should get the worst of the bargain. {: .speaker-KFJ} ##### Sir John Forrest: -- I do not want to see any injustice done to it. {: .speaker-KHC} ##### Mr HIGGINS: -- There is one important feature of the Treasurer's scheme which differentiates it from all other schemes - it has the approval of the Government. That means that it is to be taken up by the Government, and it is extremely important, therefore, that honorable members should offer such critiques as they may think necessary before it is placed before the people in a definite form. The Treasurer proposes to make one amendment only of the Constitution. {: .speaker-KFJ} ##### Sir John Forrest: -- Two. I thought that there might be one. {: .speaker-KHC} ##### Mr HIGGINS: -- Then, I understand that, in view of what has been said, the Treasurer recognises that it will be expedient to. make a second amendment of the Constitution ? {: .speaker-KFJ} ##### Sir John Forrest: -- I said in my Budget speech that only two sections of the Constitution are affected,namely, sections 94 and 105. {: .speaker-KHC} ##### Mr HIGGINS: -- I think, it will be necessary for the right honorable gentleman not only to amend the Constitution, so as to permit the Commonwealth to assume the responsibility for the debts which have been contracted by the States since Federation was accomplished, but to amend it in such a way as to enable the Commonwealth to take up the States loans as they approach maturity. {: .speaker-KFJ} ##### Sir John Forrest: -- We intend that, as will be seen by reference to my Budget statement, page 2034 of *Hansard.* {: .speaker-KHC} ##### Mr HIGGINS: -- Quite so. I am very glad to find that the Treasurer, as the result of his visit to London, has arrived at the conclusion which I ventured to urge at this time last year. He has put it in very apt words. He says - >The financial authorities whom I consulted in London were unanimous in the opinion that it would be disadvantageous to place the Commonwealth brand on State stock before conversion, as such action would prevent the possibility of any profitable conversion, and would be making to the existing holders a present of any increase in price caused by the additional Commonwealth security. {: .speaker-KNI} ##### Mr Harper: -- That is, if they are converted. {: .speaker-KHC} ##### Mr HIGGINS: -- No. If the Commonwealth were to say, " We will see that these debts are paid," it would send up their value at once. I recollect the case of a young nian who had got into debt through extravagance. His creditors were willing to sell his debts for a shilling in the pound, but his aunt stepped in and said, " I am going to see that all of Edward's debts are paid." The result was that the creditors would not accept less than 20s. in the pound. Of course, I recognise that I am putting an extreme case ; but, after all, this is only a matter in which we must exercise common sense. The meaning of the words " take over " is perfectly clear. They do not mean that a State shall not continue to be liable to its creditors. It will still be liable. But the Commonwealth will have practically said, "We will also be liable." My point is that the creditor of any State will then know that in addition to the liability of the State there will be the liability of the Commonwealth. {: .speaker-KNI} ##### Mr Harper: -- But a creditor cannot get more than £100 for £I00 worth of stock. {: .speaker-KHC} ##### Mr HIGGINS: -- If the honorable member will permit me to develop my argument, he will see that I have taken into consideration everything that he has said. I embodied my conclusions in an article which appeared in the *Daily Telegraph* and the *Age* of last year. Rightly or wrongly, I hold that there will be a most material improvement in the stocks of the States, when once they are backed by the Commonwealth guarantee. It now appears that the Treasurer, as the result of the interviews which he had with financial men in London, has come to a similar conclusion. The point which, the late Treasurer ignored in all his interviews with the Premiers has been seized very thoroughly and clearly by the present occupant of that office. The only thing that I wish to say to the right honorable gentleman is that he must recollect that the only power which the Constitution .gives us for taking over the States debts is contained in section 105. That power is to take over either all or a proportionate part of the debts of the States. In other words, what we do for one State we must do for all. When the Constitution was being framed, the fear was expressed that one State might get more advantage from the Commonwealth backing than would another State. That was the reason why the clause was drafted in its present form. If we take over all the debts of the States at one swoop, we shall be giving the existing bondholders a ' big premium for nothing. Let us suppose that a Tasmanian bond1 carrying interest at 4 per cent, is worth £100, or par to-morrow. If the Commonwealth were to declare, " We will assume responsibility for the payment of that bond," I venture to say that it would be worth at least £102. {: .speaker-KNI} ##### Mr Harper: -- How would that affect either the Commonwealth or the Tasmanian Government? {: .speaker-KHC} ##### Mr HIGGINS: -- I say that it is something to bargain with, and' that as a result the Commonwealth could give a bond carrying a lower rate of interest. I have in my mind an instance of a Queensland loan which will mature in 191 5. In that year a debt of £11,400,000 will fall due. If that debt were taken over in, say, 1907, the State of Queensland would still remain liable for it, but the Commonwealth would have pledged itself to see both the principal and the interest upon it paid. In other words, there would be behind that debt, not only the Queensland promise to pay, but also the Com-, monwealth promise - the better security of all the States. Moreover, in London, the stock would be more marketable, because we should have a large uniform stock. I am told upon very good authority that just as consols are used in London to-day for mercantile transactions - in the knowledge that there are plenty of consols available so long as people are willing to pay the price demanded for them - we shall find, so long as Commonwealth stock is uniform and invariable, and there is plenty of it to be had upon the market in time of stress, that not only investors, but financial men also will purchase it. {: .speaker-L1D} ##### Mr Henry Willis: -- What disadvantage will there be to the States or to the Commonwealth if we do not take over their indebtedness at once? {: .speaker-KHC} ##### Mr HIGGINS: -- If we said to the holders of £100 worth of these Queensland bonds, which carry interest at 4 per cent., "Your debt will fall due in 1915. We are prepared to give you the same amount of Commonwealth stock at *si* Per cent. if you will exercise your option to convert within a certain time." they would see the advantage. A large number of investors hold trusts for long terms, and do not like changes; they do not like being paid off. They would much rather have a bond which, as proposed by the Treasurer, is not to be paid for a period of say, thirty years, . or is interminable, than one which is to be paid off within a few years. And so they would say, " The rate of interest is still falling, no matter what we do, and we cannot obtain better rates. We will exchange the Queensland £100 bond for a Commonwealth bond at a lower rate, but issuedfor a longer term." {: .speaker-KNI} ##### Mr Harper: -- They might do that when the loans are approaching maturity. But I do not think they would do it during the next seven years. {: .speaker-KHC} ##### Mr HIGGINS: -- I am quoting an extreme case. I know that as the bonds get closer to maturity there will be more likelihood of securing an exchange. The honorable member is aware that in London there are investors of all sorts. There are big companies and societies, and also big investors who want nothing so much as a fixed investment. The amount of interest payable is not so material as is the requirement that they shallnot be disturbed, and, as the time approaches for payment of the bonds, they are extremely likely to be willing to make an exchange. As soon as all the stock has been taken over, as it is to be hoped it will be, we shall have a stock representing no less than. £236,000,000 to work upon. That is a huge sum. The larger it is the better for the purposes of investment, and for those who are engaged in finance. At present, a number of men do not touch Australian securities because of the trouble experienced in ascertaining the terms - the various States issuing them, the rates of interest payable, and the general conditions. All these conditions are embarrassing, and consequently, these men invest in consols or something else simpler. It is an immense advantage to have a uniform stock with an undoubted security and simple conditions. {: .speaker-L1D} ##### Mr Henry Willis: -- British trustees were barred from investing in Australian securities. {: .speaker-KHC} ##### Mr HIGGINS: -- I understand that they now have limited power to invest in them, but that power has not been largely used. In consequence of my law associations. I have a good deal of experience in these matters, and I know that it is largely because of the differences in the conditions and terms, and the uncertainty with regard to the different States issuing bonds, that so many people in the old world do not take them up. The people of England are far more likely to understand what " Australia " means than what "Tasmania" or even " New South Wales " means. We should alsogive bond-holders an option. We should advertise that holders of bonds representing the £11,400,000 should apply, say, within six months to the AgentGeneral, or whoever may be appointed, who will give them, if they wish it,Commonwealth stock in exchange for their bonds. {: .speaker-L1D} ##### Mr Henry Willis: -- At a lower rate of interest ? {: .speaker-KHC} ##### Mr HIGGINS: -- Yes. {: .speaker-KFJ} ##### Sir John Forrest: -- They would be nearing maturity. {: .speaker-KHC} ##### Mr HIGGINS: -- That is so. The nearer they are to maturity the more likely we are to secure an exchange. {: .speaker-KNI} ##### Mr Harper: -- If we gave the investor a bond for £100 he would take it. {: .speaker-KHC} ##### Mr HIGGINS: -- There are many who would prefer a bond of £100, having a Currency of thirty years, and bearing interest at 31/2 per cent., to a bond for £100, payable in two years, and bearing interest at 4 per cent. If we could next year convert the Queensland loan to which I have referred into one at31/2 per cent., we should save £57,000 per annum. If we could convert it at par, bearing interest at 3 per cent., we should secure a saving for the year of £114,000. In the four years that must elapse before the expiration of the Braddon section we should, by means of a reduction of1/2 per cent. in the rate of interest, save Queensland £228,000. It will be seen, therefore, that I thoroughly concur with the Treasurer's proposal as to only taking over those bonds step by step. As an amendment of the Constitution is required, let us have it quickly. I feel convinced that if the Government put a complete, well-recommended scheme before the people, they would be given *carte blanche.* {: .speaker-KFJ} ##### Sir John Forrest: -- Would it not be sufficient if we struck out of section 105 of the Constitution the words " as existing at the establishment of the Commonwealth "? {: .speaker-KHC} ##### Mr HIGGINS: -- I must ask the right honorable gentleman to again consult his advisers. I think that he must have misunderstood. {: .speaker-KFJ} ##### Sir John Forrest: -- I certainly was informed that we could do this. {: .speaker-KHC} ##### Mr HIGGINS:
NORTHERN MELBOURNE, VICTORIA · PROT -- There is no power under the Constitution to carry out the scheme that the Treasurer has very properly suggested for taking over the debts as they mature or approach maturity. **-Sir** John Forrest. - Has the honorable and learned member read what I propose in sub-clause1 of clause 8 of my memorandum? It is to be found at page 2034 of *Hansard.* {: .speaker-KHC} ##### Mr HIGGINS: -- I have noticed that the right honorable member proposes that a law be passed enabling the whole of the States debts to be converted or redeemed " by such successive operations as may be thought fit." That is a proper idea, but effect cannot be given to it under the Constitution. {: .speaker-KNI} ##### Mr Harper: -- Does not section 105 authorize the taking over of the debts as they mature? {: .speaker-KHC} ##### Mr HIGGINS: -- No; it merely allows the taking over of all the debts, or a proportion of them, at the one time. {: .speaker-KFJ} ##### Sir John Forrest: -- The clause in my memorandum to whichI have directed the honorable and learned member's, attention was carefully settled. {: .speaker-KHC} ##### Mr HIGGINS: -- But without regard to the constitutional question. SirJohn Forrest. - We always kept our eyes on the Constitution. {: .speaker-KHC} ##### Mr HIGGINS: -- There is no power to take over each debt as it matures. {: .speaker-KNI} ##### Mr Harper: -- Although there is a general power to take over the lot? {: .speaker-KHC} ##### Mr HIGGINS: -- We can merely take over all the debts at the one operationor a proportion of them. {: .speaker-KFJ} ##### Sir John Forrest: -- The Constitution does notsay so. {: .speaker-KHC} ##### Mr HIGGINS: -- I shall leave the right honorable gentleman to consult his advisers. I shall not venture to say that he has not received advice as good as that which I can give him, but I feel convinced that my contention is correct. {: .speaker-KNI} ##### Mr Harper: -- A layman would certainly think that the debts could be taken over asthey matured. {: .speaker-KHC} ##### Mr HIGGINS: -My honorable friend is the first layman I have met who takes that view. As to the Treasurer's proposed substitute for the Braddon section, I think that the objection of the honorable member for Mernda is a just one. {: .speaker-KFJ} ##### Sir John Forrest: -In the Constitution we have the words " take over." Can we not legislate as to the way in which we shall take over the debts? {: .speaker-KHC} ##### Mr HIGGINS: -- We can legislate only as allowed by the Constitution. {: .speaker-KFJ} ##### Sir John Forrest: -- In section 105 of the Constitution we have the words " take over," but nothing as to how we shall take over the debts. {: .speaker-KHC} ##### Mr HIGGINS: -- It says, in effect, that we must take over the whole or a proportion of the debts. {: .speaker-KFJ} ##### Sir John Forrest: -- That is what we are going to do. {: .speaker-KHC} ##### Mr HIGGINS: -- If we took over the whole, we should give to the bond-holders the present that the honorable member for Mernda has mentioned. We are in the dilemma that, if we took over the whole, we should put the Commonwealth brand on the States debts, without any equivalent, while if we did not take over the whole, we should be going against the Constitution. {: .speaker-KFJ} ##### Sir John Forrest: -- The honorable and learned member will see that sub-clause 2 of clause 8 of my memorandum provides exactly for what we want to do. We propose, to. do it by successive steps. {: .speaker-KHC} ##### Mr HIGGINS: -- I understand that the Treasurer wishes to have successive steps ; and that the only question between us is whether what he proposes can be done without an amendment of the Constitution. {: .speaker-KFJ} ##### Sir John Forrest: -- I shall look into, the point. {: .speaker-KHC} ##### Mr HIGGINS: -- As to the substitute for the Braddon section, I must say that I think that the criticism of the honorable member for Mernda is right and just. If there were a reduction in our revenue receipts, the Commonwealth would have to bear the whole brunt of it. If we had bad times, and if, as the honorable member for Mernda says, there were a fall in revenue from £8,000,000 to £7,000,000, then the States would get their fixed proportion, while the Commonwealth would receive only half of what it receives to-day. That would put the whole brunt of the difficulty on the Commonwealth. I am as hopeful as any one that we shall not have a great reduction of the kind in our receipts; but, having regard to the experience of Victoria, with which the honorable member for Mernda and myself are most acquainted, I mustsay that such an event is quite possible. I recollect that in a boom year the revenue in Victoria was £9,000,000. whereas a few years later it was only £6,000,000, showing a fall of one-third. The Treasurer has had his lines cast in pleasant places in the glorious West, and can hardly understand what it is to have a deficit. {: .speaker-KFJ} ##### Sir John Forrest: -- I was looking at the probable increase of population. {: .speaker-KHC} ##### Mr HIGGINS: -- But the more the population increases, the more women and babies there will be, and, therefore, the less revenue per head. {: .speaker-KFJ} ##### Sir John Forrest: -- I do not think so. I was taking into account new people. {: .speaker-KHC} ##### Mr HIGGINS: -- The reason that there is such an expanding revenue in Western Australia is that in that State there are more men who drink and smoke ; and I must say that the Treasurer is right when he reminds us that it is the drinking men and the smoking men who keep the Commonwealth solvent - that but for such men we should be in, sad case. As a solution of the difficulty to which the honorable member for Mernda alluded, I suggest that there should be some slight modification of the Treasurer's proposal for fixed payments. That proposal has much to recommend it, inasmuch as it would make for certainty for the States Treasurers, and would tend to do away with quarrelling and trouble. Every year we are told that we are spending too much, but if there were fixed payments the fact would diminish immensely the friction between the Commonwealth and the States. I should like, however, to see some provision made by which, if the revenue were to fall considerably below, say, for example, £8,000,000, there should be a proportionate reduction in the fixed payments. {: .speaker-KFJ} ##### Sir John Forrest: -- I have no fear of that occurring. {: .speaker-KHC} ##### Mr HIGGINS: -- I am very glad to hear the Treasurer say that, and I hope he is right. I only say that I should feel more secure if there were a provision that if the revenue fell considerably below, say, the £8,000,000 standard, which the honorable member for Mernda mentioned, there should be a proportionate reduction in thepayment to the States. {: .speaker-L17} ##### Mr Wilks: -- An automatic reduction? {: .speaker-KHC} ##### Mr HIGGINS: -- Yes. {: .speaker-KFJ} ##### Sir John Forrest: -- I did not propose such a provision, because I do not think the circumstances arelikely to arise, and, in any case, do not think it necessary. **"Mr. HIGGINS.-** But I am sure the Treasurer has no objection to any sugges tion which may help his scheme to a consummation. {: .speaker-KFJ} ##### Sir John Forrest: -- If there were a deficiency we have specific powers to finance ourselves ; we are responsible, like the States, for making both ends meet. {: .speaker-KHC} ##### Mr HIGGINS: -- I am exceedingly anxious that the relations of the Commonwealth and the States should go on with diminished friction; and I think fixed payments would help to that end. At the same time, if a crisis ever does occur, I do not want the whole brunt to fall on the Commonwealth Government, because any difficulty ought to be shared by both States and Commonwealth. I think I am not wrong in saying that the proposal of the honorable member for Mernda depends on his reading of section 96 of the Constitution. The honorable member regards that section, which gives power to the Commonwealth to grant financial assistance to any State, as involving the further power to take over the debts, practically irrespective of section 105. {: .speaker-KNI} ##### Mr Harper: -- I regard the section as giving the Commonwealth power to lend the States money. {: .speaker-KHC} ##### Mr HIGGINS: -- That was to me a new aspect of section 96, which I thought was well worth looking into, and' I have come to the conclusion, right or *wrong,* that we cannot give financial assistance in that way by practically taking over the debts. If there were no section 105 in the Constitution, there would not be so much difficulty in coming to the conclusion presented to us by the honorable member. But section 105 sets forth the conditions under which we may take over the debts, and we must give effect to that section equally with section 96 - we must read them both together. I have no doubt that the Court would come to the conclusion that section 105 provides the only way in which we can take over the debts, and that the granting of financial assistance was meant primarily to apply to the case of a State which threw out the flag of distress, and asked for help. {: .speaker-KFJ} ##### Sir John Forrest: -- That was the reason for the section. {: .speaker-KHC} ##### Mr HIGGINS: -- But, according to the honorable member for Mernda, the section means that we may grant assistance to all the States, and in the same degree, without being asked. That is not the granting of financial assistance which was meant. {: .speaker-KNI} ##### Mr Harper: -- It would involve an amendment of the Constitution? {: .speaker-KHC} ##### Mr HIGGINS: -- Yes. We all recollect the circumstances of the insertion of section 96. It was not passed by the Convention, which is, therefore, hot responsible for it. It was a provision inserted by the Premiers in 1899 after the first referendum, at the instance, I believe, of New South Wales. That State felt that a low Tariff would suit its purposes, but recognised that, at the same time, a low Tariff would almost ruin Tasmania, and, perhaps, Queensland and South Australia. On behalf of New South Wales it was then said, "Well, in place of being coerced into a high Tariff, let us have a provision by which the Commonwealth can assist a State." I do not know who was the exact propounder or proposer of section 96, but I apprehend it must have been the honorable member who leads the Opposition. No doubt that was the intention of section 96, namely, to avoid the pressure of the argument that there ' must be much Customs taxation in order to meet the needs of the poorer States. I admit that thehistory of the section does not affect its interpretation ; we must take a section as it stands in the Constitution. But I have little doubt that the interpretation of the two sections would be that the only power to take over the debts is that conferred by section 105, and that the only application of section 96 is to enable the Commonwealth to hold out a hand to a State which cries for aid. {: .speaker-KNI} ##### Mr Harper: -- Not to lend money simply. {: .speaker-KHC} ##### Mr HIGGINS: -- I may also point out that it is not enough for our purposes to exercise a power which we believe we have. It is too doubtful a power to exercise. In London investors and others will obtain advice about these things, and if a doubt is thrown upon what we are doing, it will mean that many investors will fight shy of this security. It is not enough for us to mate a safe security, but we must make a security which also seems to be safe. On these grounds, I do not think that it would be well for us to attempt the experiment the honorable gentleman has referred to. My feeling is that the sooner we get to a *per capita* distribution, the better, and that we ought not to be deterred by any difficulties with regard to small sums, of money. Still, it must be rememberedthat Western Australia is in an exceptional position. Her revenue for next year is estimated to be £3 14s.10d. per head of the population, whilst that for New South Wales is only £2 3s. 4d., and for Tasmania£1 16s. There is the difference of more than double between Tasmania and Western Australia, owing to the habits, right or wrong, wicked or 'good- {: .speaker-KFJ} ##### Sir John Forrest: -- The reason is, I think, that there are more men than women and children in Western Australia. {: .speaker-KHC} ##### Mr HIGGINS: -- Exactly; because where there are more men there is more drinking and more tobacco is smoked. As the Treasurer properly says, the greater part of our revenue is derived from the consumption of alcohol and narcotics. {: .speaker-KNI} ##### Mr Harper: -- Women and children also consume less than men. {: .speaker-KHC} ##### Mr HIGGINS: -- The more women and children there are, the smaller the consumption, because women and children do not consume drink and tobacco as men do. Why, I myself, in company with the Treasurer, saw in Kalgoorlie, men four deep waiting for drinks around a bar. The Treasurer need not think that his favorite Western Australia will always consume at such a great rate. He himself has told us that in the first year of the Commonwealth the consumption in Western Australia was not £3 14s.10d., but £5 16s. 4d. per head. In other words, when the Commonwealth started five or six years ago, Western Australia had per head two and a half limes the revenue of Tasmania. Now she has only one and a half times as much revenue, a falling off of 50 per cent. I expect that when we reach the year 1910 the States will have approached very near to an equality. The Treasurer, at page 2032 of his Budget statement, said - >My confidence is somewhat shaken, however, when I notice that resolutions have been passed in Conference and in Parliament asking for a *per capita* distribution, under which the State of which I am a representative would suffer *a* loss of about£300,000 a year. Those figures show that we are approaching very near to the state at which we ought to have a *per capita* distribution. For that reason, I think that the Treasurers scheme based upon a five years' average is not a sound one. Suppose that by 1910 the consumption of Western Australiahas approached almost to an equality with that of Tasmania? {: .speaker-KFJ} ##### Sir John Forrest: -- I have thought of that. But Western Australia is more likely to increase in population than any other State. {: .speaker-KHC} ##### Mr HIGGINS: -- But there is population and population. The more babies, then are, the smaller the revenue in proportion. The Treasurer's proposal is this : He says, " Fay to the States a fixed sum from 1910 to 1920 based upon the five years from 1905 to 1910." But that would mean that Western Australia Would get for the ten years 1910 to 1920, payments upon the basis of 1905 to 1910, which might not l« fair to the other States. {: .speaker-KFJ} ##### Sir John Forrest: -- I think it would be. {: .speaker-KHC} ##### Mr HIGGINS: -- I venture to say that, as the disproportion in Western- Australia has been lowered by '50 per cent, in the last five years, it will probably Le lowered bv 50 per cent, in the next five years. {: .speaker-KFJ} ##### Sir John Forrest: -- But there will be more people there. {: .speaker-KHC} ##### Mr HIGGINS: -- What I suggest to the Treasurer is that we should have a sliding scale after 1910 for the term of five years. {: .speaker-KFJ} ##### Sir John Forrest: -- That is a matter of opinion. I merely suggested a means. {: .speaker-KHC} ##### Mr HIGGINS: -- I think that the Treasurer is anxious to have a *per capita* system as soon as it would be fair to the States. {: .speaker-KFJ} ##### Sir John Forrest: -- Yes. {: .speaker-KHC} ##### Mr HIGGINS: -- I agree with him that it would not be fair for us to force upon Western Australia a *per capita* distribution unless the people of « that State recognised that it was fair. {: .speaker-KFJ} ##### Sir John Forrest: -- We want to be fair - that is all. The question is : How are we to arrive at it ? {: .speaker-KHC} ##### Mr HIGGINS: -- It is extremely important, as soon as we can, to have a *per capita* distribution. {: .speaker-KFJ} ##### Sir John Forrest: -- I think so. {: .speaker-KHC} ##### Mr HIGGINS: -- I suggest that after 1910 we should have a sliding scale, by which the proportion of extra payment to Western Australia would be gradually diminished. {: .speaker-KFJ} ##### Sir John Forrest: -- There is a difference of 8s. or 9s between New South Wales and Tasmania now. {: .speaker-KHC} ##### Mr HIGGINS: -- There is a difference,, but it is not very great. I think that New South Wales and Victoria would be willing to forego some of the advantages which they now get from their greater receipts per head, as long as there were not such an extreme disproportion as there is now in the case of Western Australia. In regard to the White Australia policy, Victoria, Tasmania, and the other States have shown that they are not by any means without generosity. The only States which benefit from that law are Queensland and part of New South Wales. The growers of sugar get a good deal of money from it, whilst Victoria and Tasmania get nothing. {: .speaker-KFJ} ##### Sir John Forrest: -- Nor do Western Australia or South Australia. {: .speaker-KHC} ##### Mr HIGGINS: -- Western Australia, I suppose, would be very glad to get the use of the kanakas, because the climate of that State is warm. But I am putting the extreme case of Victoria and Tasmania. They get no advantage, direct or indirect, from our White Australia legislation, but they wish to see Australia! kept white. Victoria has paid £219,000 to keep Australia white and free from the kanakas, and she has not grumbled a bit. Tasmania has paid £32,000 up to the present for the same purpose, and there is no grumbling. {: .speaker-L17} ##### Mr Wilks: -- Nev South Wales pays a larger bill. {: .speaker-KHC} ##### Mr HIGGINS: -- The honorable member knows why I have not mentioned New South Wales. She has paid a larger bill because she has a larger population; but I have not mentioned her because it would be said that New South Wales gets back through her sugar-growers a larger proportion of the money which she pays, and she also gets her borders freed from the invasion of the kanakas. {: .speaker-L0Y} ##### Mr Wilkinson: -- What has Queensland paid back? {: .speaker-KHC} ##### Mr HIGGINS: -- I have not said a word against Queensland. We are only too glad to make these payments to secure a White Australia. I was not going to say a word about coastal defence until I heard the honorable member for Bland refer to it. If I had any weight, I should like .to throw it strongly into the scale in favour of my honorable friend's argument.. do not think that we have yet rightlygrasped the nettle of our defence system. I said last year that with an island continent, the first thing to be ' looked for is coastal defence. Notwithstanding all the rifles, guns, and forts, nothing compares in importance with coastal defence. {: .speaker-L17} ##### Mr Wilks: -- The honorable anr! learned member has not listened to the honorable member for Wentworth on this question. {: .speaker-KHC} ##### Mr HIGGINS: -- I would listen to the honorable member for Wentworth more frequently if he did not falk *so* often. At all events, I shall Be very glad indeed to find that I am in accord with him on this matter. We have great difficulties, because we are paying for our post-offices and other buildings from revenue. I am very glad that we adopted that policy. I feel certain that whether the Commonwealth borrows or not, it should never borrow until it has begun to float) loans for the conversion of the States debts. It wants to get its foot firmly established on a creditable foundation in the London market. This system of paying from revenue for post-offices and the like is a strong factor in the economy which has marked our Federal system hitherto. Some years ago, I went into calculations, and I found that, notwithstanding that the object of borrowing is to relieve the tax-payers, yet they have actually paid more in interest than they would if they had paid for all their works from revenue. I have verified the figures for Victoria in particular, but the same remark applies in a greater degree to the other States, because Victoria has borrowed less per head. It is an extraordinary thing that what was meant to be a relief to the tax-payers has not been so in the long run. In conclusion, I feel that we have good reason for hopefulness in regard to Australia. A country with an oversea trade of £95,000,000, a trade per head of £23 9s. 9<i, is one which, although it has only 4,000,000 people, is not to be despised. We have great troubles and great difficulties to face; we have our problems to solve, but there is no doubt that Australia is a country which is as likely to make progress as is any country in the world. I feel convinced that if the Treasurer could -see his way at the next election to put before the people a well-framed constitutional amendment - not a partial or piecemeal one, but one which- would enable a candidate to . say to the electors, " Look, if you pass this, you will have the problem of States debts solved " - it would be ratified. {: #subdebate-7-0-s6 .speaker-K99} ##### Mr JOHNSON:
Lang .- As the usual hour for adjourning on Tuesday has arrived, I would ask the Treasurer to consent to progress being reported. Progress reported. House adjourned at zo.26 p.m.

Cite as: Australia, House of Representatives, Debates, 7 August 1906, viewed 6 July 2017, <http://historichansard.net/hofreps/1906/19060807_reps_2_32/>.